A major shippers’ association representing over 3,500 companies across chemical, manufacturing, agricultural and energy sectors has voiced strong opposition to the proposed $85 billion merger between Union Pacific and Norfolk Southern railroads, warning it could lead to deteriorating service and increased costs.
The Freight Rail Customer Alliance (FRCA) expressed significant concerns about further consolidation in the rail industry, citing historical precedents where similar mergers resulted in higher rates and declining service quality. FRCA President Emily Regis emphasized their long-standing opposition to such consolidations in the rail sector.
The proposed merger, announced July 29, would create an extensive transcontinental network spanning 43 states with over 50,000 route-miles of track. While the railroads claim the deal would improve efficiency by reducing cargo dwell time by up to 48 hours and streamlining coast-to-coast operations, shipping industry
representatives remain skeptical.
FRCA spokesperson Ann Warner highlighted how the U.S. rail industry has consolidated dramatically since the 1980 Staggers Rail Act deregulation, shrinking from 40 Class I carriers to just six, with four companies now controlling 90% of American rail freight. Warner noted that despite losing market share to trucking companies over two decades due to service issues and high rates, railroads continue to increase profits while maintaining high operating ratios.
The association particularly criticized how railroads have pushed shippers into contracts that fall outside the Surface Transportation Board’s (STB) regulatory oversight and provide inadequate protection against poor service and fee increases. They also pointed out that efficiency gains from Precision Scheduled Railroading have primarily benefited railroad shareholders rather than customers.
The merger’s impact on bulk commodity shippers, who transport materials like coal and grain in dedicated unit trains, remains particularly concerning. These shippers, who move approximately half of the 1.5 billion tons of annual U.S. rail freight, often have limited carrier options for their point-to-point shipments.
Regis emphasized that while a transcontinental merger might
theoretically enhance competition for unit train shippers, significant concerns remain about implementation timeframes and potential service disruptions similar to those experienced during past mergers. The FRCA stressed the importance of ensuring workable competitive solutions for captive shippers – those with access to only one railroad – with effective STB enforcement.
The STB, which holds authority to approve or reject the merger, primarily oversees published tariff rates rather than confidential contracts between railroads and shippers. This regulatory limitation adds another layer of complexity to addressing shipper concerns about the proposed consolidation.
The controversial merger proposal comes at a time when the rail industry faces scrutiny over its market power and service quality. Critics argue that despite railroad claims of improved efficiency and coordination, previous consolidations have often resulted in higher costs and reduced service quality for shippers.
As the merger review process moves forward, the FRCA has indicated its intention to actively participate in the formal comment period once merger applications are filed with the STB. The organization’s stance reflects broader industry concerns about continued consolidation in a sector already dominated by a small number of major players.