Final rule on railroad market dominance issued by the STB

Earlier this week, the Washington, D.C.-based Surface Transportation Board (STB), an independent adjudicatory and economic-regulatory agency charged by Congress with resolving railroad rate and service disputes and reviewing proposed railroad mergers, said it has issued a final rule regarding market dominance.

STB officials said that the objective of this rule is to “establish a streamlined approach for pleading market dominance in rate reasonableness proceedings,” adding that “The final rule provides an option for simplifying the market dominance inquiry, which otherwise can be costly and time-consuming, especially in smaller cases. 

This decision, STB said, is part of its continuing effort to make its rate review procedures more accessible, efficient, and transparent.

The impetus for this rule goes back to September 2019, when the STB proposed what it called a Market Dominance Streamlined Approach, which is designed to reduce the burden on rate cases by establishing that a complainant can make a prima facie (accepted as correct until proven otherwise) showing of market dominance, when the complainant has demonstrated:

• The movement has a revenue-to-variable cost ratio of 180% or greater;
• The movement would exceed 500 highway miles between origin and destination;
• There is no intramodal competition from other railroads;
• There is no barge or pipeline competition;
• The complainant has used trucks for 10% or less of volume (by tonnage) subject to the rate at issue over a five-year period; and
• The complainant has no practical build-out alternative due to physical, regulatory, financial, or other issues (or combination of issues)

STB said that complainants who cannot make the showing under aforementioned factors would still have the option to utilize the non-streamlined market dominance approach to prove market dominance, saying that under either approach, defendant railroads would continue to have the opportunity to rebut a complainant’s evidence.

And it added that after considering stakeholder comments regarding commodity-specific mileage thresholds, STB will soon initiate a proceeding to further explore the adoption of various commodity-specific thresholds, including for chlorine and agricultural products. 

The final rule will take effect on September 5.