The Union Pacific/Southern Pacific Railroads Merger: Effect of Trackage Rights on Rates

Abstract

We investigate the impact of the 1996 UP/SP railroads merger on rail rates for potential 2-to-1 shippers. As part of its merger conditions, the Surface Transportation Board (STB) granted trackage rights to BNSF to preserve competition for these shippers. Using the STB's Carload Waybill Sample data for the Salt Lake City economic area, we found that the remedy was effective -- BNSF provided more effective competition to UP in the post-merger era than SP did in the pre-merger era. This results, however, differed by commodity, direction of traffic, and shipper type.

Keywords: UP/SP merger, BNSF, trackage rights, Surface Transportation Board, freight railroads, shippers

JEL Classification: L10, L13, L40, L92