The following appeared in the APPA newsletter this morning;
Senate Judiciary Committee gives green light to bill that would put railroads under antitrust laws
The Senate Judiciary Committee yesterday approved S. 146, the Railroad Antitrust Enforcement Act of 2009, on a vote of 14-0. APPA supports the legislation.
The railroad industry currently is exempt from the nation’s antitrust laws. The Senate bill, introduced by Sen. Herb Kohl of Wisconsin, would remove that exemption so the rail industry would be subject to antitrust laws. Identical legislation was introduced in the 110th Congress and was approved by the House and Senate judiciary committees, but never won final passage.
In a letter to Senate Majority Leader Harry Reid, the Consumer Federation of America, National Association of Regulatory Utility Commissioners and National Association of State Utility Consumer Advocates urged Congress to pass the measure. (See yesterday’s Public Power Daily.) -JEANNINE ANDERSON
After reading Sen Kohl’s press release, it seems that this legislation will only tie up the courts. It talks about more oversight on mergers because of the loss of competition, well, in my humble opinion, that boat sailed long ago. With only 7 major class I RRs serving North America, not much chance of overseeing too many more mergers. It also talks about litigation in the face of higher rates, again, more business for the courts. I don’t profess to be an expert in RR rates and anti-trust issues, but the trains gotta go where the tracks go, unlike trucks. Oh well, back to my little world of model railroading where I rule supreme!
Oh no, it’s not that at all. This is the government listening to one group of constituents who are asking them to elevate their fortunes at the expense of another group of constituents. This is not even railroads against shippers, it’s one class of shippers against another class of shippers.
Generally the government is not composed of Martians but of actual people, who are responding to constituents who are asking the government to make something happen. If you want to know why the government does something you don’t like, look to see who’s lobbying them. Last time I was in Washington, there was a hilarious moment where us (railroad and rail-shipper lobby) ran into them (truck lobby) in the same elevator. There were 8 of them and 2 of us in that elevator, so we just smiled.
1.) whoever’s argument is more persuasvie (a no-brainer for the RRs - who can make solid energy/environmental arguments to party in power that’s supposed to be friendly to these arguments)
or
2.) whoever can deliver more PAC money. (a toss up)
Long story. Short answer is they are not exempt from anti-trust law only exempt from one particular expression of the law – but covered equally by other expressions of the law. But that’s not how the story is sold, because to pronounce “Railways are getting away with something!” is simple to say and sensationalist to hear.
Railways, being the first big business in the U.S., were the first to be regulated, and railway regulation has always been a separate case from everything else. Railway regulation became the example for general industrial regulation, but once the general regulation was created, there was no enthusiasm for going back and bringing railways under the umbrella of the general regulation, because there was a mountain of investment decisions, case law, state law, local law, labor law, commercial decisions, shipper decisions, public policy decisions, etc., that were all matched to the railway regulation and would have to all be undone, and redone to match the general regulation. Thus to say railways are “exempt from (some) antitrust regulation” is a true statment but also a disingenuous statement, because railways are in fact under a separate set of regulations that for most people’s satisfaction provides the same thing as the general anti-trust regulation.
What this law proposes to do is lay another layer of regulation on top of the existing regulation to (my opinion) allow a certain class of shippers to advance their commercial interests “at the expense of the railway interest.” In reality, there is no railway interest; there is nothing but shipper interests; the railway is a pass-through. The proposed anti-trust regulation would (my opinion) in the long-term be a significant net cost to the average American shipper (as well as the average consumer and citizen), but in the ve
Do you think it will mean a return to the dark days of the sixties and seventies with it’s bankrupcies and decreped tracks etc? Railway Age magazine devoted an entire issue to this subject and it sounds pretty bad. It sounds like there will be traffic leaving rails to go to trucks. Is that right? Thanks in advance for the good information.
Could it? Sure. People were foolish enough to let that happen once, they probably have the capacity to be that foolish again.
But there’s no clear road map into the future here, only a direction that people are proposing to take. If you go that direction long enough, it leads to a cemetery with “Penn Central” over the entrance.
Enter stage left: floundering IQ of 80, pedantic coxcomb (aka me)
I don’t get it!
At least in so far as the issue of regluation relates to the regluation of mergers, the regulation opponents and champions seem to be arguing on an all or nothing premise. The opponents of regulation act as though maintaining the status quo and not permitting a further round(s) of mergers will bring the industry to its knees and return the country to the 1970s. Conversely, the champions of reglation act as though current industries served by rail will fall into immediate peril if the status quo is maintained.
I am quite certain I have seen both positions championed on this forum as well as in periodicals.
Is the status quo really all that bad for either side? It seems to me that, although they are not in danger of becoming Microsoft any time soon, railroads were fairly profitable pre-recession and were delivering competitive services to industry that could not have been imagined in the 70s.
Why either side feels a non-monetary need to move that apple cart one direction or the other is beyond me.
Gabe
P.S. The first time I had an 11th Circuit oral argument, my opponents got into the elevator the same time I did on the way to the court room. It was just me, and there were 5 attorneys for my opponents. One of the younger attorneys said to me something to the effect that they were going to trounce me. I (not to be outdone in sophoric jabs) said, not cheaply, and proceeded to push every button for every floor. I still don’t know if I won that appeal; but immaturity never felt so good.
As a person who considers himself an historian above all things, I have often pontificated ad naseaum against the falacy of arguing that history repeats itself. That having been said, at least in so far as I can legitimately comprehend some of the literature written over the current recession, it is hard for me to argue against the premise that, even if history does not repeat itself, there are no shortage of people who will allow cupidity to cause us to repeat the sins of our fathers.
