News & Reviews News Wire Justice Department chimes in, again, with concerns about CP-KCS merger

Justice Department chimes in, again, with concerns about CP-KCS merger

By Bill Stephens | January 25, 2023

Antitrust division has concerns about merger, despite absence from CP-KCS hearings last fall

Email Newsletter

Get the newest photos, videos, stories, and more from brands. Sign-up for email today!

Four Kansas City Southern units lead a northbound container train across the Rio Grande and into the United States at Laredo, Texas, in November 2017. Railroads have expressed concern about the Laredo gateway as a result of the proposed Canadian Pacific-KCS merger. Bill Stephens

WASHINGTON — No one from the Justice Department bothered to testify at the Surface Transportation Board’s September hearing on the proposed merger of Canadian Pacific and Kansas City Southern.

But that absence doesn’t mean the Justice Department doesn’t have concerns about the first merger of Class I railroads in two decades.

In a letter to the STB this week, the Justice Department emphasized that all the issues it raised about the deal in April — including the potential for a reduction in railroad competition, a reduced incentive to invest in new technology, and more concentration of the industry — still stand.

At the September hearing, CP and KCS argued that the STB could infer that the Justice Department’s Antitrust Division does not believe the merger has the potential to cause harm, eight Justice Department lawyers, including Assistant Attorney General Jonathan Kanter, wrote to the STB.

“No such inference should be drawn,” they said, noting the Justice Department said in April that it “shares the Board’s serious concerns about increasing consolidation in the industry” [see “Justice Department questions structure of CP-KCS merger plans,” Trains News Wire, April 12, 2021].

“The Antitrust Division emphasizes that the Board should not interpret the Antitrust Division’s absence from the Board’s September 2022 proceedings to imply otherwise,” they wrote.

The Justice Department once again urged the STB to give careful scrutiny to the proposed merger and its competitive implications. CP and KCS argue their merger will boost railroad competition, particularly for service linking Canada and the Midwest with Texas and Mexico. Other Class I railroads, however, have said the merger poses competitive problems, particularly at the KCS-controlled Laredo gateway to Mexico.

The letter was apparently triggered by hearing comments from CP and KCS witness Robert Majure.

“It’s also informative to look at who’s not complaining. The Department of Justice has a long history of concern for competition in the railroad industries,” he told the STB. “Their absence from these proceedings tells me that they don’t agree with these comments … From my own experience, they do not tend to be shy about expressing their concern and particularly in the rail industry. And from that experience, I would say that I can infer from that how they feel about the potential for harm from this particular transaction.”

CP lawyer David Meyer told the STB that the railroads agree with the Justice Department: The board should protect competition in the industry and fully examine competition concerns.

“Applicants certainly did not mean to suggest that DOJ had ever affirmatively concluded that any particular competition claim lacked merit or expressed affirmative support for the Transaction. However, as the long-closed factual record developed in this case establishes, Applicants have demonstrated both that the effect of the Transaction will be strongly procompetitive and that, especially in light of the commitments Applicants have made to the Board and the public, the claims of commenters raising competitive concerns lack merit and do not warrant conditions beyond those Applicants have already accepted,” Meyer wrote.

The STB is an independent agency that is nearing a completion of its review of the merger. Once a final environmental impact statement is issued, likely in the next couple of weeks, the board must wait 30 days to issue a final decision on the merits of the merger.

The Justice Department reminded the STB that the attorney general has the right to intervene in Class I mergers. The Justice Department did say, however, that it “remains committed to working collaboratively with the Board to protect and promote competition in the railroad industry, including sharing our perspective on pending transactions.”

15 thoughts on “Justice Department chimes in, again, with concerns about CP-KCS merger

  1. KCS and CP both meet in Kansas City. There, they could (and do) turn over traffic to each other and both benefit. What this is about is exec’s of KCS getting money (bonuses) and then a good number of them stepping aside. Many employees of KCS will lose their jobs. That is what mergers always do. Otherwise there is no compelling reason to merge other than Creel saying he is head honcho of a BIG railroad.

  2. Regarding the CP/ KCS merger, the best objection was stated by the one dissenting vote on the KCS Board of Trustees (which was essentially ignored), ie, that the feint toward the CN/ KCS merger did not properly allow for government review and public comment to be considered in real time.

  3. Given the DOJ’s recent very partisan, and possibly even criminal behavior (FBI intervening in recent elections?), it seems to me the DOJ has little or no credibility, combined with the fact that they didn’t weigh in during the STB hearing last September, they (DOJ) should just shut-up and go away …….

    Then again, “rule-of-law” in this country (supposedly enshrined in the U.S. Constitution?) is disappearing (if not gone altogether) and this country is rapidly sliding down the slippery slope to ‘Banana-republic’ territory such that DOJ has become an unaccountable power to itself and seems intent on sticking its nose into wherever and whenever it pleases.

    Truly sad & scary what’s happening in this country right now …..

    “Who is John Galt?”

  4. A little late to the show DOJ. Less than 30 days away and now you have concerns? Should of been at the meeting in the summer. Also this is a pro competition. This will be the last merger in this industry. We are all
    Part of history.

  5. Moons ago I watched as a peanut gallery reject started off his Congressional testimony by thanking a particular congresscritter for his support and and going on record about how he knew said congressman was “passionate” about the particular subject under discussion. The congresscritter retorted, categorically, ‘don’t tell me what I am and am not passionate about.’ The denizens inside the Beltway know the power of legacy. If it goes on record that so-and-so is passionate about saving the skeets then 500 years from now that will be taken as gospel. Best not to declare nor infer what other people or groups are thinking.

  6. The Justice Department is too busy on “other” matters right now for them to even worry one iota what the railroads are doing.

  7. Let me translate to English. USDOJ has no coherent thoughts on the merger, so takes this opportunity to express incoherent rambling.

    1. Exactly! If they wanted to comment, they should have been at the meeting. It’s just another case of the government sticking their nose where it doesn’t belong.

    2. Mr Woodruff, isn’t the Surface Transportation Board an entity of the U.S.Government?
      Or is it a UN organization, maybe a European Union department.☺

    3. You’re right Ian! I should have worded it a little better. But I catch your drift.

You must login to submit a comment