The Railroads’ Latest Myth
April 2009

The Railroad Antitrust Enforcement Act (S.146/H.R.233) Creates a
Fifth Amendment “Taking” by Changing the Antitrust Law Prospectively and Applying That Law to Existing Contractual Arrangements

At a recent seminar conducted by the Association of Transportation Law Professionals, a railroad official asserted that repeal of existing railroad exemptions from the antitrust laws by the Railroad Antitrust Enforcement Act of 2009 (S. 146 and H.R. 233) would result in the unconstitutional takings of private property.  Apparently the railroads believe that the exemptions have conferred on them a perpetual right to restrict competition.

The railroad argument is based on myths rejected by the Supreme Court long ago, sometimes in cases involving railroads:

• “[I]t has been 'authoritatively settled' by decisions of this Court that no previous contracts or combinations can prevent the application of the Anti trust Acts to compel the discontinuance of combinations declared to be illegal…. There is no constitutional ground for denying to the Congress the power expressly to prohibit and invalidate contracts although previously made, and valid when made,  when they interfere with the carrying out of the policy it is free to adopt."  Norman v. Baltimore & O. R. Co., 294 U.S. 240, 309 (1935).
  
  
• “[O]ur cases are clear that legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations…. ‘[A] claim of an illegal taking gain[ed] nothing from the fact that the employer in the present litigation was protected by the terms of its contract from any liability beyond the specified contributions to which it had agreed…. Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them.’”  Concrete Pipe & Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602, 637, 643 (1993).
  
  
• In one of its first cases under the Sherman Act, the Supreme Court effectively rejected an identical takings claim by a group of price-fixing railroads.  It ruled that their contract in restraint of trade, even though legal when entered into before passage of the Act, could be enjoined as an antitrust violation.  United States v. Trans Missouri Freight Asso., 166 U.S. 290, 342 (1897).

The railroad “takings” argument misstates both established constitutional law and the necessary and proper power of Congress to protect shippers and consumers from anticompetitive abuses in interstate commerce.