99-3120. Market Dominance DeterminationsProduct and Geographic Competition

[Federal Register Volume 64, Number 26 (Tuesday, February 9, 1999)]
[Notices]
[Pages 6417-6418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3120]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board
[STB Ex Parte No. 627]


Market Dominance Determinations--Product and Geographic 
Competition

AGENCY: Surface Transportation Board.

ACTION: Notice of Policy Statement.

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SUMMARY: On December 21, 1998, the Surface Transportation Board (Board) 
served a decision changing its policy with respect to market dominance 
by eliminating product and geographic competition as factors in market 
dominance determinations in railroad rate proceedings.

EFFECTIVE DATE: January 17, 1999.

FOR FURTHER INFORMATION CONTACT: Thomas J. Stilling, [phone]. 
[TDD for the hearing impaired: [phone].]

SUPPLEMENTARY INFORMATION: In Market Dominance Determinations--Product 
and Geographic Competition, STB Ex Parte No. 627 (served Dec. 21, 
1998), the Board revised the guidelines used to determine whether a 
rail carrier has market dominance. Market dominance ``means an absence 
of effective competition from other rail carriers or modes of 
transportation for the transportation to which a rate applies,'' 49 
U.S.C. 10707(a), and is a prerequisite to the Board's jurisdiction to 
review the reasonableness of a challenged rail rate, 49 U.S.C. 
10701(d)(1), 10707(b), (c). In assessing whether a railroad has market 
dominance, the Board concluded that it was no longer practical to 
consider whether product competition (i.e., the ability of the 
complaining shipper to avoid using the defendant railroad by shipping 
or receiving a substitute product) or geographic competition (i.e., the 
ability of the complaining shipper to avoid using the defendant 
railroad by obtaining the same product from a different source, or by 
shipping the same product to a different destination) effectively 
constrained the railroad's rates. Rather, the Board decided to limit 
market dominance evidence to only evidence of direct intramodal 
competition (i.e., whether the complaining shipper can use other 
railroads to transport the same commodity between the same points) and 
intermodal competition (i.e., whether the complaining shipper can use 
other transportation modes, such as trucks or barges, to transport the 
same commodity between the same points).
    Prior to 1976, all rail rates were subject to government oversight 
to enforce the statutory requirement that rates be ``just and 
reasonable.'' In Section 202(b) of the Railroad Revitalization and 
Regulatory Reform Act of 1976 (4R Act), Congress limited regulatory 
jurisdiction over the reasonableness of railroad rates to those 
instances where the railroad involved has market dominance. The 4R Act 
delegated to the Board's predecessor--the Interstate Commerce 
Commission (ICC)--the task of establishing standards and procedures for 
determining market dominance in rate cases, but expressly directed that 
those standards and procedures be ``designed to provide for a practical 
determination without administrative delay.''
    In 1976, the ICC adopted market dominance procedures that declined 
to consider the effects of product or geographic competition on a 
railroad's ability to set its rates, out of concern that the 
introduction of such considerations would require extensive fact-
finding and produce lengthy antitrust-type litigation. However, in 1979 
the ICC changed its approach regarding product and geographic 
competition. Believing that consideration of product and geographic 
competition evidence would not necessarily conflict with the statutory 
directive to make practical market dominance determinations without 
administrative delay, the agency sanctioned the introduction of such 
evidence to show that effective competition exists.
    Based on many years of experience processing rate complaint cases 
under the expanded approach to market dominance and the record 
developed in this rulemaking, the Board concluded that consideration of 
product and

[[Page 6418]]

geographic competition significantly impedes the efficient processing 
of such cases. Accordingly, to comply with both the recent legislative 
directive to process rate complaints more expeditiously and the long-
standing Congressional intent that market dominance be a practical 
determination made without delay, the Board limited the evidence that 
would be considered to only that required by the statute, i.e., 
competition ``for the transportation to which a rate applies.''
    The Board's decision is available on the Board's web site at 
www.stb.dot.gov. Copies of the decision also may be purchased from DC 
NEWS & DATA, INC. by phoning [phone].

    Dated: February 2, 1999.
Vernon A. Williams,
Secretary.
[FR Doc. 99-3120 Filed 2-8-99; 8:45 am]
BILLING CODE 4915-00-P