The plastics industry is right to be concerned over the pending takeover of Conrail by Norfolk Southern Corp. and CSX Corp. So is every other shipper that relies heavily on rail transport in the Northeast region.
Despite assurances that the deal, estimated to be worth $10 billion, will increase competition, history, experience and logic suggest the opposite can be expected.
Less than 20 years ago, more than 40 major railroads operated in the United States. Today, nine exist. Fewer railroads and the consolidation of trackage has not promoted competition in the industry any more than joint operating agreements have produced more daily newspapers in the country.
Daily newspapers, which cite competition from radio, television and other communication outlets, routinely have increased prices for both subscribers and advertisers. Why? Because they can, especially in communities served by only one major newspaper. Railroads, which point to competition from truck companies and other carriers, differ little in the sophistry and similarity of their claim.
Railroads historically have been slow to modernize, partly as a result of union pressures, but primarily because no incentive existed to alter the status quo protected by government fiat. For years inefficient railroads could run on autopilot and make money.
The interstate highway system, started during the administration of President Eisenhower in the 1950s, altered the old way of doing business for railroads. Today's environment, seasoned by government deregulation, is the result.
The irony of deregulation is that it produces less competition in the end as the economic rule of the jungle is asserted. This is why there are fewer local telephone companies in 1997 than right after the 1984 breakup of AT&T, which aggressively is seeking to acquire one of the so-called ``Baby Bells'' it spun off 13 years ago.
The market that Norfolk and CSX will control after the Surface Transportation Board in Washington approves the merger next year is captive. The government-created Conrail monopoly will simply become a commercially operated duopoly. One way each railroad can be expected to generate the revenue to retire the $10 billion purchase price and pay for debt service is through track access charges to each other that shippers must pay.
If Congress were serious about deregulation, it would remove the railroads' antitrust protection and let the Justice Department determine whether the merger supports competition.
We don't think it does.