Railroads Accused Of Price-Fixing

A new study supports allegations by several industry groups that five major freight-rail companies fixed prices for fuel surcharges without any relationship to actual fuel costs.

"This is the greatest train robbery of the 21st century," said Jack Gerard, president and chief executive of the American Chemistry Council, which represents about 90Vo percent of the nation's chemical makers.

The council commissioned the study, which was based on regulatory filings and other estimates from 2005 to first quarter 2001 for Union Pacific Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp., Kansas City Southern, and CSX Corp. Total surcharges for this period totaled more than $6.5 billion.

In January, the federal Surface Transportation Board banned excessive fuel surcharges and imposed strict rules on the fees that many rail companies reportedly charge to boost their earnings. The board ruled that railroads must link surcharges directly with actual fuel costs for specific rail shipments and prohibited "doubledipping."

But the board has no authority to enforce refunds or seek penalties, said Gerard. who added that railroad customers currently lack any regulatory means to attempt to recoup the money. The American Chemistry Council and other trade groups support legislation that would subject railroads to stiffer antitrust standards.

Some companies have filed lawsuits alleging that the fuel surcharges amount to price-fixing. In May, Dust

Pro Inc., Phoenix, Az., filed an antitrust lawsuit that seeks classaction status on behalf of parties who shipped goods on one or more of the five railroads since July 2003. Filed in the U.S. District Court for New Jersey, the suit seeks monetary darnages from the railroads. It also cited the Surface Transportation Board's decision, even though the ruling applied only to rate-regulated shipping. The majority of shipments involved in the suit are unregulated.

The Association of American

Railroads maintains that the lawsuits prove the industry's rates already are subject to antitrust laws, though the industry has been exempt from some laws since it was deregulated in 1980.

Norfolk Southern declined to comment on the study, but said the antitrust lawsuits were "without merit" and that the company plans to contest them.

The Surface Transportation Board has awarded a $l million contract to a consulting firm to assess competition in the freight railroad industry. The new study should be completed by fall2008.

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