Exempt from antitrust laws, railroads set exorbitant rates

By Rep. Tammy Baldwin (D-Wis.)
The Hill
March 25, 2009

In these challenging economic times, we hear a lot about falling stock prices, shrinking retirement funds and plunging home values. What we don’t hear about are actions taken by freight railroads that result in a hidden tax on U.S. consumers, causing higher prices for everything from the electricity lighting their homes to the food on their dinner table.

Due to industry consolidation since 1980, only four major Class 1 railroads carry 90 percent of the nation’s freight traffic. These railroads currently enjoy exemptions from antitrust law, which allows them to charge exorbitant fees, often accompanied by unreliable service. These exemptions also protect a wide range of railroad industry conduct from scrutiny by antitrust enforcers.

That is why I have introduced the Railroad Antitrust Enforcement Act (H.R. 233, with S. 146 introduced by Sen. Herb Kohl, D-Wis.), which would result in placing the rail industry under the same antitrust laws that apply to other industries such as telecommunications, trucking and energy. Earlier this month, the Senate Judiciary Committee supported the legislation by a vote of 14-0.

Many industries are served by only one railroad. These “captive shippers,” which account for 44 percent of all freight rail traffic, have faced constantly rising rail rates. The protections normally provided by antitrust law, available to customers in nearly every other industry, are unavailable to captive shippers.

As an example, in my state, Dairyland Power in La Crosse serves the electricity needs of more than 575,000 people. In 2005, Dairyland experienced a 13 percent shortfall of scheduled coal shipments, yet the electricity cooperative was hit with a 93 percent rate increase — resulting in about $35 million in increased costs passed along to its customers.

In Florida, the railroad’s recent doubling of its charges to ship coal will increase consumers’ electricity bills there by $100 million in 2009.

That’s why captive shippers from all over the nation — including farmers, local utilities and manufacturers — are coming to Washington this week to meet with members of Congress to ensure we all understand the devastating consequences the current system of freight rail causes.

The American Bar Association’s committee on antitrust law recently endorsed legislation to end the railroads’ exemption. In addition, 21 state attorneys general have asked Congress to remove the railroad antitrust exemption, citing price-gouging concerns.

With our economy already challenging consumers and businesses at every turn, the last thing our farmers, manufacturers and local utility companies need is to be forced into paying exorbitant rates because of the railroads’ uncontrolled pricing power. It’s time for Congress to apply our antitrust laws more equitably to protect consumers throughout the nation.