senate judiciary committee approves Kohl bill targeting railroad 'price gouging'

[The Straight Story]

SENATE JUDICIARY COMMITTEE APPROVES KOHL BILL TARGETING RAILROAD 'PRICE GOUGING' THAT DRIVES UP CONSUMER COSTS
Four railroads, providing 90% of the nation's rail transportation, can hold shippers captive and charge staggering fees

WASHINGTON -- The Senate Judiciary Committee today approved legislation sponsored by U.S. Senator Herb Kohl to repeal the obsolete antitrust exemptions protecting freight railroads from competition. These exemptions deny rail consumers antitrust protections available to consumers in virtually every other industry. Kohl authored the Railroad Antitrust Enforcement Act of 2007 in response 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. The legislation is co-sponsored by Senators Norm Coleman (R-MN), Russ Feingold (D-WI), Jay Rockefeller (D-WV), David Vitter (R-LA), Patrick Leahy (D-VT) and Joe Biden (D-DE).

"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 We have seen the result of this outdated policy in Wisconsin, where our utilities were forced to absorb staggering cost increases for shipping coal.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," Kohl said.

According to the Wisconsin Public Service Commission, in 2005 Wisconsin utilities incurred nearly $73 million in additional costs associated with shipments of coal, which provides about 60 percent of the state's energy. These costs are then passed along to consumers already paying for record high energy prices.

Over the last 20 years, railroad industry consolidation has reached the point where only four class I railroads provide over 90 percent of the nation's rail transportation. 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% shortfall of scheduled coal shipments, but was hit with a 93% rate increase - resulting in about $35 million of increased cost.

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 bill 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. It will restore the review of these mergers to the agencies where they belong -- the Justice Department's Antitrust Division and the Federal Trade Commission. And it will eliminate the antitrust exemption for railroad collective rate making.

http://kohl.senate.gov/~kohl/press/07/08/2007920502.html