- The Washington Times - Friday, September 14, 2007


Five major freight rail companies overcharged customers by more than $6.5 billion under the guise of fuel surcharges, according to a study backed by businesses that accuse U.S. railroads of anti-competitive behavior.

“This is the greatest train robbery of the 21st century,” said Jack Gerard, president and chief executive of the American Chemistry Council, which represents about 90 percent of the nation’s chemical makers.

The council commissioned an economic analysis that found the railroads’ fuel surcharges were excessive by more than $6.5 billion between 2005 and the first quarter of 2007. The study was based on regulatory filings and other estimates for Union Pacific Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp., Kansas City Southern and CSX Corp.

Federal regulators in January banned excessive fuel surcharges and imposed strict rules on the fees that many rail companies have openly credited with bolstering their earnings.

The Surface Transportation Board ruling said the railroads must link the surcharges directly to the fuel costs for specific rail shipments and prohibited “double-dipping,” which means fuel costs can’t be calculated into certain price increases if the shipments already have other fuel surcharges.

The board has no authority to enforce refunds or seek penalties, Mr. Gerard said, adding that railroad customers lack any regulatory means to attempt to recoup the money. Still, some have filed lawsuits claiming the fuel surcharges amounted to price-fixing.

Phoenix-based Dust Pro Inc. in May filed an antitrust lawsuit that seeks class-action status on behalf of parties that shipped goods on one or more of the five railroads since July 2003.

The lawsuit, filed in the U.S. District Court for New Jersey, seeks monetary damages from the railroads, which reputedly fixed prices for the fuel surcharges without any relationship to fuel costs.

The lawsuit cited the Surface Transportation Board’s decision, even though the agency’s ruling applied only to rate-regulated shipping. The majority of shipments involved in the lawsuit are unregulated.

Robin Chapman, a spokesman for Norfolk Southern, declined to comment on the study, but said the antitrust lawsuits were “without merit” and that the company plans to contest them.

Tom White, a spokesman for the Association of American Railroads, said the lawsuits prove that the industry’s rates already are subject to antitrust laws, though he acknowledged the industry has been exempt from some laws since it was deregulated in 1980.

The Surface Transportation Board yesterday awarded a $1 million contract to a consulting firm to assess competition in the freight railroad industry. The study, prompted by a Government Accountability Office report that expressed concerns on the matter, will be completed next fall.

The American Chemistry Council and other trade groups support legislation that would subject railroads to stiffer antitrust standards.

The trade groups think their chances of passing such legislation are helped by the $300 million fines that the Justice Department levied last month against British Airways PLC and Korean Air Co. for colluding with rivals over cargo rates and fuel surcharges.

The five companies involved spent a total of about $6.3 million lobbying the federal government in the first half of 2007, compared with a total of about $1.6 million for the American Chemistry Council, Consumers United for Rail Equity and the Consumer Federation, according to disclosure records.

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