Railroads Charged With Price-Fixing in Lawsuit

By Josh Funk | June 9, 2011

Oxbow Mining filed a federal antitrust lawsuit against Union Pacific and Burlington Northern Santa Fe, saying the railroads conspired to raise prices on customers like the Colorado coal mine that Oxbow runs.

Oxbow said in the lawsuit that the two biggest railroads in the western U.S. worked to avoid direct competition with each other to keep rates high. Oxbow also said CSX and Norfolk Southern railroads conspired on rates, but they are not included in the lawsuit.

“Union Pacific and BNSF have systematically gouged their customers, and the result is higher prices for everybody — from companies that rely on them to ship their goods to the consumers who buy products shipped on those lines,” said Bill Koch, chairman and CEO of Oxbow.

Oxbow said Union Pacific has refused to ship coal from its Oxbow’s Elk Creek Mine in Colorado west, to avoid competing with BNSF.

Oxbow also complained that the fuel surcharges the major freight railroads charge aren’t based on actual costs and simply raise shipping rates.

Neither railroad would comment directly on the lawsuit, but BNSF offered a general defense of its business practices.

“BNSF has not colluded or conspired in violation of any law,” spokesman Steve Forsberg said.

Union Pacific spokesman Tom Lange said the railroad would not comment because it hadn’t received the lawsuit.

A number of companies that ship by rail don’t have good alternatives to ship their goods. Those customers, called captive shippers, are mostly electric utilities, chemical and agricultural companies.

Congress has discussed regulating railroad pricing more closely but hasn’t approved any new rules. Railroads maintain that they must charge higher rates to cover their costs and reinvest in their costly track networks.

Oxbow said it will be represented by David Boies, the lawyer who previously was a prosecutor on the federal antitrust case against Microsoft. He also argued for the losing side in the Supreme Court case that settled the 2000 presidential election in favor of the Republicans George W. Bush and Richard Cheney.

Union Pacific is headquartered in Omaha, Neb. BNSF is based in Fort Worth, Texas, but it is now part of Warren Buffett’s Omaha-based Berkshire Hathaway Inc.

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