NGFA encourages STB to establish pro-competition conditions for CP-KCS rail merger

ARLINGTON, Va., Feb. 28, 2022 – In comments submitted to the Surface Transportation Board (STB) on Feb. 28, the National Grain and Feed Association (NGFA) encouraged the STB to ensure competitive opportunities for rail shippers continue under the merger of Canadian Pacific Railway and Kansas City Southern Railway.

“The NGFA generally does not oppose the merger of CP and KCS, but the Board should be proactive in conditioning any approval of the merger with conditions that strictly hold the railroads to their commitments concerning competition and service, and to generally preserve and encourage additional rail-to-rail competition…,” the comments stated.

STB announced it had accepted the merger application for consideration in November 2021.

CP and KCS serve separate regions, so their proposed merger would not pose the same problem as past major railroad mergers, which reduced shippers’ options from two Class I railroads to one, or three railroads to two, NGFA noted. 

“However, despite the efforts of the STB to preserve rail-to-rail competition when evaluating and conditioning the approval of prior mergers between Class I railroads, the consolidation of the rail industry into essentially two rail duopolies in the Western and Eastern United States has resulted in the overall diminishment of rail-to-rail competition systemwide,” NGFA noted. 

Therefore, the Board should practice “proactive vigilance” when it comes to imposing meaningful conditions on the merger designed to maintain competitive opportunities for rail shippers. Several areas in which the Board could do so include: 
(1) establishing or directing the railways to establish reasonable terms for the continued use of existing gateways post-merger; 
(2) clarifying that parties may challenge the reasonableness of Rule 11 rates established by the merged railroad at its interchanges with other railroads;    
(3) conditioning merger approval on the applicants agreeing to enter into reciprocal switching arrangements at certain locations; and 
(4) enabling rail shippers and other customers of the merged railroad to seek payment of money damages for service failures that result from the railways failing to adhere to their representations concerning service levels post-merger.   

The Board also should maintain oversight over the implementation of the merger transaction for at least five years, consistent with prior merger proceedings, NGFA noted. 

Full NGFA’s full comments here. 

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The NGFA, established in 1896, consists of grain, feed, processing, exporting and other grain-related companies that operate more than 8,000 facilities handling U.S. grains and oilseeds. Its membership includes grain elevators; feed and feed ingredient manufacturers; biofuels companies; grain and oilseed processors and millers; exporters; livestock and poultry integrators; and associated firms that provide goods and services to the nation’s grain, feed and processing industry. The NGFA consists of 27 affiliated State and Regional Grain and Feed Associations, is co-located and has a strategic alliance with North American Export Grain Association, and a strategic alliance with Pet Food Institute.