STB Confronts Rail Dominance

The Surface Transportation Board released new regulations aimed at dealing with railroad market dominance in rate reasonableness proceedings. “The final rule provides an option for simplifying the market dominance inquiry which otherwise can be costly and time-consuming, especially in smaller cases,” the STB said, adding the decision part of its continuing effort to make rate review procedures more accessible, efficient and transparent. The proceeding was opened last fall following years of complaints from shippers about the inadequacy of the board’s rate regulation process, including measuring cost of capital and establishing market dominance in what are now largely regional rail monopolies (AA 10-15-19, P. 1) The final rule sets forth the following seven factors that a complainant must demonstrate: • The movement has a revenue-to-variable cost ratio of 180% or greater; • The movement would exceed 500 highway miles between origin and destination; • There is no intramodal competition from other railroads; • There is no barge competition; • There is no pipeline competition; • The complainant has used trucks for 10% or less of its volume (by tonnage) subject to the rate at issue over a five-year period; and • The complainant has no practical build-out alternative (regardless of transportation mode) due to physical, regulatory, financial or other issues. Complainants who can’t make this showing would still be able to use the non-streamlined market dominance approach to prove market dominance. Under either approach, defendant railroads would continue to have the opportunity to rebut a complainant’s evidence, the STB stressed. The board also announced that it would soon initiate a proceeding to further explore the adoption of various commodity-specific thresholds, including ones for chlorine and agricultural products.