October 1, 2014

BNSF, UP target of price-fixing lawsuit

A mining and natural resources company, Oxbow Carbon and Minerals, has filed an antitrust suit against BNSF and Union Pacific, alleging the railroads have illegally fixed freight rates, in violation of the Sherman Antitrust Act, “to gouge customers.” Oxbow mines and ships coal and petroleum coke.

The lawsuit, before the federal District Court for the District of Columbia, was filed the same day the Association of American Railroads and the American Short Line and Regional Railroad Association urged members of Congress to oppose legislation introduced in the Senate earlier this year by Sen. Herb Kohl (D-Wis.) to bring railroads more fully under the nation’s antitrust laws. That bill is S. 49, the Railroad Antitrust Enforcement Act of 2011.

There is no direct connection between the Oxbow lawsuit and S. 49, although they both deal with antitrust law. The lawsuit alleges violations of the Sherman Antitrust Act of 1890.

Oxbow, controlled by industrialist William Koch, is asking the federal court to order BNSF and UP “to stop their illegal practices that restrain competition,” and is seeking unspecified damages that would be tripled under antitrust law if the lawsuit is successful.

The lawsuit also alleges BNSF and UP “have colluded” with CSX and Norfolk Southern, with the four railroads “[conspiring] since 2003 to use the deceptive concept of a ‘fuel surcharge’ to raise prices charged to their customers. The so-called ‘fuel surcharge’ has little to do with the actual cost of fuel and is simply a mechanism to increase rail shipping prices,” alleges Oxbow.

An attorney for one of the law firms representing Oxbow said, “This lawsuit will finally force Union Pacific and BNSF to account, in federal court, for their long history of breaking American antitrust laws. The complaint filed today describes how the railroads have used monopolization and price-fixing illegally to drive up the price of shipping coal and many other products, and those higher prices affect every business and consumer in the country.

“Only the power of the federal court can compel the freight railroad industry to fundamentally reform its business practices and stop abusing customers, consumers and the national economy,” said the attorney representing Oxbow.

Additionally, the Oxbow complaint alleges that since passage of the Staggers Rail Act of 1980, which partially deregulated railroads, mergers have resulted in only four major rail carriers – BNSF, CSX, NS and UP — and that the four “control shipping in the western states and agreed not to compete with each other or encroach on each other’s service territories by offering lower prices to potential customers.”

A BNSF spokesperson told Bloomberg news, “BNSF has not colluded or conspired in violation of any law.” UP said in a prepared statement that Oxbow had long warned of litigation unless the railroad came through with “exceptional commerical concessions.”

In its letter to congressional lawmakers June 7, the Association of American Railroads and the American Short Line and Regional Railroad Association said S. 49 “purports to repeal the railroads’ antitrust exemptions in order to treat the railroads like all other industries. However, the bill goes much further than repealing the limited antitrust exemptions the railroads currently have. It would subject railroads to discriminatory provisions that do not apply to other regulated industries.

“Railroads are already generally subject to the same antitrust laws as other businesses,” said the railroad associations in regard to S. 49. “The limited exemptions that the railroads do have exist only where the Surface Transportation Board regulates the same matter or activity. There is no gap in government regulatory oversight.

“Going beyond the antitrust laws, the bill limits the application to the railroads of the judicial doctrine which allows courts to defer to the primary jurisdiction of an administrative agency on matters that are within the agency’s areas of expertise and oversight,” the railroad associations told lawmakers.

“This doctrine is common for all regulated industries and for all legal matters,” said the railroad associations. “However, [S. 49] singles out only the railroads for hostile treatment in a manner which has nothing to do with an antitrust exemption.”