Surface Transportation Board Announces Final Rule on Railroad Market Dominance

The Surface Transportation Board (STB) issued its a final rule on evaluating market dominance in rate reasonableness proceedings.

Per the final rule, a complainant must demonstrate these seven conditions to have a prima facie showing of market dominance:

(1) The movement has a revenue-to-variable cost ratio of 180% or greater;

(2) The movement would exceed 500 highway miles between origin and destination;

(3) There is no intramodal competition from other railroads;

(4) There is no barge competition;

(5) There is no pipeline competition;

(6) The complainant has used trucks for 10% or less of its volume (by tonnage), subject to the rate at issue over a 5-year period;

(7) The complainant has no practical build-out alternative (regardless of transportation mode), because of physical, regulatory, financial, or other issues (or combination of issues).

Complainants who cannot demonstrate the presence of these seven conditions still retain the option of making a traditional market dominance case, which involves a more thorough qualitative analysis of whether there are any feasible transportation alternatives sufficient to constrain the railroad’s rates.

Either approach provides opportunity to defendant railroads to rebut a complainant’s evidence.

The final rule will be effective on Sept. 5, 2020.

This article comes from USDA’s Aug. 6, 2020 Grain Transportation Report.

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