Railroad Antitrust

Floor Speech

Mr. LEE. Madam President.

I stand in this moment in opposition to the railroad antitrust amendment offered by my distinguished colleague, Senator Kohl, and I urge my fellow Senators to do likewise.

As the Antitrust Modernization Commission noted in 2007, free market competition is the fundamental economic policy of the United States. In advancing this overarching policy goal, we should be wary of particularized exemptions from our Nation's antitrust laws. I know Senator Kohl shares my view in that regard.

When properly applied, antitrust laws function to help ensure that market forces promote robust competition, spur innovation, and result in the greatest possible benefit to the American consumer. In many respects, Federal and State agencies enforce antitrust laws in order to forestall the need for burdensome and long-lasting government regulation.

If competition thrives and market forces operate properly, there is no need for extensive government intrusion or interference. Likewise, when the antitrust laws do apply, comprehensive economic regulations should not dictate how an industry operates. It, therefore, makes little sense to impose upon a heavily regulated industry an additional layer of government oversight and enforcement through the application of antitrust laws while at the same time leaving in place a comprehensive regime of government oversight through economic regulation. Piling layer upon layer of government interference will not advance the cause of free market competition, innovation, and consumer welfare.

I am concerned that such layering of government regulation is effectively what the Kohl amendment does. I worry that in extending the reach of antitrust laws to the freight rail industry, the amendment does not remove any authority or jurisdiction of the Surface Transportation Board, the regulatory agency currently overseeing the rail industry. As a result, the amendment simply imposes additional government supervision over the rail industry with attendant increased regulatory burdens and costs as well as inevitable conflicts and uncertainties resulting from a second layer of government oversight over the same activities.

Given the highly regulated nature of the freight rail industry, application of antitrust laws would likely require courts to wade into the complex realm of rate setting and other highly technical matters--a task for which judges are particularly ill-equipped. In addition to this fundamental unease over multiplying government regulatory burdens, I am also very concerned with a number of the amendment's provisions that seem to reach beyond simply eliminating antitrust exceptions for the rail industry.

First, I worry that section 4 of the amendment limits what is known as the doctrine of ``primary jurisdiction'' in those antitrust cases that involve railroads. Under this longstanding doctrine, which was established in 1907, a court will normally defer to an expert agency when that agency has jurisdiction over the subject matter of a legal dispute. This doctrine allows courts to balance regulatory requirements with other legal requirements for regulated industries. The primary jurisdiction doctrine is not an antitrust exemption and discouraging the use of this would be a legal and judicial change that reaches far beyond the antitrust laws and its implications.

I would also note that section 4 would give trial lawyers the power to disregard agency action, but only with respect to the railroads. As a result, railroads would be singled out for special treatment, leaving the doctrine of primary jurisdiction available to the courts in cases involving electrical utilities and other regulated industries. I am unaware of any compelling justification for this disparity.

My second concern relates to section 7(a) of the amendment which not only repeals antitrust immunity for rail rate bureaus but also repeals procedural protections that facilitate lawful rail transportation services. Because of their route structures, railroads are often not individually capable of providing rail transportation services to all locations that a customer may request or that regulations may require. As a result, approximately 40 percent of all rail travel is jointly handled by more than one railroad.

While the railroads must work together to provide through service on some routes in order to meet their regulatory obligations and to meet their customers' transportation needs, the railroads compete with one another for freight movements on routes not involved with through service, and they are fully subject to the antitrust laws.

Current law provides that proof of an antitrust violation may not be inferred from discussions among two or more rail carriers relating to interline movements and rates. In the conference report for the Staggers Rail Act of 1980, Congress explained the need for these evidentiary protections as follows:

Because of the requirement that carriers concur in changes to joint rates, carriers must talk to competitors about interline movements in which they interchange.

That requirement could falsely lead to conclusions about rate agreements that were lawfully discussed. To prevent such a conclusion, the Conference substitute provides procedural protections about lawful discussions and resulting rates.
These evidentiary protections are not antitrust exemptions. They are designed to avoid prejudicial inferences from discussions the railroads must have in order to implement joint arrangements. I am unaware of any compelling reason to alter Congress's considered judgment in establishing these procedural protections. Were these protections to be discarded, railroads would be exposed potentially to legal liability for interline discussions, and they may choose simply not to participate, and rail customers would be faced with the burden of having to deal separately with each railroad in a given route in order to work out commercial and service details.

Third, and perhaps most critically, I am concerned that section 8 of the amendment would effectively lead to retroactive application of antitrust laws, allowing a government agency or private plaintiff to bring a case attacking past railroad activities that were expressly immunized from the antitrust laws in that respect.

Section 8(b) would allow antitrust lawsuits for ongoing railroad activity that was previously immunized from the railroad antitrust laws. This would leave open the possibility that conduct in accordance with railroad merger and line sale transactions previously approved by the Interstate Commerce Commission or the Surface Transportation Board as in the public interest, immunized by statute from antitrust laws, and implemented by the railroads, consistent with the agency's approval, could now be challenged as unlawful.

Were this to become law, the impact on the railroad network and its ability to plan and invest to meet our Nation's growing transportation needs would be adversely affected in a significant way.

In summary, if this amendment eliminated regulatory intervention in the marketplace for rail transportation and left the rail industry subject solely to the antitrust laws, I could, perhaps, endorse that effort. However, that is not the case. This amendment increases rather than improves government oversight of the rail industry's activities and, in my view, is inconsistent with the overarching goal of seeking greater competition in the transportation marketplace unfettered by intrusive government regulation.

In addition, the amendment goes beyond simply eliminating antitrust exemptions and instead changes longstanding policies and judicial doctrine that are not antitrust law tenets.

Last year, when the Judiciary Committee favorably reported S. 49, which is the text of Senator Kohl's current amendment, I made clear that my support was contingent upon resolving these and other concerns prior to floor consideration. Regrettably, such a resolution did not occur, and I must now oppose the amendment and ask my colleagues in the Senate to do likewise.

Thank you, Madam President.

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