Class 1s Say Review CP-KCS Merger Under New Rules

Four Class 1 railroads have asked the U.S. Surface Transportation Board to evaluate the proposed acquisition of Kansas City Southern by Canadian Pacific under more stringent rules.

BNSF, Canadian National, Union Pacific and Norfolk Southern have urged the STB to use its 2001 merger review rules in the case.

KCS had earlier received a waiver from the current merger review rules. KCS nd CP have sought to have the transaction reviewed under the pre-2001 standards.

That idea received support from CSX, the only Class I railroad to support the KCS waiver.

In their filings with federal regulators, the other Class 1 systems said CP and KCS should be required to submit service assurance plans, demonstrate that the deal would provide public benefits and enhance competition, and explain how existing gateways would be preserved.

In their filings, the Class 1 systems said the KCS of 2021 is a vastly different railroad than the KCS of 2001, with significantly more revenue, traffic, and mileage due to its having gained a full interest in the Texas Mexican Railway and KCS de Mexico.

“Any justification for the potential KCS exception has evaporated,” CN wrote in its filing. “KCS’s expansion of its Mexican operations post-2000 make it a transnational carrier and a very different railroad from the one it was in 2000. Indeed, KCS’s revenues now exceed the $1 billion threshold that it claimed in 2000 would be an appropriate trigger for full review under the new rules.”

UP said the STB never should have adopted a waiver for KCS while BNSF said all Class I railroad mergers should be judged by the same standards.

NS said in its filing that the old rules are out of step with the industry today.

“The prior rules are antiquated, adopted over 40 years ago. The railroad industry has transformed itself since then, and the STB modernized its major merger guidelines in sync with those changes,” NS said.

No Class 1 merger has been reviewed under the current STB merger rules.

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