Consumers are hard hit by unfair rail monopoly

Salt Lake Tribune
By Robert Szabo
March 14, 2009

As consumers face foreclosures, lost jobs and tighter budgets from the nation's historic economic crisis, America's freight railroads are reaping record profits through their monopoly stranglehold on "captive shippers" -- companies for whom one single freight railroad is the only option for transporting their goods. This shakedown of captive shippers increases the costs of consumer goods for everyone.

But as the Wall Street Journal reported, Congress is being asked to take action to remove the special monopoly exemption that only America's freight railroads possess.

Legislation to end the railroads' exemption from antitrust law -- the Railroad Antitrust Enforcement Act (H.R. 233 in the House, S. 146 in the Senate) -- was approved by the Senate Judiciary Committee on March 5 by a bipartisan vote of 14-0. The House Judiciary Committee is expected to vote on companion legislation later this month. In addition, legislation to tighten the captive shipper protections of the Surface Transportation Board is expected to see action in Congress this year.

Today, the railroads are exempt from the nation's antitrust law, the nation's basic law that is designed to prevent monopoly mergers and anticompetitive abuse of market power. As a result, the four remaining major U.S. freight railroads have divided the country into regional monopolies and now control more than 90 percent of U.S. freight rail shipments.

This monopoly power allows the railroads to raise shipping rates to anticompetitive levels on captive shippers. These shipping rates are two to five times higher than the rates that are being paid by rail shippers with access to transportation competition. And from the small towns to the big cities of America, consumers of basic necessities ranging from food to electricity are footing the bill for this hidden tax.

As one example, CSX Railroad doubled its price, effective Jan. 1 of this year, for shipping coal to Seminole Electric Cooperative, which provides electricity to 1.7 million customers in two-thirds of the counties in Florida. This rate increase will cost Florida electricity consumers $100 million annually, at a time when struggling families and businesses can ill afford unjustified increases in costs.

If our economy is to recover and the American family is to have the necessary funds for necessary consumer goods, Congress must put a stop to these monopoly prices.

Rail reform legislation is supported by groups representing captive shippers, consumers, rural America, American manufacturers, state regulators and legislators, as well as 21 attorneys general and antitrust legal experts. Members of Congress representing Utah should be encouraged to join the coalition in support of this legislation.

Consumers United for Rail Equity is a broad coalition of freight rail customers working to improve national freight rail policy. Legislation to end this hidden tax on consumers must be part of the congressional agenda to restore consumer confidence, ensure that American families have sufficient funds to purchase necessary consumers goods and get our country's economy back on track.