The Justice Department's antitrust division yesterday urged the Interstate Commerce Commission to disapprove the merger of the Santa Fe and Southern Pacific railroads.
In a brief filed with the ICC, Justice said that none of the conditions proposed to alleviate potential anti-competitive aspects of the merger would be sufficient. If the ICC approves the merger, Justice said, that action "would contravene the mandate of the Staggers Act to rely upon and therefore to preserve rail competition."
The Staggers Act is the railroad deregulation act of 1980 that is generally credited with having restored financial strength to the nation's railroads. Among other things, it has made railroad mergers easier.
The Atchison, Topeka and Santa Fe Railway Co. and the Southern Pacific Transportation Co. merged in December 1983 to become the Santa Fe Southern Pacific Corp. However, the operations of Southern Pacific were placed under an independent trustee, insulated from the holding company, pending the ICC's merger decision.
Justice said that analyses made during the ICC study of the proposal "demonstrate that the merger would adversely affect competition in markets throughout the geographic networks of the two railroads."
Both roads run from California to the Midwest, with the Santa Fe terminating in Chicago and the Southern Pacific in New Orleans. There is parallel track in the California Central Valley and both roads have lines across Arizona and New Mexico, among other places.
Justice called the proposed transaction "a parallel merger of a scope unprecedented in recent years." Furthermore, it said, there is no evidence that Southern Pacific needs Santa Fe to survive financially.
Railroads have argued that their strongest competition comes not from each other, but from truckers and, especially in the East, from barges.
Justice said, "While trucks and other modes compete with railroads for certain traffic, there is overwhelming evidence . . . that, in the region of the merger, trucks are at a distinct competitive disadvantage for large shipments of rail traffic -- particularly bulk commodities moving in large volumes over long distances."