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 2007 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 Surface Transportation Board banned excessive fuel surcharges and imposed strict rules on fees charged by many rail companies. The board ruled that railroads must link surcharges directly with actual fuel costs for specific rail shipments and prohibited "double-dipping. "

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 class-action 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 damages from the railroads. It also cited the Surface Transportation Board's decision, even though the ruling applied only to rateregulated 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 suits were "without merit" and that it plans to contest them.

The Surface Transportation Board awarded a $1 million contract to a consulting firm to assess competition in the freight rail industry. The study should be completed by fall 2008.

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