competition "source" competition, e.g., between railroads carrying the same product to the same destination, but from different origins. In concluding my description of the Department's policy regarding railroad mergers, I wish to briefly discuss so-called "protective - conditions." Protective conditions requirements that the ICC imposes in merger proceedings in order to protect the financial interests of the railroads that are not included in the proposed consolidation. Typically, this is accomplished by requiring the merging railroads to conduct at least some part of their operations following the merger in the same manner as they did prior to the merger. a recent decision, the Interstate Commerce Commission indicated that it now views such protective conditions as generally undesirable and announced that it will no longer routinely impose them. / The Commission's decision, we believe, is a wise one. When protective conditions are imposed, merging railroads are frequently prevented from achieving operational efficiencies, and, at the same time, are precluded from fully competing with the beneficiaries of the protective conditions. The procedure followed by the Department of Justice in reviewing major railroad mergers is somewhat different from the are In */ Rulemaking Concerning Traffic Protective Conditions in Railroad Consolidation Proceedings, Ex Parte No. 282 (Sub No. 5), 366 I.C.c. 112 (1982). serve common points, but do not serve those points from the same origin or destination. Most rail mergers have both types of competitive features, but usually it is possible to describe a proposed merger as being either primarily parallel ΟΙ primarily end-to-end. As a general rule, it is the policy of the Department of Justice to oppose ICC approval of proposed parallel rail such consolidations since consolidations significantly reduce competition in transportation markets. sometimes occurs, however, that the parallel features of a proposed rail merger are a relatively minor part of the transaction. In such cases we might not oppose approval of the merger if adequate conditions can be imposed by the Commission to reduce ΟΙ eliminate the competitive problem. Such conditions, for example, might involve divestiture by the consolidating carriers of parallel rail facilities or requiring the merger partners to grant other railroads the right to provide service over the tracks of the merged carrier frequently It ("trackage rights"). In contrast, the Department does not generally oppose rail mergers insofar as they can be characterized as end-to-end. End-to-end mergers usually lead to efficiencies and do not have significant anticompetitive effects. It is conceivable, however, that in some circumstances the Department might oppose an end-to-end merger. For example, we would consider opposing an end-to-end merger if it would substantially lessen so-called "source" competition, e.g. competition between railroads carrying the same product to the same destination, but from different origins. Protective conditions are In concluding my description of the Department's policy regarding railroad mergers, I wish to briefly discuss so-called "protective - conditions." requirements that the ICC imposes in merger proceedings in order to protect the financial interests of the railroads that are not included in the proposed consolidation. Typically, this is accomplished by requiring the merging railroads to conduct at least some part of their operations following the merger in the same manner as they did prior to the merger. In a recent decision, the Interstate Commerce Commission indicated that it now views such protective conditions as generally undesirable and announced that it will no longer routinely impose them. */ The Commission's decision, we believe, is a wise one. When protective conditions are imposed, merging railroads are frequently prevented from achieving operational efficiencies, and, at the same time, are precluded from fully competing with the beneficiaries of the protective conditions. The procedure followed by the Department of Justice in reviewing major railroad mergers is somewhat different from the */ Rulemaking Concerning Traffic Protective Conditions in Railroad Consolidation Proceedings, Ex Parte No. 282 (Sub No. 5), 366 I.C.c. 112 (1982). procedures we follow in considering other types of mergers. Because rail mergers are subject to the exclusive jurisidiction of the Interstate Commerce Commission, the parties to a proposed railroad merger are not required to give us the same kind of advance information as we are entitled to receive under the terms of the Hart-Scott-Rodino Act of 1976 concerning other major consolidations. */ Instead, we receive a copy of the merger application filed with the ICC. Interstate Commerce Act, the Under a provision of the Department is also entitled to receive a copy of all public comments filed with the ICC concerning a proposed merger, and we have 15 days after receipt of these comments in which to intervene in the ICC's proceeding. **/ At the time it intervenes, the Department is required only to state its preliminary views, and is not usually required to state a final position on a merger proposal until the evidentiary phase of the Commission's hearing is complete. In almost every case in which the Department files preliminary comments, we also participate as a party in the Commission's evidentiary hearing, and we frequently present expert witnesses from the Antitrust Division's Economic Policy Office. If the Department believes the decision of the Commission regarding a particular merger */ P.L. 94-435, 15 U.S.C. §18a. **/ 49 U.S.C. §11345(b). proposal is contrary to the terms of the Interstate Commerce Act, we have the right to appeal that decision to the federal courts. 2. The Northern Lines Merger Let me now briefly summarize for you the Department's role in the merger that created the Burlington Northern and our subsequent investigation of the Burlington Northern's compliance with the conditions imposed on that merger by the ICC. As you may know, in 1970 the so-called "Northern Lines" merger combined three railroads that served the Midwest and Northern Tier states: */ the Great Northern (GN), the Northern Pacific (NP), and the Chicago, Burlington and Quincy (CB&Q). From a competitive perspective, the merger's parallel element was the most important since two of the railroads, the Great Northern and the Northern Pacific, had parallel tracks across the Northern Tier and were therefore direct competitors.**/ It was primarily for this reason that the Department of Justice vigorously opposed the merger, and appealed the Commission's decision approving the merger all the way to the Supreme Court.***/ * Minnesota, North Dakota, Montana, Idaho, and Washington. **/ In contrast, the merger's end-to-end feature--the inclusion in the consolidation of the CB&Q--was substantially less important. United States v. Interstate Commerce Commission, 396 U.S. 491 (1970). |