Rail Merger Hinges On Competitiveness

The federal government’s decision whether to give a green light to the proposed $5.4 billion merger of Union Pacific Railroad and Southern Pacific Rail Corp. turns on the question of competitiveness.

Whose definition of competitiveness the government accepts remains to be seen.

The fate of the proposed merger, which would create the nation’s largest railroad, lies in the hands of the three-member Surface Transportation Board. It will decide Wednesday whether to reject the merger or accept it in whole or with certain conditions attached.

The companies contend their marriage would be a competitive gain, resulting in corporate efficiencies and improved service while buttressing the flagging fortunes of San Francisco-based Southern Pacific.

But opponents of the deal counter that the near-monopoly resulting in broad swaths of the country would dampen competition, inevitably leading to higher freight prices.

The Justice, Transportation and Agriculture departments want to scuttle or dramatically alter the deal, saying it would cost consumers $800 million annually in higher prices while also harming farmers and U.S. exporters.