Republican members of Congress today urged the Surface Transportation Board to conduct a thorough review of the proposed merger of Union Pacific and Norfolk Southern, to ensure that the historic deal creates substantial benefits for shippers.
Rep. Dusty Johnson of South Dakota, in a letter to STB Chairman Patrick Fuchs and members Michelle Schultz and Karen Hedlund, encouraged the regulator to “conduct a rigorous and comprehensive review of the proposed merger…to ensure it enhances competition and is clearly in the public interest.”
The letter, co-signed by 46 members of Congress, states, “We also want to underscore at the outset that the responsibility to demonstrate clear, measurable, and substantial benefits for domestic manufacturers, agricultural producers, the energy sector, and the American consumer – all of whom rely on an efficient, competitive, and cost-effective freight rail system – rests squarely with the applicant railroads.
“Absent such a showing, the Board should not permit this transaction to proceed.”
Johnson, who sits on House committees on agriculture and transportation, wrote that elected officials are hearing concerns over the merger application by UP (NYSE: UNP) and NS (NYSE: NSC) and its “lack of serious and meaningful commitments to enhance competition and protect against service meltdowns. In light of this, the Board must consider with extreme care the potential risks posed by this transaction to determine whether it meets the public interest test.”
The STB rejected the railroads’ initial merger application as incomplete. The companies have said they plan to re-file by March.
In November dozens of GOP state senators and representatives told the STB that the merger would hurt competition and raise prices; state attorneys general from nine red states said the merger effects could affect national security.
The letter comes as shippers and other stakeholders increasingly voice their opposition to the merger, which would create the first coast-to-coast freight railroad operating more than 50,000 miles of track in 43 states.
The letter referenced the new, tougher merger rules drawn up in the early 2000s that stipulate a consolidation must not only preserve competition, but enhance it. This ‘higher bar’ has never been tested, so there is uncertainty about how it will be applied by the STB, and what, exactly, defines enhanced competition.
“The new rules place a significant burden on would-be merging parties to demonstrate how the transaction would, among other requirements, enhance competition for rail shippers, ensure reliable rail service, and be in the interest of the public,” Johnson wrote.
It’s known that the regulator has collected more information ahead of the formal filing than for any previous merger. Specialists from the Massachusetts Institute of Technology have been brought in to help analyze the more than 100 million separate data points under consideration.
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Find more articles by Stuart Chirls here.
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