Every product on an American store shelf carries a hidden cost. Before it reaches the checkout counter, it has been shipped, warehoused, reshipped, and delivered, and consumers pay for each step of that journey in the final sticker price. That is why one of the most important consumer welfare questions before federal regulators right now has almost nothing to do with a product on a shelf. It concerns the network that gets the product there: the proposed rail merger between Union Pacific and Norfolk Southern.
The Surface Transportation Board (STB) is currently reviewing the deal, which would create a single rail line connecting the East and West. News coverage often portrays this as a fight between two railroads and their competitors, but that narrative misses the point. The more important question is whether consumers will save money if the deal goes through, and economic theory points to yes.
The applicants project that the combined network would generate roughly $3.5 billion in annual savings for shippers by offering seamless, coast-to-coast, single-line service. In today’s fragmented U.S. rail system, freight moving from Los Angeles to Charlotte must be handed off between carriers. Economic theory suggests that removing such inefficiencies and adding cost savings to the supply chain can put downward pressure on consumer prices.
Opposition come largely from three places. First, competing railroads worry about losing market share. A combined Union Pacific and Norfolk Southern would compete better against the other Class I railroads, which makes the deal an obvious target for them. Second, shipper associations are professionally and systemically opposed to consolidation. Third, regulators tend to be skeptical of any rail merger, and a thorough, lengthy review is their job.
According to Norfolk Southern, the UP and NS filing has also been endorsed by more than 2,000 stakeholders. These include more than 500 individual shippers whose businesses depend on affordable transportation, as well as labor unions that have signed onto an unprecedented job security pledge.
Regulators in Washington should consider the potential consumer benefits when making their decision.
Tirzah Duren is the President and CEO of the American Consumer Institute, a nonprofit education and research organization. Follow Tirzah on X @tzduren