Tuesday, May 15, 2007

Phoenix firm claims price-fixing by 5 freight railroads (kvoa.com)

NEWARK, N.J. -- Five major freight railroads conspired to fix prices by adding fuel surcharges, according to an antitrust lawsuit filed Monday in U.S. District Court.

The lawsuit, which seeks class-action status, was filed by Phoenix-based Dust Pro Inc. on behalf of other parties who shipped goods on one or more of the railroads since July 2003.

The suit seeks unspecified monetary damages from the five railroads: CSX Transportation Inc., of Jacksonville, Fla., Norfolk Southern Railway Co., of Norfolk, Va.; BNSF Railway Co., a subsidiary of Burlington Northern Santa Fe Corp., of Fort Worth, Texas; Union Pacific Railroad Co., of Omaha, Neb.; and Kansas City Southern Railway Co., of Kansas City.

The lawsuit alleges the five engaged in an "unreasonable restraint of trade or commerce" in violation of the Sherman Act, a federal antitrust law. It said the companies control more than 90 percent of the rail freight traffic.

CSX spokesman Bob Sullivan said the railroad could not yet discuss specific allegations, but that it "believes strongly that its fuel surcharge practices comply with all applicable laws and regulations."

Kansas City Southern said the allegations are "without merit," but did not elaborate.

Officials at the other railroads had no immediate comment.

The lawsuit charged that the railroads "moved in uniform lockstep" to fix prices for the fuel surcharges, which it said had no relationship to actual fuel costs.

As a result, the railroads "restrained competition in the market for unregulated rail freight transportation services" and "realized billions of dollars in revenues ... in excess of their actual increase in fuel costs from the specific customers on whom they imposed the surcharge."

The lawsuit cited a decision by the U.S. Surface Transportation Board, which in January banned excessive fuel surcharges by railroads and imposed strict rules on the fees that many companies had credited with bolstering profits.

That ruling, however, applied only to rate-regulated shipping. The lawsuit said the majority of shipments are unregulated.

The board said it did not have jurisdiction over unregulated shipping, said Stephen Neuwirth, a lawyer for Dust Pro, which ships liquids used for large-scale dust control.

Neuwirth said the lawsuit was filed in Newark because the region is one of the nation's freight centers.

Freight is considered "unregulated" when a shipper has choices on how to transport its goods, said Robert G. Szabo, executive director of Consumers United for Rail Equity _ a nonprofit lobbying group representing freight rail customers seeking changes in federal law and policy.

Shippers who require rail to move their goods and only have one rail company to choose from can petition the Surface Transportation Board for lower rates, a process that Szabo called expensive and rarely successful.

His group is not involved in the lawsuit, although Szabo said, "I agree with it totally."

The lawsuit said much of the freight rail industry was deregulated in 1980, but that the number of carriers has declined from 35 at the time to seven.

As a result, "Rail freight shippers across the nation are being subjected to an endless string of rate increases by railroads made possible by a concentrated market structure, tight capacity, and coordinated pricing," the lawsuit said.

The suit was filed in the U.S. District Court for New Jersey.

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