Walking the Talk

President Biden is planning to issue an executive order targeting freight transport industry consolidation, which is yet another indication that he intends to be serious about antitrust in his administration:

The Biden administration will push regulators to confront consolidation and perceived anticompetitive pricing in the ocean shipping and railroad industries as part of a broad effort to blunt the power of big business to dominate industries, according to a person familiar with the situation.

The administration, in a sweeping executive order expected this week, will ask the Federal Maritime Commission and the Surface Transportation Board to combat what it calls a pattern of consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market.

The administration says the relatively small number of major players in the ocean-shipping trade and in the U.S. freight rail business has enabled companies to charge unreasonable fees.

In the case of the seven Class 1 freight railroads, consolidation has given railroads monopoly power over sections of the country where theirs are the only freight tracks, the person said.

The executive order will encourage the STB to take up a longstanding proposed rule on so-called reciprocal or competitive switching, the practice whereby shippers served by a single railroad can request bids from a nearby competing railroad if service is available.

As an aside, when I was working on locomotives at GE Transportation Systems in the 1990s, we had a discussion about a nearby town where they were trying to seize a 2 mile(ish) strip of railroad that a rail company had purchased with the goal of tearing it out of the ground, so that a competing line would be permanently eliminated.

This anticompetitive sh%$ has been going on for years.

Of course, the railroads, and their Evil Minions^™, are bleating about how the sacred market, meaning their monopoly rents, must be defended:

“Competition remains fierce across freight providers, and any proposal mandating forced switching would put railroads—an environmentally friendly option that invests $25 billion annually in infrastructure—at an untold disadvantage,” Ian Jefferies, chief executive of the railroad association, said Thursday. “Such a rule would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads’ ability to serve customers at a time when freight demands have dramatically increased.”

Literally every word from his mouth is a transparent lie.

The call to crack down on ocean carriers and freights is one facet in a multipronged executive order that will be one of President Biden’s most sweeping unilateral moves on economic policy to date.

The Democratic president, who has stacked his administration with a cohort of advisers skeptical of corporate power and market dominance, is trying to blunt big business while introducing more competition in areas across the economy.

………

In its actions targeting the transportation sector, the administration is highlighting what it calls the dangers of consolidation. Three alliances control 80% of the shipping market, the person familiar with the executive order said.

In 2000, this person said, the 10 largest shipping companies controlled just 12% of the oceangoing freight business.

And this orgy of consolidation over the past 2 decades only makes sense if it allows for anticompetitive price gouging.

This is an unalloyed good. 

This is good policy, though the devil will be in the details, and it gives some credibility to the Democratic Party on supporting small to medium business that it aggressively threw away under Bill Clinton and Barack Obama.