On September 20, 2007, the Senate Judiciary Committee approved a bill that would repeal long-standing antitrust exemptions enjoyed by U.S. railroads. Sponsored by Senator Herb Kohl (D-WI) and cosponsored by Senators Norman Coleman (R-MN), Russ Feingold (D-WI), Jay Rockefeller (D-VA), David Vitter (R-LA), Patrick Leahy (D-VT) and Joe Biden (D-DE), the Railroad Enforcement Act of 2007 would eliminate entirely the antitrust exemption for railroad collective ratemaking and would bring railroad mergers and acquisitions under the purview of the Clayton Act. The legislation would allow the federal government, state attorneys general, and private parties to file suit to enjoin anticompetitive mergers and acquisitions, and would also permit private parties who are injured by anticompetitive conduct to sue railroads for treble damages.
Currently, concerns about competition in the rail industry are reviewed principally by the Surface Transportation Board (STB), which, according to a 2006 U.S. Government Accountability Office report, has failed to ensure that the industry remains competitive. The Kohl bill proposes that review of railroad mergers be restored to the Justice Department’s Antitrust Division and the Federal Trade Commission (FTC) and eliminates the exemption that prevents FTC scrutiny of railroad common carriers. The bill also requires the STB, as well as other reviewing agencies, to consider a proposed agreement’s impact on shippers, consumers, and affected communities, and to inform parties engaging in railroad merger, acquisition, or ratemaking transactions that they are no longer exempt from the antitrust laws.
The bill’s sponsors have characterized the antitrust immunity enjoyed by railroads as an antiquated exemption that has allowed freight railroads to reap record profits, while often providing unreliable service and charging exorbitant fees. They have also suggested that, because of the exemption, many public utilities, paper mills, and agricultural interests, a number of whom are served by only one railroad, have suffered declining service, unreliable rail shipments, and unreasonably high costs.
Opponents, on the other hand, argue that railroads already are subject to the antitrust laws in significant respects, that the current regulatory regime works well, and that certain provisions of the pending legislation would hamper the STB’s mandate to regulate the industry and make broad policy determinations to ensure that the industry operates in the public interest. They further argue that the legislation would expose the railroad industry to inconsistent rulings by various federal courts, allow shippers dual remedies, and interfere with the STB’s implementation of national transportation policy.
In an unusual procedural twist, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on S. 772 on October 3, 2007, some two weeks after the full Judiciary Committee had already approved the bill. While the bill is expected to reach the floor of the Senate sometime in October, its outcome is uncertain. Similarly uncertain is the bill’s counterpart in the House, H.R. 1650, introduced on March 22, 2007 by Representatives Tammy Baldwin (D-WI), Rodney Alexander (R-LA), and Earl Pomeroy (D-ND). That bill currently is tied up in a jurisdictional dispute among three House committees — Commerce, Transportation, and Judiciary. Whether this legislation could survive any potential White House opposition or presidential veto also remains an issue, notwithstanding the legislation’s bipartisan sponsorship.