Democratic U.S. senator raises concerns over potential CP, CSX deal

Thu Oct 16, 2014 12:52pm EDT
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By Nick Carey

CHICAGO Oct 16 (Reuters) - The head of a U.S. Senate subcommittee raised concerns in a letter on Thursday to the U.S. Attorney General and head of the top U.S. rail regulator about a potential merger between Canadian Pacific Railway Ltd and CSX Corp, and called on them both to fully review the antitrust implications of any such deal.

"Given recent concerns about shipping delays and ongoing concerns about anticompetitive conduct in the railroad industry, any further consolidation would prompt significant concern," Senator Amy Klobuchar, a Democrat representing Minnesota, wrote to Eric Holder and Dan Elliott of the Surface Transportation Board (STB).

The Wall Street Journal reported on Sunday that Canadian Pacific, the No. 2 Canadian rail operator, had made a bid for CSX, the No. 3 U.S. railroad, but had been rebuffed. Both companies declined to comment on the report.

While not impossible, any merger between major railroads with extensive networks in the U.S. is seen facing significant hurdles before it can gain STB approval.

Klobuchar, who chairs the Senate Judiciary Antitrust Subcommittee, wrote that as she travels across Minnesota, a heavily agricultural state, she has heard complaints about poor rail service plus concerns "from the shipping industry about the railroad industry's antitrust exemption and the anticompetitive conduct that occurs as a result."

"Without access to competition, rail customers are often in a 'take it or leave it' position with respect to both price and service," she added.

Klobuchar wrote that "one of the most concerning aspects" of a potential merger between Canadian Pacific and CSX is that the Department of Justice has "no independent authority to review and, if appropriate, block or condition a railroad merger."

The senator called for a Department of Justice review of any deal and called on the STB chairman to "give weight" to the department's analysis of a merger. (Reporting By Nick Carey; Editing by Chris Reese)