Attorney Generals from nine states say the proposed merger of Union Pacific and Norfolk Southern threatens national security and urged regulators to conduct a “thorough and exacting” review.
The comments came in a letter addressed to Surface Transportation Board Chairman Patrick Fuchs, Vice Chairman Michelle Schultz and member Karen Hedlund, and distributed to the media Friday afternoon. It was signed by the top state law enforcement officials of Florida, Iowa, Kansas, Mississippi, Montana, Ohio, North Dakota, South Dakota and Tennessee.
“[T]he proposed merger between Union Pacific (NYSE: UNP) and Norfolk Southern (NYSE: NSC) will result in undue market concentration that stifles competition and ther…
Attorney Generals from nine states say the proposed merger of Union Pacific and Norfolk Southern threatens national security and urged regulators to conduct a “thorough and exacting” review.
The comments came in a letter addressed to Surface Transportation Board Chairman Patrick Fuchs, Vice Chairman Michelle Schultz and member Karen Hedlund, and distributed to the media Friday afternoon. It was signed by the top state law enforcement officials of Florida, Iowa, Kansas, Mississippi, Montana, Ohio, North Dakota, South Dakota and Tennessee.
“[T]he proposed merger between Union Pacific (NYSE: UNP) and Norfolk Southern (NYSE: NSC) will result in undue market concentration that stifles competition and therefore creates higher prices, lower reliability, and less innovation at the expense of America’s manufacturers and, ultimately, America’s consumers,” the letter stated. “An America First economy will not work if high internal shipping costs kneecap American companies’ ability to compete with foreign manufacturers. The downstream impact of the merger poses significant risk not just for our industrial base but also our agricultural producers.
“Ultimately, then, this merger could compromise our national security.”
The $85 billion acquisition of NS by UP would create the first freight-only coast-to-coast rail network with 53,000 miles of track in 43 states. While major intermodal companies and other entities have backed the deal, thousands of shippers led by the petrochemical industry have voiced their opposition, saying the tie-up would raise freight rates and degrade service.
The letter went on, “Our states are home to a diverse and dynamic set of industries, including chemical manufacturing, energy production, and agriculture. These key strategic American industries rely heavily on freight rail to move essential goods safely, efficiently and affordably. Yet, as the railroads have consolidated, many shippers have seen rail service suffer while costs have increased dramatically. Further freight rail consolidation could make these problems worse. It is vital that the STB determine how this merger will affect all stakeholders, including farmers, workers, consumers, and manufacturers so that increased monopolistic power does not stifle innovation and productivity in industry, put inflationary pressure on household budgets, or otherwise throttle the economy as a whole with the costs of this merger.”
The letter also comes as Trump faces cratering public support for his economic initiatives. The administration on Friday rolled back tariffs meant to rein in rising costs for meat, coffee and other consumer staples.
Shareholders from both railroads on Friday voted overwhelmingly to approve the merger.
The extraordinary nature of the letter is notable: A search by STB staff found many instances of state AGs submitting filings in various proceedings, but none for any recent merger proceedings.
The letter quoted text of the STB’s ‘higher bar’ regulations for merger review adopted after major service meltdowns during industry consolidation in the Nineties but which have to be tested. It states that a merger can only be approved if it they “serve the public interest only when substantial and demonstrable gains in important public benefits – such as improved service and safety, enhanced competition, and greater economic efficiency – outweigh any anticompetitive effects, potential service disruptions, or other merger-related harms.”
The letter further states that unless it meets those standards, the merger is also “inconsistent” with President Donald Trump’s efforts to promote his plans for “America First” prosperity.
Trump earlier backed the merger in an Oval Office meeting with UP Chief Executive Jim Vena; the company later made a donation to Trump’s White House ballroom project. UP also won the support of two of its largest unions after it agreed to post-merger jobs guarantees.
“Given the stakes, we encourage the Surface Transportation Board to subject this proposed merger to a thorough and exacting review in accordance with the law and STB regulations,” the letter stated. “Only if these serious concerns are assuaged should the merger be allowed to proceed.”
The railroads plan to file their detailed merger application with the Surface Transportation Board in early December.
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