Trains.com
You have 7 views remaining. Click here to learn about the Unlimited Membership!

Home / News & Reviews / News Wire / Justice Department raises competitive concerns over CSX-Pan Am merger

Justice Department raises competitive concerns over CSX-Pan Am merger

By Bill Stephens | August 26, 2021

STB urged to require sale of CSX interest in Pan Am Southern joint venture

Email Newsletter

Get the newest photos, videos, stories and more.

Map showing Pan Am Railways, Pan Am Southern, and northernmost portion of CSX Transportation
Map showing Pan Am Railways, Pan Am Southern, and northernmost portion of CSX Transportation
A detail from a map filed with the Surface Transportation Board shows how Pan Am Railways (in red) and Pan Am Southern (in green) connects with the easternmost portion of CSX Transportation. The Justice Department says CSX should have to sell its stake in Pan Am Southern as part of the deal to acquire Pan Am Railways. (CSX)

WASHINGTON — The Surface Transportation Board should force CSX Transportation to sell its stake in Pan Am Southern as part of its proposed acquisition of New England regional Pan Am Railways, the Justice Department said Thursday.

The Pan Am Southern is the joint venture between Pan Am Railways and Norfolk Southern, which provides NS with access to the Boston area via the former Boston & Maine main line from the Albany, N.Y., area to Ayer, Mass. The Pan Am Southern also includes Pan Am’s north-south route along the Connecticut River from Vermont to Connecticut.

CSX and NS agreed that a new Genesee & Wyoming subsidiary, the Berkshire & Eastern, would be named the neutral operator of Pan Am Southern as part of CSX’s proposed acquisition of Pan Am Railways [see “CSX files Pan Am merger application …,” Trains News Wire, Feb. 26, 2021].

But the Justice Department says there are still competitive concerns because CSX would own its own route into New England, the former Boston & Albany, while stepping into Pan Am Railways’ stake in the parallel Pan Am Southern.

“The proposed transaction would give CSX both control over the operating entity on a competing line and a 50% stake in the track and physical infrastructure of that line. This arrangement is likely to diminish competition between CSX and PAS on these parallel routes,” the Justice Department wrote in a filing with the STB. “Additionally, the transaction may allow CSX to impair the ability of its remaining rival, NS, to effectively compete. Although NS owns, and will continue to own, the other 50% of the PAS line, CSX could potentially hamstring its rival through its stake in PAS and its control of the joint venture’s operating entity. Because certain joint venture customers will purchase service attributable to NS, CSX could undermine NS notwithstanding the joint venture by sabotaging this service and expecting to recapture traffic on its independent line.”

The Justice Department also raised concerns about a reduction in competition in the north-south Knowledge Corridor along the Connecticut River from White River Junction, Vt., through Massachusetts, and into Connecticut.

Pan Am Southern currently operates on a combination of its own trackage and trackage rights over G&W’s New England Central to reach White River Junction and interchanges with the Vermont Rail System.

“If the CSX-Pan Am transaction is consummated and B&E becomes the contract operator of the Knowledge Corridor PAS line, G&W subsidiaries will be both the contract operator of PAS and PAS’s primary competitor,” the Justice Department said. “In effect, the proposed remedy reduces the numbers of competitors in the Knowledge Corridor from two to one.”

The Justice Department said it was “highly skeptical” that two G&W railroads — Berkshire & Eastern and New England Central — could compete with each other effectively on the north-south route.

“Ultimately, the easiest, cleanest, and least risky solution would be a structural remedy involving the sale of Pan Am’s stake in PAS to another party that could operate PAS,” the Justice Department said. “Structural remedies are strongly preferred in merger cases because they are clean and effective, and they avoid ongoing government entanglement in the market.”

In a statement Thursday evening, CSX said it remains confident about the future of the Pan Am deal.

“We appreciate the overwhelming support this pro-competitive transaction enjoys from New England shippers, elected officials, passenger groups, and other stakeholders,” the statement says. “CSX is confident in the significant benefits that this transaction will provide to New England through enhanced service, improved environmental performance and investment in infrastructure. We will address and work through concerns by continuing discussions and participating in the regulatory process.”

One thought on “Justice Department raises competitive concerns over CSX-Pan Am merger

  1. The service levels offered by CSX on the rest of its system do not bode well for “improved” service on Pan Am Southern r ails. It’d refreshing to see a well-reason ed order coming from the STB in this case. Hopefully, its views will prove persuasive in a formal hearing.

You must login to submit a comment