Washington D.C. – Today, the American Consumer Institute (ACI) released a study – “Veering Off the Rails: How the Recent Push to Reregulate Railroads Threatens Consumer Welfare” – outlining the dangers of the federal government imposing additional regulations on America’s freight railroads. The research highlights the problems that regulations can create on already functioning markets, leaving consumers worse off and undermining market competitiveness. More specifically, the study discusses how imposition of “open access” regulations, as recommended by a recent White House Executive Order, would amount to a wealth transfer to more profitable rail shippers. Key findings of the study include:
- Much of the freight rail industry’s success can be attributed to the regulatory reforms that took place in the 1980s, resulting from the Staggers Act, a law that was enacted by a democratic-controlled Congress and signed into law by then-president Jimmy Carter.
- The Act’s reforms allow freight rail companies to have rate flexibility, make investment decisions concerning its own rail network, and enter into private contracts.
- Recent proposals to mandate reciprocal switching regulations – a process where rail carriers would be required to share their privately-owned infrastructure with other parties – would create rail bottlenecks, reduce efficiency, raise costs, divert freight, and put the government in charge of setting rates – akin to utility regulation.
- The study also found no market failure to justify the calls by lobbyists representing select rail customers to impose these regulations, whose members are collectively more profitable than the rail carriers they seek to subjugate.
In summary, the study found the regulatory proposals were not based on informed economic analysis and ignore the reality that freight rail operates competitively against other modes of transportation. Until an empirically-based analysis of the costs and benefits are conducted, ACI recommends that policymakers should not reverse the more than $10 billion in annual consumer welfare gains since regulatory reforms were promulgated.
You can read the full study here.