Shipper files petition to reopen BN-Santa Fe merger

WASHINGTON, D.C. (Feb. 16, 2000) — One of the largest corn processors in the United States filed a petition with the U.S. Surface Transportation Board yesterday to reopen the 1995 merger between the Burlington Northern Railroad and the Atchinson, Topeka, and Santa Fe Railway Co. because a loss of pre-merger competition created “substantial harm” to the company.

Roquette America Inc.’s request for a reopening of the ICC-approved merger coincides with the STB’s consideration of the largest rail merger proposal to date between the BNSF and the Canadian National Railway.

In 1995, the merger of the BN and the ATSF was the largest at that time.

“Since last June, we have been trying to resolve this matter through voluntary, private negotiations with the BNSF,” said Lee Williams, Director of Logistics of RAI. “It is ironic that our petition with the STB is filed at the same time that the BNSF is preparing another merger application for the STB’s consideration as well. Our petition to the STB should be a warning to the shipping community that negotiated merger conditions imposed to preserve competition do not always work out as planned.”

Prior to its 1995 merger, the BN and the ATSF each competed for rail traffic Keokuk, Iowa, a centre of corn processing in the Midwest. Since then, virtually the only single line service to Keokuk has been provided by the merged BNSF railroad, although the ICC’s approval of the merger conditioned it on BNSF allowing the Southern Pacific (now part of the Union pacific) access to Keokuk traffic.

BNSF, as an express condition of the approval of its merger by the ICC (the predecessor agency to the STB), agreed to allow SP access to Keokuk and RAI business through an interchange at Bushnell.

“The condition imposed by the ICC has proven not to be a viable option, and today, UP does not even operate trains at Bushnell,” said Williams. “BNSF is obligated to allow competitive access to our traffic and BNSF must determine an alternate condition that at least equals pre-merger competition. BNSF’s steadfast refusal to acknowledge the scope of competition prior to its merger, and its continued refusal to recognize the necessity of competition in Keokuk presents us with no other recourse than to seek STB intervention to reopen the BNSF merger, even as the STB considers another merger request by BNSF.”

According to Williams, RAI’s Director of Logistics, rail costs of moving RAI bulk products account for up to 20% of the delivered price. “Even when we consider BNSF’s monopoly pricing position, we have no cost effective alternative for shipping beyond 400 miles except by rail,” said Williams. “We are captive to one railroad and the de facto monopoly power of the BNSF prevents RAI and other area shippers from seeking a competitive price for the shipment of our products.”

As an example, in 1994 prior to the merger, 61% of RAI’s traffic to customers in the West was carried by the ATSF and 39% by BN. Today, the BNSF carries 100% of the traffic. “Without competition, we have no idea whether the BNSF’s rates or terms of service on this route are reasonable. From experience, we know that competition among carriers reduces rates and improves service,” said Williams.

“All we are asking is that the STB recognize changed circumstances and restore the existing level of pre-merger competition to the Keokuk area,” said Williams.

Concluding, Williams said that the RAI would participate in the STB’s public hearings on March 8 & 9 to review the impact of rail consolidations.

“As a major shipper on the merged BNSF lines, we believe that we are in a unique position to testify on promises made and promises kept. Our experience should be instructive to the STB as it determines how best to impose, monitor, enforce, and revise conditions requiring viable competitive alternatives. Let’s hope that the future is brighter than the past.”