The Commission gave several reasons why it had decided that KCS could maintain its derogation after 2001. A combination of CP and KCS would still result in the smallest Class I railway line, the merger appears to result in the least overlapping routes compared to a merger between KCS and another Class I air carrier, and the interrelationship between the CP and KCS networks appears to be ongoing in nature, This is likely to raise fewer competition concerns. STB said. The Surface Transportation Board today announced a decision determining that the exemption in 49 C.F.R. § 1180.0(b) applies to the potential transaction between Canadian Pacific Railway (CP) and Kansas City Southern Railway (KCS). These 2001 merger regulations provided an exemption from allowing a merger between KCS and another Class I railway company to be considered under the Agency`s merger control rules prior to 2001, subject to review by the Agency. Pursuant to the Commission`s decision, the agency`s review of the transaction is subject to the rules set out in 49 C.F.R.part 1180 (2000). (2) After approval, the board of directors shall conduct full operational oversight to ensure that service levels following a merger are appropriate and appropriate. “We note that STB`s procedural decision to defer consideration of our confidence vote was based solely on the fact that a merger agreement for the CN-KCS merger was not yet available to be filed with the board,” CN officials said. “We intend to complete our application expeditiously, as the merger agreement with KCS was entered into on May 13, 2021, the same day that KCS` Board of Directors announced that our merger was superior and that it intends to terminate its merger agreement with Canadian Pacific Railway Ltd.” (i) Restriction of Competition. Although railways operate in some markets in a highly competitive environment with strong intermodal competition from road and marine carriers, mergers can deprive shippers of efficient options. Intramodal competition may be reduced if two air carriers serving the same point of departure or destination merge. Competition arising from development, transloading, siting and shipper movement can be eliminated or reduced if two railways serving overlapping areas merge.
Competition in product and geographic markets may also be eliminated or restricted through mergers, including end-to-end mergers. Any rail merger carries the risk that the merged air carrier will acquire and exploit increased market power. The complainants propose remedies to mitigate and compensate for the harm to competition. Applicants must also explain how they would obtain at least competitive and commercial options, such as those involving the use of larger existing gateways, upgrades or integrations, as well as the possibility of entering into contracts for one segment of a movement, in order to obtain the right to benefit from the tax reduction separately for the rest of the movement. Primus also argued that the old rules do not require KCS and CP to provide a comprehensive competitive analysis of the system that would review service assurance plans and operational plans in Canada and Mexico. “The new rules impose a `greater burden on merger proponents` to demonstrate that a major rail merger is consistent with the public interest,” CP officials said. (2) Information on the measures they intend to take to remedy crossings potentially blocked as a result of changes in operation related to a merger or an increase in rail traffic. The Surface Transportation Board (STB) determined yesterday that the current merger rules will apply to the review of the proposed merger between CN and Kansas City Southern. A proposed merger between Kansas City Southern (NYSE: KSU) and Canadian Pacific (NYSE: CP) could move forward under old rules for Class I mergers, the Surface Transportation Board (STB) noted Friday. The new rules were designed to require applicants to formally pass these tests before the board approves the use of a voting trust. (b) consolidation criteria. The Agency`s review of the merger or control of two or more Class I railroads will be governed by the public interest criteria set forth in 49 U.S.C.
11324 and the rail transportation policy set forth in 49 U.S.C. 10101. In determining the public interest, the Commission must take into account the various objectives of effective competition, the safety and efficiency of transport undertakings, adequate service for shippers, protection of the environment and fair working conditions for employees. The Board of Directors is responsible for ensuring that each transaction approved promotes a competitive, efficient and reliable national rail system. (i) contingency plans in the event of a service disruption related to a merger. In order to deal with potential service disruptions, applicants must establish contingency plans. These plans, which are based on available resources as well as traffic flows and density, must identify potential areas of disruption and the risk of occurrence. Applicants must demonstrate that contingency plans are in place to restore an adequate level of service without delay. Candidates should also plan for the establishment of problem-solving teams and describe the specific procedures to be used to resolve the problem. Earlier this month, a number of shipper groups and four Class I railways urged STB to consider the merger of CP and KCS under the post-2001 rules, while CSX (NASDAQ: CSX) and other observers urged the Agency to maintain KCS` exemption. (1) Potential benefits. By removing barriers to transaction costs between firms, increasing investment productivity and empowering airlines to reduce costs through economies of scale, interconnection and density, mergers can generate significant public benefits such as improved services, increased competition and greater economic efficiency.
A merger can strengthen an airline`s finances and operations. To the extent that a merged carrier continues to operate in a competitive environment, its new efficiencies would be shared with shippers and consumers. Both the public and the consolidated air carrier can benefit if the air carrier is able to expand its marketing opportunities and provide better service. A merger may also improve existing competition or open up new opportunities for competition, and this increased competition is given considerable weight in our analysis. Proponents must make good faith efforts to calculate the net public benefit that their proposed merger would generate and the Agency will carefully assess this evidence. To ensure that applicants are not incentivized to exaggerate these anticipated benefits to the public, the Commission expects applicants to propose additional measures that it could take if the expected public benefit does not materialize in a timely manner. In this context, however, the Commission recognizes that applicants require flexibility to adapt to changing market conditions or other circumstances, and that it is inevitable that an approved merger may not necessarily be carried out exactly as contemplated in the application. However, applicants will be held liable if, in light of developments, they do not act appropriately to obtain the promised merger benefits. In adopting the new 2001 merger control rules for proxy trusts, the STB`s Voting Trust Regulation focused on the upcoming request for review and did not create a “new test” to anticipate the “public interest” benefits of the entire proposed transaction prior to the approval of a proxy trust.
The Board considered the public interest factors that it believed were relevant to the approval of the trust, not to the approval of the merger itself. (3) The Board will also require applicants to establish specific problem-solving teams and procedures to ensure that any unforeseen post-amalgamation issues related to services or other transportation matters, including claims, are resolved expeditiously. These teams should include representatives of all appropriate categories of staff. In addition, the Panel is considering the creation of a service council composed of shippers, railway companies, passenger representatives, ports, railway workers and other interested parties to serve as a permanent forum for discussing implementation issues. (5) Loss of Service Claims. Applicants must propose a protocol for dealing with complaints related to the non-provision of adequate services due to problems in the implementation of mergers. The obligation to submit all such claims to arbitration is preferable.
