Rail Customer Losses Should Be Compensated

May 19, 2000

The federal Surface Transportation Board should require rail carriers seeking future approval of mergers or consolidation to make "full and timely compensation for any and all commercial losses" incurred by their customers from service-related disruptions caused by the merger, the National Grain and Feed Association says. Carriers need to be held accountable economically for the "full established consequences" of merger-related service disruptions.

In a statement filed with the STB as part of its look at future rules governing rail mergers and acquisitions, the NGFA urged the agency to closely monitor all major rail mergers in the future. Consequences may include plant disruptions, processing or manufacturing slow_downs, curtailed shipments, contract defaults or penalties, interference with normal cycling of private cars on the railroad, and the need to substitute other modes of transportation to replace clogged rail service.

The NGFA also said the STB should collect data such as rail car cycle times and shipment data on a rail corridor-by-corridor basis to "ensure the enforceability" of service commitments made by merging carriers. The NGFA said the STB also should "more aggressively elicit" post-merger service plans from the carriers "and step in to enforce adherence" to those plans if they are ignored without appropriate justification in the aftermath of the merger.

Further, as part of its merger-conditioning authority, the NGFA said, the STB should spell out the appropriate ground rules for resolving commercial-damage claims including the concept of full liability resulting from service disruptions attributable to such mergers. As a mechanism to resolve such claims, the NGFA urged the STB to expressly encourage the use of private-sector arbitration to resolve such disputes, noting the existence of the NGFA's rail arbitration system and the STB's own voluntary arbitration procedures.

"Under its merger-conditioning authority, the (STB) can require the merging carriers to agree to arbitration if requested to do so by a shipper claiming merger-related damages," the NGFA's statement suggested.

The NGFA said it would be appropriate for the STB to require the rail shipper or receiver to demonstrate the linkage between its claim and a merger-related event and provide documentation regarding the specific damages sought.