CN on UP+NS: ‘Remedies Are Necessary’

Railway Age

Now that Union Pacific and Norfolk Southern have, as anticipated, submitted an amended merger application to the Surface Transportation Board (STB), the proposed transaction has come under intense scrutiny. CN on April 30 announced that it “continues to review [the] amended merger application … will remain actively engaged in this process.”

CN apparently intensely reviewed the application as soon as it became public, and has not stepped back its initial objections: “Despite having addressed certain deficiencies, the Applicants have failed to materially improve the amended application in ways that address the competitive harms of the merger, despite the STB’s clear encouragement to do so. Most notably, they have not remedied the significant competitive harms posed by the merger, nor have they offered any meaningful competitive enhancements as required under the Board’s new rules. These failures should be fatal to the application.”

UP and NS “falsely continue to call their merger end-to-end,” CN said. “However, as CN has previously demonstrated, [we] continue to believe the areas of competitive overlap and harms are more extensive than those identified in this amended application. CN is well positioned to provide solutions to the issues the Applicants acknowledge, as well as those harms they have yet to address.

“Remedies are necessary for a transaction that would control approximately 40% of U.S. freight rail traffic. But the measures outlined in the amended application are plainly inadequate. The Applicants cannot cure an incomplete and deficient application with vague and insufficient remedies. The STB’s mandate to impose the necessary conditions to protect competition and the public interest is not negotiable.”

“Given the magnitude of this transaction, the Board’s authority to impose conditions that protect competition and the public interest must be paramount,” said CN Senior Vice President and Chief Legal Officer Olivier Chouc. “If Union Pacific and Norfolk Southern have set a cost cap on the conditions they’re willing to accept, that’s their business decision and their risk. It is not a ceiling on the Board’s authority, and it doesn’t limit what’s required in the public interest.”

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