Railroad: Big 4 Class I's (UP, BNSF, CSX, NS) accused of price-fixing

[Astronuc]

https://journalstar.com/business/lo...cle_ca625906-790f-543e-b568-2e9d26d35a1d.html

OMAHA — A federal judge has ruled that the details of conversations between the nation's four largest railroads should be included in lawsuits challenging billions of dollars of charges the railroads imposed in the past.

The ruling Friday undercuts one of the defenses Union Pacific, BNSF, CSX and Norfolk Southern had offered in dozens of lawsuits major companies filed last year questioning the way railroads set rates. The lawsuits say the railroads conspired to boost prices starting in 2003 by imposing coordinated fuel surcharges and pocketing billions of dollars in profits.

The individual major railroads did not immediately respond to questions about the lawsuits Monday.

The price-fixing allegations have been winding their way through U.S. courts for more than a decade since several companies first filed similar lawsuits in 2007.

I've been wondering about this for some time. I'm puzzled by the decision of an appellate judge ruling last year that the case didn't qualify for class-action status for as many as 16,000 shippers affected by the rates.

 

[Astronuc]

Somewhat related - since it involves US Class I common carriers - a warning from former BNSF executive Matt Rose’s in 2019

https://www.trains.com/trn/news-rev...executive-matt-roses-2019-warning-comes-true/

Before he retired in 2019, BNSF Railway Executive Chairman Matt Rose warned that the other Class I railroads were inviting regulatory risk by adopting Precision Scheduled Railroading, reducing service, and demarketing some types of traffic in pursuit of higher profits.

“We have this common-carrier obligation to provide freight service to all customers in all markets,” Rose told an industry conference in January 2019. “And what we’re doing in PSR is we’re redefining what we’re willing to accept in the freight railroad industry on certain lanes. And I really do believe we’re going to get in a lot of trouble by doing that.”

“When you start redefining markets,” Rose warned, “I think then the federal policymakers will look at this, and quite frankly, they will not be happy with us.”

That day of reckoning is here.

About two weeks ago, Surface Transportation Board Chairman Martin J. Oberman questioned whether railroads are shirking their common-carrier obligations due to pressure from Wall Street. Price-fixing allegations and questionable surcharges will attract regulatory scrutiny.

Edit/update: Another part of the story - back during the week of July 15
UP Temporarily Stopping Eastbound Container Service To Chicago
Freightwaves, July 15 - https://finance.yahoo.com/news/temporarily-stopping-eastbound-container-chicago-200247988.html

Union Pacific is temporarily suspending eastbound service from West Coast port terminals to its Global IV intermodal facility in Chicago to help ease "significant congestion" at inland terminals, especially Chicago, and at the ports.

UP hopes this suspension, which will start on Sunday (July 17) and last for about seven days, will not only help relieve port backlogs for Chicago-bound container traffic but also ultimately help address backlogs for containers destined to other markets.

The suspension applies to UP-served terminals at the ports of Los Angeles, Long Beach and Oakland, California, and Tacoma, Washington.

Apparently, BNSF did something similar.

 

[Vanadium 50]

Price fixing bad. I get that.
Dropping service to some areas bad. I get that too.

But what's wrong with stopping shipments to overwhelmed facilities? And how does this relate to the above? We could argue that they shouldn't have let the facilities get overwhelmed in the first place, but once that has happened, what should they do instead? And I have a hard time imagining a bunch of railroad tycoons sitting around a table saying, "You know what will really make us some money? Gumming up the works in Chicago so we can't move our freight!"

 

[Astronuc]

But what's wrong with stopping shipments to overwhelmed facilities?

Nothing, except that it seems there were warnings. It didn't just happen.
June 21 - https://www.forbes.com/sites/willys...ention-to-pipeline-inventory/?sh=7c41d8e32708
June 3 - https://www.joc.com/rail-intermodal...ng-congestion-pressures-chicago_20210603.html

And how does this relate to the above?

Just an added complication.

We could argue that they shouldn't have let the facilities get overwhelmed in the first place, but once that has happened, what should they do instead?

Yes, we could agree. Better planning needed perhaps? It seems there were indicators as early as June, if not earlier. The question is why the inland terminals became overwhelmed.

And I have a hard time imagining a bunch of railroad tycoons sitting around a table saying, "You know what will really make us some money? Gumming up the works in Chicago so we can't move our freight!"

I agree. I don't think that was case.

The good news - opportunities abound and customer interest is high for domestic intermodal, even though congestion is expected to persist.
https://www.freightwaves.com/news/international-intermodal-congestion-to-persist-through-2021-up

I'm just wondering about the monopolistic structure of the industry. It used to be 4 major lines in the west (ATSF, SP, BN and UP), or 5 if one considers the Milwaukee Road (MILW), which basically evaporated in 1980. Now its UP and BNSF. Is there really competition? Is there incentive to improve service?

And certainly the situation is complicated because of the ocean (marine) carriers, the port systems, and various intermediaries.

From the Forbes article

A shortage of truck chassis means its difficult to get containers out of the terminal to warehouses, that in turn leads to congestion that makes it is difficult to unload trains.

 

[Vanadium 50]

Is there really competition? Is there incentive to improve service?

That's a political question. Our elected government seems to think it's fine, since they approved it.

Going down a level, we want the low, low prices of a free market, but we also want not to penalize people too much for not being in a convenient place for rail traffic (like, ironically, Santa Fe). That takes work.

 

[Astronuc]

That's a political question.

Yes.

Our elected government seems to think it's fine, since they approved it.

I don't believe they even begin to understand the subject.

https://www.joc.com/rail-intermodal...arges-5000-second-straight-year_20210729.html

Jul 29, 2021 - Union Pacific Railroad has raised domestic intermodal surcharges for a fourth time in 2021 with a $5,000 per container fee on excess contract loads for low-volume shippers in California.

I wonder if that will attract regulatory scrutiny. It seems designed to discourage shipping by the particular carrier. Potentially a problem is the only other competitor does the same.

 

[Astronuc]

Burlington Northern Santa Fe (BNSF) CEO Katie Farmer, explained the situation. ". . . while we are transporting and unloading volumes this year at a pace exceeding our peak year of 2018, international containers are dwelling in our yard after unloading nearly 30% longer. The reality is that significantly more freight is coming into BNSF facilities than is being picked up . . . " There is a shortage of people driving trucks picking up and delivering containers, and it's affecting the same regions served by BNSF and UP.

https://www.trains.com/trn/news-rev...s-international-intermodal-congestion-issues/

CSX Transportation CEO Jim Foote has indicated similar issues, particularly in the Chicago area, where BNSF and UP are facing congestion. Foote wrote, "While the number of containers dwelling at CSX terminals has increased this year, particularly in Chicago, the railroad has kept its terminal gates open. The railroad has boosted efficiency by increasing ground storage capacity, moving containers to off-site parking, and converting its Bedford Park facility in Chicago into an international terminal and its 59th Street terminal into a domestic facility."

CSX also has a different problem because of a labor shortage. This had lead to complaints by shippers'groups.
https://prod.stb.gov/wp-content/uploads/Fertilizer-Institute-to-Board-relating-to-CSX_20210602.pdf

(June 2, 2021) The Fertilizer Institute wrote, "[It] Appears CSX has cut too much in terms of crews. It is trying to manage by bringing back the bare minimum."