News / US state legal chiefs in late bid to steer UP-NS rail merger into the buffers

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Six of the nine Republican attorneys general that objected to the looming Union Pacific-Norfolk Southern tie-up remain unconvinced, claiming the railroads’ resubmitted merger filing is still “incomplete”.

After their November warning that the merger threatened the “America First” agenda, AGs from Florida, Iowa, Kansas, Montana, North Dakota, and South Dakota said they saw nothing in the resubmitted filing to allay their concerns.

In a letter to the Surface Transportation Board (STB), they wrote: “The applicants’ own projections show they will control 50% of US Class I freight rail traffic, and their own predicted market shares are even higher for specific commodities and corridors.

“The harm to competition associated with such market shares is clear, yet UP and NS are careful to avoid discussion of these shares. Multiple commentators note projected shares are buried in appendices not easily accessible or interpretable.”

On top of market share, there are concerns that a tie-up between the major railroads could provoke “downstream consolidation”.

Citing STB rules, the letter claimed UP and NS had failed to consider “the possibility that other railroads might attempt to merge to compete with a combined UP and NS”, nor how the newly formed entity would fit within the market – and there was more.

It added: “A combined UP-NS would control key industry assets that are jointly owned and shared by major railroads, including the Kansas City Terminal Railway Co, Terminal Railroad Association of St Louis, and railcar pooling company TTX. The application fails to specify what UP-NS will do to prevent the combined company from having the ability to control these entities or manipulate their operations to benefit the combined company at the expense of other railroads.”

However, quite how effective the letter will be in impeding the merger’s progress – the deal is backed by the president – remains to be seen, its filing coming almost a fortnight after the STB’s deadline for comment on the merger application’s completeness. But, pointing to the brevity of the challenge, the attorneys general said the seven amendments included in the filing were complicating the process of fully evaluating the proposed merger.

“Due to resource constraints in our offices, we relied on the parties’ submissions to guide our review of the lengthy application and the associated back-up files, which are incredibly voluminous (and which UP and NS were still uploading this week),” they said.

“Recognising the important role attorneys general play in protecting the citizens and businesses in our states, we respectfully request that the board waive the deadline and accept this short submission.”