U.S. rail merger application accepted, but regulator pauses review

Canadian National Railway Co. says a U.S. regulator’s decision to pause its review of a proposed rail merger confirms concerns that the applicants have yet to present a credible case.

Canadian National Railway said the Surface Transportation Board was right to freeze the process and require Union Pacific and Norfolk Southern to submit additional information.

Union Pacific and Norfolk Southern said they applauded the Surface Transportation Board’s decision to accept their merger application, saying it is an important step toward a reinvigorated, more competitive U.S. railroad industry. The companies acknowledged the board’s request for additional information on their amended merger application, reiterating their commitment to work constructively with the board.

“We are confident this merger will deliver more reliable and lower-cost transportation options for American businesses,” said Union Pacific CEO Jim Vena. “We submitted a comprehensive, data-driven application backed by a detailed plan for seamless integration. We look forward to the opportunity to show the facts and demonstrate the benefits for our customers, employees and America.”

The board said the companies must present a “prima facie case” — one that meets the public interest standard at first glance — before the review can proceed.

CN said the regulator found “concerning” gaps in the amended application, including unresolved competitive issues, insufficient market analysis and a lack of measures to enhance competition.

The railway added that the decision reinforces concerns that stakeholders cannot fully assess the merger’s impacts without more detailed information.

The proposed deal would reshape the U.S. rail network and concentrate control of about 40 per cent of freight rail traffic in a single company, CN said.

“The Board already told the Applicants what was missing. Instead of fixing the gaps in their case, UP and NS largely recycled the same deficient arguments and inadequate analyses,” said Olivier Chouc, executive vice-president and chief legal officer, CN. “CN from the beginning has emphasized that the heightened merger rules require applicants to demonstrate real competitive enhancements and clear public benefits. UP and NS have failed to meet that standard. At every stage of this process, the record continues to show an application full of holes, unsupported assumptions and remedies that fall far short of what is required for a major merger between Class Is. Applicants need to take this process seriously, and so far, they have not done so.”

CN said it continues to believe the merger would reduce competition, increase concentration across key freight corridors and create risks for supply chains.

The company also criticized proposed remedies as too limited, saying a pricing program highlighted by the applicants would apply to only a small portion of rail traffic and could leave some shippers facing higher costs.

CN said it supports the regulator’s approach and will review additional information once it is submitted.