STB heralds one-year anniversary of WH executive order focused on promoting economic competition

On July 9, Martin J. Oberman, Chairman of 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, lauded the White House’s actions to foster competition in U.S. businesses, commemorating the one-year anniversary of Executive Order 14036, “Promoting Competition in the American Economy.”

As previously reported by LM, a main driver for this EO, according to the White House, was that in more than 75% of U.S.-based industries, a smaller number of large companies now control more of the business than they did 20 years ago, adding that a lack of competition has increased consumer prices and also driven down wages for workers.

What’s more, the freight railroad sector was a key focus of the EO. The EO encouraged the STB to require railroad track owners to provide rights of way to passenger rail and to also strengthen their obligations to treat other freight companies fairly.”

It added that going back to 1980, there were 33 Class I railroads, whereas now there are seven, with four major rail companies that it said now dominate their respective geographic regions.

“Freight railroads that own the tracks can privilege their own freight traffic—making it harder for passengers to have on-time services—and can overcharge other companies’ freight cars,” it said.

That sentiment is closely aligned with the STB’s proposed reciprocal switching legislation offered up in 2016, which would allow a rail shipper to gain access to another railroad if the shipper makes certain showings. As defined by the STB, reciprocal switching is a situation in which a railroad that has physical access to a specific shipper facility switches rail traffic to the facility for another railroad that does not have physical access. And the second railroad compensates that railroad that has physical access in the form of a per car switching charge, with the shipper facility gaining access to an additional railroad.

The STB’s Oberman said that the White House’s policy of emphasizing the need for more competition among U.S. businesses coincided with his own commitments to focus on improving rail competition, while also welcoming the White House’s underscoring the importance of improving competition as national policy.

And he also highlighted various efforts the STB has made, focusing on its own competition-related efforts and anticipated actions, including:

• a two-day hearing in March on reciprocal switching;
• two proposed rulemakings to address rate reasonableness procedures, one focused on a streamlined “final offer” procedure, with the other regarding an expedited voluntary binding arbitration procedure; and
• the STB is also considering and carefully considering the proposed Canadian Pacific-Kansas City Southern merger

Todd Tranausky, FTR vice president of rail and intermodal, told LM in a previous interview that many times in Washington, the bark is louder than the actual bite, observing how this EO is closer to a statement of administration policy than it is an actual executive order.

“The STB is an independent federal agency so it is not as beholden to announcements such as this the way, say, DOT would be, but they are also not immune to the political winds either,” he said. “The important thing is to focus on the exact wording of what comes out. Is it directing an agency or is it ‘encouraging an agency to consider?’ The later wording is a suggestion and would be tough for the [STB] to defend if it used that as a reason to stop a merger proceeding. Longer term, it certainly gives some more backing to proceedings like EP 711 [competitive or reciprocal switching] that have languished at the board for a decade now, especially given there is now a board with relatively recent tenures and new eyes to examine rail-shipper disputes through where this could help sway them one way or the other.”