CN: STB should reject ‘incomplete’ UP-NS merger application

Canadian National urged the U. S. Surface Transportation Board to reject the amended merger application by Union Pacific and Norfolk Southern, claiming it still fails to meet the regulator’s requirements.

Montreal-based CN (NYSE: CNI) in a filing Monday said the application “continues to omit required information regulators and stakeholders need to meaningfully assess the competitive and operational impacts of this major proposed merger.”

The STB in January rejected the initial application from UP (NYSE: UNP) and NS (NYSE: NSC) for missing information on, among other elements, forward-looking market share data; details that would allow UP to walk away from the deal; and specifics on control of a terminal railway in St. Louis that interchanges traffic between railroads.

CN said the revised application addressed only one deficiency by providing the complete merger agreement. “Applicants still have not offered meaningful competitive enhancements, falling far short of the STB’s higher burden for Class I mergers to enhance competition and meet the public interest standard,” CN said.

The filing also lacks complete competition analyses and market share information, and instances where rail service to shippers would shrink from two Class I options to one, or from three to two. Also, it noted the absence of analyses of downstream competitive impacts from future potential rail consolidation.

CN criticized the proposed Committed Gateway Pricing (CGP) program, which it termed the sole alleged enhancement to competition, calling it a “temporary” and “highly limited” program that applies to less than 1% of U. S. rail traffic.

“CGP excludes major categories of traffic including finished vehicles, intermodal shipments, unit trains, and all customers currently served by CN, CPKC (NYSE: CP), and most short lines,” CN said. According to UP and NS, it claimed, “CGP will actually harm many shippers.

Importantly, many shippers would face increases in rail shipping costs due to the CGP program, as shown in the state maps submitted with CN’s comments.

“Rather than provide the required competition analyses, they recycled the same flawed approach the board already rejected,” said Olivier Chouc, CN executive vice-president and chief legal officer, in a release. “Rather than submit the required Terminal Railroad Association of St.

Louis application, they deleted their prior filing and offered a vague promise in its place. And rather than propose real competitive enhancements, they doubled down on a pricing program that will harm more shippers than it helps as shown by their own expert’s study.

“This is not a serious effort to comply with the Board’s requirements – it is a disregard for the process and for the stakeholders who depend on it.” The company said it expects the STB to conduct a thorough and fair review.

“CN remains confident the board will hold applicants to the standards required by the board’s regulations and to reject this incomplete application.” Subscribe to FreightWaves’ Rail e-newsletter and get the latest insights on rail freight right in your inbox. Read more articles by Stuart Chirls here.