The best “snappy comeback” lines always occur to the victim (us) too late, of course, but a good one here would have been to the effect of, “Well, it’s taking 5 of you to attempt to counter 1 of me. And at your hourly rate, too - does your client know about that ?” (I’m guessing you were in the usual David v. Goliath scenario, right ?) Sometimes it’s interesting-to-amusing to see what happens when the opposing client is present enough to realize how his bill - and other interests - are being handled by his supposedly fiduciary-responsibility representatives.
The “Please protect us from more railroad mergers !” aspect of re-regulation is a red herring. The “major merger” rules adopted by the STB during the 18 (?)month moratorium after the BNSF-CN merger was proposed in 1999 (?) address all reasonable concerns. Since then - 10 years ago ? - there have been - let’s count them now - how many ? Oh, yeah - exactly none - major mergers, that is, which would involve large-scale non-competitive effects (sure, there’ve been a lot of smaller lines vaccumed up, but that’s different.)
The “captive shipper” objection is more problematic. RWM wrote something above to the effect that the railroad is just a middleman between shipper interests. But my retirement account objects to its 100 shares worth of BNSF common
Why the fear of regulation? Was the current economic crisis a result of a lack of regulation? Why the quick knee-jerk reaction that any railroad regulation would be bad? Do you feel that way about banks and financial products? Why the difference?
It’s incorrect to say “railroads were deregulated” and incorrect to say “railroads will be re-regulated.” I know, that’s what people say, but they are speaking in relative terms. In 1980, railroad regulation was changed and the net overall effect was a substantial reduction in government administration of rates and terms of service. But railways were not deregulated. The net difference was that the threshold at which the government would investigate rate abuse was raised, the thresholds for which the government could disapprove of abandonment and merger were raised, and railways were given the right to engage in private contracts. The government gave up on direct administration of rates and terms of service, and quit seeking to determine an actual-cost basis to set specific rates for specific commodities on specific routes.
Banks and financial products, on the other hand, were largely abandoned by regulation, and the result is that banks and financial products are acting in extra-legal ways – you could even term them “outlaw” because they are operating in multinational environments answerable to no country at all, where there is no regulation whatsoever. This is the difficulty that faces the Obama Administration – there is no legal authority for it to regulate or unwind very large pieces of the large multinational banks, and because the activities cross over into dozens of countries, there is no legal authority for it to simply seize these banks either. This isn’t like a small-town bank receivership, at all. These are behemoths operating in a regulatory vacuum.
While I have not studied the proposed changes in the law, to the extent they will force rate reductions, the certain results are predictable. Key is that cash available for investment in capacity expansion will be reduced. It is my opinion that more than any “captive shipper/natural monopoly” condition, capacity constraints have been the underlying factor in the railroads’ recently improved pricing power.
So suppose the new laws actually inhibit the pricing power and all those who complain about high rates go home happy. Railroads shippers will still be confronted with the service consequences brought on the lack of sufficient capacity to handle all the traffic that might be offered. To my knowledge, nothing in the law addresses that. Perhaps service mandates will be tried. “Accept all freight offered and forward without delay”
Somehow, it seems to me that there is a better chance that both the rate and service issues would improve without the added regulation.
Railway Age reported that there was a compromise being worked out between Congressmen Obestar, Rockfeller, captive shippers and the AAR. Something was supposed to be announced before too long. I have not heard anything else.
I am curious about what you mean. It sounds like you are saying that government is merely a neutral instrument through with the public and its lobbyists can express their collective will to effect action, and therefore, government is without any agenda of its own that could also affect the outcome.
Bucyrus: I started to answer your question, but I did not, as I don’t think my answer would be even remotely on-topic for this forum. It would diverge into a discussion of the way government in the U.S. operates, and off the subject of railways. I apologize for the second paragraph above, which wasn’t much on topic either, and worse, was glib.
Allow me to rephrase my prior answer above to say, more formally:
"Bills before Congress to change the regulation of railways are, to my direct knowledge, being promoted by various parties because they see the result as beneficial to their commercial success, while other parties oppose the bills because they see the result as harmful to their commercial success. Still another group of parties promote these bills as effecting a desired social outcome, while their counterparts oppose these bills as they view the social outcome as undesirable. No party lobbying before Congress on these bills, to my direct knowledge, views Congress as anything more than a gatekeeper. Certain Representatives and Senators, to my direct knowledge, consider bills such as these in context of general social outcomes they were elected to either advance or diminish by their electorate, but none, to my direct knowledge, are acting unilaterally of the electorate and in disregard of their re-electability.
My direct knowledge is direct. That is, it’s 100% first-hand. Not extracted or inferred from secondary sources such as newspapers, television commentary, or internet news or commentary.
My direct knowledge may be insufficient or inaccurate. People may be telling me one thing and thinking another, but they are not telling me one thing and doing another, which is far more important than what they think about it. So far I have seen no actions that do not match up to the words.
RWM, you correctly point out that one’s constituency, however perceived, is what counts to those who seek election/re-election.
Who are the constituency/ies of the railroads…or, to whom can they appeal for understanding and support? If, as you say, the proposals effectively seek an interposition between the shipper and their various preferred shippers, should the shippers be asked to voice their objections, and would the railroads we wise to seek that voice?
Simply, to whom can the railroads appeal in their own interests? Who will champion them?