Choo Choo Let’s Get Rid of the Railroads’ CRAP!… Time for Some Rail Reregulation

In our previous Blog, we addressed the need for the government to protect airline passengers who are subjected to/victimized by the airlines’ terrible customer service policies. In this Blog we’ll look at the railroad sector.

Just so you’re up to speed, the railroads had pretty strong fourth quarter earnings. In fact, looking at their earnings reports, you’d never know that the economy was in a recession. As a full fledged capitalist, I’m all in favor of solid earnings reports, unless these earnings are driven by anti-competitive - some would argue monopolistic - models that hold shippers hostage to the railroads’ demands. The railroads are so good at exploiting these advantages that we’ve come up with a name for their innovative efforts: The Customer Retaliation and Alienation Program, commonly referred to as CRAP!

Think I’m exaggerating? Then you should have been in my office listening to a Corporate VP - Supply Chain talk about his recent contract “negotiations” with the railroads. Since his company is a “captive shipper” the railroad came in and told him what his increase for the year would be. In an environment where pricing for almost every other mode is either flat or falling, the railroad took a 7% increase. He was lucky.  Another captive shipper “graciously” accepted the 12% increase the railroad jammed down his throat.

If you are upset or unhappy with the rate increase, here are some options: stop using the railroad, or take your case to the Surface Transportation Board (STB) to try and get some relief. Keep in mind the railroads have done everything in their power to make the STB route as expensive, ineffective and time consuming as possible.

We could go on about other interesting things the railroads are able to do, because frankly, they have very little competition. The Class 1 railroads have carved up the country and, while there is nominal competition in certain parts of the country, vast parts of the United States are in essence only served by one railroad. Are you a HazMat shipper who doesn’t like some of the provisions in the railroads’ contract affecting liability issues? Tough luck; sign or go. Unhappy with the magnitude of your rate increase? As the kids say: “Too bad, so sad.” And if you’re a shipper that wants to stand up and fight; good luck. The fear of retaliatory practices is an ever present danger. That is how the CRAP works.

Beyond their innovative CRAP, the railroads have also been attacking the trucking industry. A couple of years ago, the railroads fought for the “Safe Highways and Infrastructure Preservation Act” or SHIPA. This legislation would have extended the federal weight limits to the entire National Highway System, and frozen trailer lengths on the National Highway System at 53 feet. Today, the railroads are pushing for the trucking industry to pay their “fair share” of the roads even though today’s truck taxes would choke a horse. This consumption-based pricing will further increase the cost of using a truck.

The railroads continue to attack the trucking industry because they don’t want the competition. After all, if there were viable competition, shippers might have options that threaten the railroads’ ability to use their CRAP. What can you do if you’re fed up with the railroads CRAP? 

Most importantly, get familiar with federal legislations designed to help shippers with the railroads. For example, The Railroad Antitrust Enforcement Act has already been introduced in the Senate and House by Sen. Herb Kohl (D-WI) and Rep. Tammy Baldwin (D-WI), respectively. The Railroad Competition and Service Improvement Act (RCSIA) is expected to be introduced soon. This legislation would address the elimination of ‘bottlenecking,’ disallow the Surface Transportation board (STB) from authorizing certain sales of track by a Class I railroad to a Class II or III railroad, improve the ‘rate reasonable standard’ by requiring the STB to consider specific cost data, reduce filing fees for bringing a ‘rate reasonable standard’ case to the STB, establish a new regulatory process for ‘Areas of Inadequate Rail Competition’ (AIRC), and a provision in the Bill would allow rail customers to hold railroads liable for damages sustained due to poor service. 

After you’re familiar with this and are tired of the railroads CRAP, pick up the phone or write a letter to your Congressional Representative and Senators and ask them to support these pieces of legislation. 

(A special thanks to John Cutler, General Counsel of NASSTRAC and Partner in the firm of McCarthy, Sweeney & Harkaway. John is very involved in representing shipper interests with the railroads and provided important information for this Blog.) 

TranzAct Technologies, Inc.