WASHINGTON — Five major freight rail companies overcharged customers by more
than $6.5 billion under the guise of fuel surcharges, according to a study commissioned
by businesses that accuse U.S. railroads of anti-competitive behavior.
"This is the greatest train robbery of the 21st century," said Jack Gerard, president and
chief executive of the American Chemistry Council, which represents about 90 percent of
the nation's chemical makers. The amount was more than double what some railroad
customer groups had expected.
The council commissioned an economic analysis to be released Thursday that found the
railroads' fuel surcharges were excessive by more than $6.5 billion between 2005 and the
first quarter of 2007. The study was based on regulatory filings and other estimates for
Union Pacific Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp.,
Kansas City Southern and CSX Corp.
Federal regulators in January banned excessive fuel surcharges and imposed strict rules
on the fees that many rail companies have openly credited with bolstering their earnings.
The Surface Transportation Board ruling said the railroads must link the surcharges
directly with the actual fuel costs for specific rail shipments and prohibited "doubledipping,"
which means fuel costs can't be calculated into certain price hikes if the shipments already have other fuel surcharges.
But the board has no authority to enforce refunds or seek penalties, Gerard said, adding
that railroad customers currently lack any regulatory means to attempt to recoup the
money. Still, some have filed lawsuits alleging the fuel surcharges amounted to pricefixing.
Phoenix-based Dust Pro Inc. in May filed an antitrust lawsuit that seeks class-action
status on behalf of parties who shipped goods on one or more of the five railroads since
July 2003.
The suit, filed in the U.S. District Court for New Jersey, seeks monetary damages from
the railroads, which allegedly fixed prices for the fuel surcharges without any relationship
to actual fuel costs.
The lawsuit cited the Surface Transportation Board's decision, even though the agency's
ruling applied only to rate-regulated shipping. The majority of shipments involved in the
suit are unregulated.
Robin Chapman, a spokesman for Norfolk Southern, declined to comment on the study,
but said the antitrust lawsuits were "without merit" and that the company plans to contest
them.
Tom White, a spokesman for the Association of American Railroads, said the lawsuits
prove the industry's rates already are subject to antitrust laws, though he acknowledged
the industry has been exempt from some laws since it was deregulated in 1980.
The Surface Transportation Board on Thursday awarded a $1 million contract to a
consulting firm to assess competition in the freight railroad industry. The study, prompted
by a Government Accountability Office report that expressed concerns on the matter, will
be completed next fall.
The American Chemistry Council and other trade groups support legislation that would
subject railroads to stiffer antitrust standards.
The trade groups believe their chances of passing such legislation are helped by the $300
million fines the Justice Department levied last month against British Airways PLC and
Korean Air Co. for colluding with rivals over cargo rates and fuel surcharges.
The five companies involved spent a total of about $6.3 million lobbying the federal
government in the first half of 2007, compared with a total of about $1.6 million for the
American Chemistry Council, Consumers United for Rail Equity and the Consumer
Federation, according to disclosure records.
