For Immediate Release
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KOHL, BALDWIN INTRODUCE BILLS TO END UNFAIR RAILROAD MONOPOLY POWER

 Legislation Targets Freight Rail ‘Price Gouging’ that Drives Up Consumer Costs

 

WASHINGTON, DC – Today, US Senator Herb Kohl and Congresswoman Tammy Baldwin (WI-02) unveiled legislation to repeal antiquated antitrust exemptions protecting freight railroads from competition. 

 

Due to industry consolidation, as of now only four major Class 1 railroads carry 90 percent of the nation’s freight, resulting often in unreliable service and exorbitant fees.  Kohl’s and Baldwin’s bills, titled The Railroad Antitrust Enforcement Act, responds directly to concerns that freight railroads are abusing their dominant market power and raising rates for those who rely on them to ship dozens of vital commodities, including coal and agricultural products.  Their legislation, introduced in the Senate and House, would result in placing the rail industry under the same antitrust laws that apply to other industries, including trucking, aviation, telecommunications and energy.

 

 “Freight railroads have the luxury of being protected from the competition other industries face.  They can name their price and the consumer pays.  We have seen the result of this outdated policy in Wisconsin, where our utilities were forced to absorb staggering cost increases for shipping coal.  This bill will bring scrutiny to freight railroads and encourage competition in this highly consolidated industry,” said Kohl, Chairman of the Senate Antitrust Subcommittee.

 

“This legislation is long overdue and absolutely necessary to begin to end the railroad monopolies that are driving consumer prices up and service down,” said Congresswoman Baldwin. 

“This virtual monopoly by the freight rail industry is unnecessary, unfair, and unacceptable.  It’s time for Congress to apply our antitrust laws more equitably and I’m optimistic that this

legislation will be on track for passage this session of Congress,” Baldwin said.

 

Many industries – known as “captive shippers” – are served by only one railroad.  These captive shippers have faced constantly rising rail rates.  In many cases the ordinary protections of antitrust law are unavailable to these captive shippers – instead, the railroads are protected by a series of exemptions from the normal rules of antitrust law to which all other industries must abide.

 

As an example, Dairyland Power in La Crosse serves the electricity needs of more than 575,000 people.  In 2005, Dairyland experienced a 13 percent shortfall of scheduled coal shipments, but was hit with a 93 percent rate increase – resulting in about $35 million of increased cost passed along to its customers.

 

Current antitrust law protects a wide range of railroad industry conduct from scrutiny by antitrust enforcers.   Railroad mergers and acquisitions are exempt from antitrust law and are reviewed solely by the Surface Transportation Board.  Railroads that engage in collective ratemaking are also exempt from antitrust law.   Kohl’s and Baldwin’s bills will eliminate these antitrust exemptions by allowing the federal government, state attorneys general and private parties to file suit to enjoin anti-competitive mergers and acquisitions.   Their legislation will restore the review of these mergers to the agency where they belong – the Justice Department’s Antitrust Division.  And they will eliminate the antitrust exemption for railroad collective rate making.

 

Last year, both Senate and House versions of the legislation, authored by Kohl and Baldwin, were approved by the respective chambers’ Judiciary Committees.

 

Last month, the American Bar Association's committee on antitrust law endorsed legislation to end the railroad exemption.  Citing price gouging concerns, a November 2007 letter from 21 state attorneys general to the House and Senate leadership asked Congress to remove the railroad antitrust exemption.