March 03, 2023

After East Palestine Rail Disaster, Warren Urges Surface Transportation Board to Block Proposed Railroad Merger Citing Threats to Safety and Jobs

Former Iowa Mayor Warns Merger Could Result in “Disaster of Monumental Proportions”

“The proposed CP-KCS merger would not benefit the public interest, failing the test needed to receive STB approval. Given its adverse impact on competition, service disruptions, jobs, and rail safety, I ask that STB use it authority granted under the ICC Termination Act of 1995 to deny the merger”

Text of Letter (pdf) 

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to the Surface Transportation Board (STB), urging them to block the proposed merger between Canadian Pacific (CP) and Kansas City Southern (KCS), which would combine the sixth- and seventh-largest U.S. railroads by revenue. The Senator sent the letter following the derailment and massive chemical spill in East Palestine, Ohio and highlighted the risks from years of cost-cutting and deregulation of the nations’ railways.

Sen Warren raised concerns that if the deal goes through, it would reduce competition in an already consolidated market, cause increased shipping costs, job losses and service disruptions that impact American supply chains. She also raises safety concerns, citing industry cost-cutting and efforts “to squeeze as much productivity out of these workers as they can” – and one former Iowa mayor’s warning that the merger could ultimately result in “a disaster of monumental proportions.”

Under the ICC Termination Act, which created the STB, the board may authorize a merger only if it affirmatively finds that it “is consistent with the public interest,”  and must take into consideration “the effect of the proposed transaction on the adequacy of transportation to the public…the total fixed charged charges that result from the transaction, the interest of rail carrier employees … (and) whether the proposed transaction would have an adverse effect on competition.” 

“Allowing this merger… to proceed would reduce competition in an already highly consolidated market and could cause increased shipping costs,” wrote Senator Warren. “(T)he proposed merger could result in significant job losses and service disruptions that negatively impact American supply chains.” 

Since the deregulation of the rail industry by the Staggers Act in 1980, consolidation has rapidly accelerated, with the number of Class I railroads decreasing from 33 in 1980 to just 7 now. This proposed merger would reduce this number to just 6. If approved, it would join 7,300 miles of KCS’s tracks with 15,000 miles of CP’s tracks to create the only north-south rail corridor bisecting the whole continent, from Mexico to Canada. This merger would give the new company additional leverage over competitors, and has shippers worried that they’ll be left with no alternative rail shipping options.

Recently, the Department of Justice Antitrust Division shared its own serious concerns about increasing consolidation in the industry, noting that the proposed merger could “empower the merged railroad to deny shippers access to the lowest cost or fastest end-to-end routings,” and enable the firm to “foreclose competition in other ways, such as raising costs for their rivals through control over inputs or access.” Indeed, like previous railroad mergers, this one could also lead to increased shipping rates across the board.

As a champion for consumers and fair markets, Senator Warren has urged regulators to combat market concentration, monopolies, and anticompetitive practices across different sectors of the economy:

  • In January 2023, Senator Warren sent a letter to the Federal Trade Commission (FTC) urging the agency to closely scrutinize two pending big pharmaceutical mergers: Amgen and Horizon Therapeutics, and Indivior and Opiant. 
  • In January 2023, Senator Warren sent a letter to Federal Communications Commission (FCC) Chair Jessica Rosenworcel urging the agency to block hedge fund Standard General’s proposed acquisition of broadcaster Tegna, Inc. 
  • In October 2022, Senators Warren, Bernie Sanders (I-Vt.) and Representative Jan Schakowsky (D-Ill.) sent a letter to FTC Chair Lina Khan urging the agency to oppose Kroger’s proposed $24.6 billion acquisition of Albertsons, which could increase the companies’ monopoly power and hurt both companies’ workers and consumers. The lawmakers also raised concerns about an unusual $4 billion dividend payout by Albertsons that is part of the deal.
  • In September 2022, Senator Warren, along with Representatives Mondaire Jones (D-N.Y.), Katie Porter (D-Calif.), Mark Pocan (D-Wisc.), Pramila Jayapal (D-Wash.), and Jesús “Chuy” García (D-Ill.), sent a letter to the FTC calling on the agency to oppose Amazon’s proposed $1.65 billion acquisition of iRobot, raising concerns about Amazon’s anticompetitive practices that put consumers and their privacy at risk.
  • In September 2022, Senator Warren sent a letter to Secretary of Transportation Pete Buttigieg, urging the Department of Transportation to use its full statutory authority to address consolidation in the airline industry and expressing serious concerns about the proposed merger between JetBlue and Spirit Airlines.
  • In June 2022, Senators Warren, Bernie Sanders, and Cory Booker (D-N.J.), and Representative Katie Porter sent a letter to Jonathan Kanter expressing skepticism regarding a bid from a private equity firm to acquire the Enfamil infant formula manufacturing arm of Reckitt Benckiser Group and how such a transaction, amid the nation’s ongoing infant formula shortage, could harm competition or prolong this crisis. 
  • In May 2022, Senators Warren and Mike Rounds (R-S.D.) introduced a bipartisan joint resolution that would direct the FTC to report to Congress within one year on the extent of anti-competitive practices and violations of antitrust law in the beef-packing industry, including price-fixing, anti-competitive acquisitions, dominance of supply chains, and monopolization.
  • On March 16, 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the DOJ and FTC the teeth to reject deals in the first instance without court orders and to break up harmful mergers. 
  • In March 2022, Senator Warren and Representative Jones, along with Senators Ben Ray Luján (D-N.M.) and Bernie Sanders , and Representatives Rashida Tlaib (D-Mich.), Katie Porter, Jan Schakowsky, and Alexandria Ocasio-Cortez (D-N.Y.) sent a letter to Jonathan Kanter and Transportation Secretary Pete Buttigieg, expressing concerns about Frontier Airlines’s proposed acquisition of Spirit Airlines. 
  • In February 2022, Senator Warren and Representative Jones led their colleagues to slam the proposed merger between Sanderson Farms, the third-largest poultry processor, and Wayne Farms, the sixth-largest poultry processor, and called on the DOJ to thoroughly review the deal and step in to prevent harm to American farmers and consumers. 
  • In February 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits. 
  • In February 2022, Senator Warren requested the DOJ to take aggressive action against corporations violating antitrust laws to hike prices for consumers. 
  • In January 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.
  • At a hearing in January 2022, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.
  • In December 2021, Senator Warren and Representatives Joaquin Castro (D-Texas), David Cicilline (D-R.I.), Pramila Jayapal and 29 other Members of Congress sent a letter to the DOJ, calling on it to investigate the proposed $43 billion merger of Discovery and WarnerMedia for violations of antitrust laws.
  • In November 2021, Senator Warren requested the Department of Justice to investigate the poultry industry's anticompetitive behavior as turkey and chicken prices soared.
  • In June 2021, Senator Warren called on the FTC to engage in a “broad” and “meticulous” review of Amazon's acquisition of Metro-Goldwyn-Mayer Studios (MGM) consistent with Section 7 of the Clayton Act, expressing concerns that the acquisition has the potential to harm consumers and workers, and reduce innovation.