Rail shippers face higher rates and reduced competition if the proposed Union Pacific (UP) and Norfolk Southern (NS) merger proceeds, according to BNSF President and Chief Executive Katie Farmer. In a statement Tuesday, Farmer said the carriers' fourth attempt to submit a complete merger application to the Surface Transportation Board (STB) fails to address core anticompetitive concerns.
Despite the supplemental filing completed Monday at the STB's request, Farmer asserted that "UP and NS have not changed the core of their proposal that fails to demonstrate how combining two major railroads into a single carrier would preserve – much less enhance – competition as required by the STB's merger rules."
Anticompetitive Impact and Market Share
According to Railfax data cited by Farmer, the combined UP-NS would capture approximately 37% of North American rail traffic. An operating agreement recently announced with Canadian National (CN) would add another 13% share, bringing the total to 50%. "They do nothing meaningful to mitigate the massive anticompetitive impact of 50% market share held by one company," Farmer said.
| Metric | Value |
|---|---|
| UP-NS combined North American rail traffic share | ~37% |
| Additional share via CN operating agreement | ~13% |
| Total market share | ~50% |
Committed Gateway Pricing (CGP) Flaws
Farmer highlighted the carriers' so-called Committed Gateway Pricing (CGP) proposal, which they tout as a competitive safeguard. However, she noted it would be available to only about 1% of rail shipments and would disappear after a few years. Moreover, "as UP and NS's application makes crystal clear – would actually raise rates for most of the shippers who ever use it." The gateways cover important interchange hubs such as Chicago, St. Louis, and the border with Mexico.
Shipper and Consumer Consequences
Farmer concluded, "The additional data submitted by UP does not change the fact that this would be an anti-competitive transaction between two financially healthy companies that will reduce competitive options and raise rates on rail customers, result in higher prices for consumers and thus do great harm to the American economy and broader supply chain."
Implications for Freight Forwarders and Shippers
For logistics managers and freight forwarders relying on transcontinental rail service, the merger threatens to inflate costs and limit service options. With BNSF and UP as the two dominant western carriers, a UP-NS combination would concentrate pricing power. Shippers should prepare for potential rate increases and explore intermodal alternatives, including trucking, if the merger is approved. Close monitoring of STB proceedings and any additional conditions imposed on the merger will be essential.
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