DOJ probes two railroads' pricing practices

By James A. Cooke -- Logistics Management, 3/1/2005

WASHINGTON, D.C.—The U.S. Department of Justice (DOJ) has launched an investigation into how BNSF Railway Co. and the Union Pacific Corp. price their western coal shipments. A DOJ spokesperson confirmed the existence of a probe but would not identify its subjects; however, both railroads have acknowledged that they have received requests from the government for information.

In its 10-K filing with the Securities and Exchange Commission for last year, BNSF said it received a Civil Investigative Demand from the DOJ's Antitrust Division. The railroad also said the DOJ requested information about its pricing for coal shipments from the Powder River Basin. BNSF said it's cooperating with that request.

Union Pacific spokesman John Bromley acknowledged that his company had responded to a Justice Department request to explain its process for pricing coal shipments. "We plan to cooperate fully," he said.

The investigation may have been triggered by a letter from House Judiciary Chairman F. James Sensenbrenner (R-Wis.) to the DOJ last year. In that letter, Sensenbrenner raised concerns about the railroads' practice of announcing rates, and hence telegraphing their plans for rate hikes. In a market segment with just two major competitors, that could restrict competition as each railroad would try to avoid undercutting the other's posted rates.

One shipper advocacy group, the Alliance for Rail Competition, applauded the DOJ's move. "We didn't initiate this probe, but we welcome it," said Executive Director Mike Grisso.