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 Throughout history, antitrust laws have been utilized to
protect the process of competition to benefit consumers, making sure there are
strong incentives for businesses to operate efficiently, keep prices down, and
keep quality up. This is not the case, however, with the looming acquisition of
the American-owned Kansas City Southern (KCS) railroad by Canadian Pacific (CP),
a foreign-owned company.
If you haven't heard of this development, then it's for good reason. While the
Biden administration claims that it is concerned about a lack of competition in
the rail sector, they are seemingly allowing the potential acquisition to
proceed without the same widespread scrutiny other large mergers have triggered.
It also appears as if the White House is now willing to abandon the President’s
July 2021 executive order “Promoting Competition in the American Economy” which
was meant to highlight the importance of healthy market competition and to
remove foreign monopolies.
By failing to address challenges associated with our ongoing
supply chain crunch, it is as if some within the White House understand that
they are not adequately supporting their initial promises to help tame excessive
inflation. This is a failure to act in a manner that puts American consumers
first.
So what would happen if this acquisition were to be completed without the same
types of merger reviews conducted by either the U.S. Department of Justice
Antitrust Division or the Federal Trade Commission? Other than reducing the
quality of the rail sector in the United States, it would destroy competition.
The proposed acquisition would combine the more than 20,000 miles of track in
the CP and KCS networks into the only railroad extending service between Mexico,
Canada, and the United States, inherently giving the new railroad monopolistic
power. Although CP and KCS contend that their companies are end-to-end –
servicing different areas with little direct competition – combining the two
companies could ultimately allow them to deny service to competitors, cancel
reciprocal switching agreements, and close critical gateways. That is especially
concerning here in the southwest, where a newly combined CP-KCS railroad would
have the incentive to undermine competition at the international rail junction
in Laredo, Texas, which is the gateway to 54% of all U.S.-Mexico rail traffic.
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Nothing less than the future of rail-reliant
American businesses is at stake. Certain commodities and products
are already geographically limited. Foreign-owned railroads in
control of those routes would leverage even more market power over
shippers. This will spike prices in an already troublesome economy.
Land-locked states like Minnesota, Montana, and the Dakotas, for
example, rely heavily on a single railroad monopoly to move their
agricultural products. Already, agriculture inputs are paying twice
the rates of areas that have competition. The consequences on
business owners and American wallets should this take place are
unimaginable.
But the creation of this new railroad would not
just adversely affect Americans in their wallets, it could
additionally impact Americans in their local communities as well.
States like Illinois, Iowa, Missouri, Kansas, Oklahoma, Arkansas,
Louisiana, and Texas would see an increase of eight to 14 trains per
day. But believe it or not, the noise from these trains would indeed
not be the biggest negative of this acquisition.
In a totally expected fashion, there would also be a substantial
increase in rail traffic and train length on major rail lines,
adding entirely to an issue that already exists in many parts of the
country. Hours more of traffic delays are certain, but this may just
be a nuisance. More importantly, millions of Americans may have to
grapple with potentially life-threatening EMS calls that may not
make it to the scene in time. Every second counts on these calls but
unfortunately, EMS vehicles, fire or medical, could have to grapple
with the gridlock that can result from rail crossings that are
blocked for 10 minutes or more when a train is passing through,
leading to slower response times.
It is crucial that the Biden administration hold true to its
economic and working-class promises. This acquisition will be
subsidized and controlled by a foreign entity: a factor worth
resisting in and of itself. The Surface Transportation Board must be
held accountable and take all public comments, including those who
are raising broader economic competition concerns, into
consideration. Before a conclusion is reached in early 2023, either
the Department of Justice Antitrust Division or the Federal Trade
Commission should also consider providing their thoughts on this
proposed acquisition.
At this time of uncertainty in the global
marketplace, it is imperative to promote competitive and efficient
supply chain solutions for the good of American economic security
and competitive markets.
Patrick M. Brenner is the founder and president of
the Southwest
Public Policy Institute,
a research institute dedicated to improving the quality of life in
the American Southwest by formulating, promoting, and defending
sound public policy solutions. |
