News & Reviews News Wire Union Pacific challenges STB’s Canadian Pacific-Kansas City Southern merger decision

Union Pacific challenges STB’s Canadian Pacific-Kansas City Southern merger decision

By Bill Stephens | May 5, 2023

UP asks federal court to vacate the board's March 15 decision

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Canadian Pacific and Kansas City Southern officially tied the knot on April 14, 2023. CPKC
WASHINGTON – Union Pacific has asked a federal court to overturn the Surface Transportation Board’s approval of the Canadian Pacific-Kansas City Southern merger.

In a petition for review filed on Wednesday with the U.S. Court of Appeals for the District of Columbia Circuit, UP said the STB’s March 15 decision exceeded the board’s authority and was not supported by substantial evidence.

Union Pacific logo without slogan“Union Pacific requests that this Court vacate the order under review and grant such additional relief as may be necessary and appropriate,” the railroad said in its court filing.

UP asked the court to consider whether the STB’s decision-making process was based on relevant factors and whether the board made an error in judgment.

“The merger of Kansas City Southern and Canadian Pacific is likely to reduce competition and negatively impact shippers and stakeholders. In approving the merger, the Surface Transportation Board acknowledged these concerns, but did not adopt solutions to remedy the harms,” a Union Pacific spokeswoman said.

CPKC said the STB’s review of the first merger of Class I railroads in two decades was thorough.

“We don’t know what UP’s argument is, but in our view, the STB conducted a comprehensive, thorough and thoughtful review of the combination which produced the right final decision clearly recognizing the combination’s many benefits,” the railway said in a statement.

UP is the dominant carrier in the north-south corridor linking Mexico and Texas with the Midwest. CPKC is a new competitor in this north-south corridor that also includes BNSF Railway. The CP-KCS merger application said CPKC would divert more traffic from UP than any other railroad.

Independent analyst Anthony B. Hatch was stunned by UP’s lawsuit.

“I’m flabbergasted. This has not happened before, at least not in my recollection,” he says.

The STB clearly said the merger would be judged under the old review rules, not the tougher 2001 rules that require a railroad combination to enhance competition, Hatch noted. The old rules merely required that a merger not harm railroad competition.

“The UP is a product of many mergers itself,” Hatch noted. “How is this merger decision process any different than UP-SP and UP-CNW?”

UP has responded to new competition from CPKC by partnering with Canadian National and Ferromex on Falcon Premium intermodal service that will link Detroit and Canada with points in Mexico, Hatch noted. The CN-UP-FXE announcement came after CPKC landed intermodal contracts to handle Schneider and Knight-Swift containers between Chicago and Mexico.

19 thoughts on “Union Pacific challenges STB’s Canadian Pacific-Kansas City Southern merger decision

  1. UP knows their service is horrible and they know competition could further harm their income so this is the way they choose to fight it. Getting more power out of storage, improving quality of the engines, running track speed with maximum 8500 ft trains is the obvious answer. But, no way in hell will they do it under current management.

  2. Said the railroad that swallowed Chicago & North Western and Southern Pacific, and screwed-up badly in both cases.

    Focus on running your own railroad, UP. Right now, your metrics, reputation and legacy are in shambles, and your actions are threatening re-regulation of the whole industry.

  3. There is not a snowball’s chance in hell that UP is going to undo the CPKC merger through this lawsuit. I hope UP isn’t that stupid. Assuming they aren’t, lemme take a guess at UP’s real motivations.

    During the STB hearings, UP wanted the STB to establish what they call a “rate mechanism” for freight moving through the Laredo border crossing. Pre-merger about half of KCSM’s traffic was handed over to UP at Laredo. Much of that traffic moved to the Midwest which was beyond the pre-merger KCS network. Since CPKC serves the Midwest, they no longer have to give as much traffic to UP at Laredo. UP’s “rate mechanism” would have prevented CPKC from diverting most of this traffic over its own network since it would lock in the pre-merger rates. If I were to guess implementing this “rate mechanism” would be UP’s main goal in this lawsuit.

  4. So UP is baby rageing because they now are not top dog? That laughable. I’m SORRY… BUT… you the got SP… CNW… the Rio Grande… the Katy…. do you see what I am getting at here? UP I’d jaut mad because now they have competition and ha e to play nice and share. Utterly pathetic. Doesn’t matter that your late to the party on a closed case and now wanna have a petty party.

  5. If UP had management that knew how to run their business it wouldn’t have all the problems it has had the last 40 years.

  6. From the MBA school that teaches that legal costs are always cheaper than the cost to compete. “We would rather compete in the least expensive forum in the world, the courts of the US government”.

    Where the thinking is 200 lawyers arguing over 10 years is more effective than extending a siding.

    Maybe the STB should extend an “embargo” on counter-merger lawsuits. See how that sock fits over the big red-white & blue shield. Bah!

    1. Best post (John Rice above) ever in the history of comment pages.

  7. This from the same carrier that was using embargoes to moderate their traffic flow. An old saying about people in glass houses comes to mind….

  8. This would be funny if it were not so sad on UP’s part

    Forget the old rules about not just harming competition but apparently the merger enhanced competition satisfying the new rules. Evidence, UP’s response of “. . .partnering with Canadian National and Ferromex on Falcon Premium intermodal service that will link Detroit and Canada with points in Mexico.

    Case closed! If it were only so easy. . . . At least the lawyers will be making some dineros. 🙂

  9. Isn’t UP a bit “late to the party” in terms of their challenge here? Public comment and review happened last summer.

    And given UP’s history of mergers over the last 30+ years (and subsequent operational screw-ups) it would seem the UP doesn’t have a strong case here ….(?)

  10. 4 major RR’s in this country and they don’t want to compete with each other??
    I am guessing the “Big 4” doesn’t know how to compete with the trucking industry, nor the barge companies. Good Grief.

    1. Even with the just completed merger, there is still 6 “major” railroads here…CSX, BNSF,CN, NS,UP, and now we have CPKC.

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