Date: 1986-01-21
Speaker: REESE H. TAYLOR (republican)
Chamber: H

Chairman. Interstate Commerce Commission. Washington. DC. DEAR CHAIRMAN TAYLOR: It is our understanding that a request has been made of the Interstate Commerce Commission to conduct an exhaustive analysis of the Secretary of Transportations recommendation to sell the governments interest in Conrail to Norfolk Southern Corporation. This recommendation for sale. mandated by Congress in the Northeast Rail Service Act of 1981 (NERSA). is the product of an extensive selection process of a suitable purchaser for Conrail. The request to the Commission asks for the commencement of a proceeding. which would entail the solicitation of information from "interested parties" and the opportunity for rebuttal submissions. on the traffic diversions that could result from the sale and on the financial and competitive viability of the carriers which will acquire lines to be divested as a condition of the sale imposed by the Department of Justice. It appears that this request is attempting to encourage the initiation of a proceeding similar to those rail merger proceedings undertaken by the Commission under 49 USC 11343 et seq.. which provides for a time frame of over two years. What is most troubling. however. is that this request totally ignores Congressional intent and theexplicit legislative language of the Northeast Rail Service Act of 1981. Section 1142 of NERSA. codified as Section 408 of the Regional Rail Reorganization Act (3R Act). states in unequivocal terms: (c) ReviewNo transfer of the Corporations stock or rail properties and freight service responsibilities under this title shall be subject to judicial review or to review by the Commission. Without doubt. the clear meaning of the statute as contemplated by Congress was that the Commission would not. and could not. play a role in reviewing or analyzing the Secretarys recommendation. This was a role to be played by Congress. as evidenced by the inclusion of legislative veto mechanisms. by which the recommendation was to be scrutinized whether Conrail was sold as an entity or in pieces. (See. Sections 401(a)(3) and 407(d) of the 3R Act.) In light of the Supreme Courts decision holding legislative veto unconstitutional and the need for substantive legislation to effectuate the sale. Congress will review the Secretarys recommendation and enact enabling legislation. Moreover. the Secretary of Transportation. as part of her thorough negotiation process. asked the Department of Justice to review the competitive implications of a potential sale to Norfolk Southern Corporation. That extensive review led to divestiture requirements as a condition to such sale. Accordingly. the Department of Justice. as indicated in their January 29. 1985. letter to the Secretary. must review and approve any divestitures before the sale can be consummated. In fact. the Department of Justice specifically requires any carrier. which is to acquire the lines to be divested. to "demonstrate to the satisfaction of the Attorney General that it preserves the managerial. operational. and financial capability necessary to compete effectively and to remain a viable entity providing longterm rail service." Review of this issue by the Interstate Commerce Commission would obviously be duplicative. The Department of Justice also. as part of its analysis. examined the effect of the combined Norfolk Southern and Conrail entity on the regional carriers ability to continue to compete effectively in the markets they currently serve. While definitive assessments of diversions were not calculated by the Department. given the general uncertainty and unreliability of such numbers. it did seek to identify and remedy the potential. anticompetitive consequences of the merger through the divestiture requirements. Specifically. the divestitures Are designed to provide regional carriers "friendly connections" that will enable them to continue to compete effectively in markets they now serve and to ensure competitive access to those markets. Again. it appears that in independent Commission proceeding on this issue would be redundant and unnecessary. For the above articulated reasons. we believe that the Commission does not have the legal authority. by virtue of the explicit statutory exclusion of Commission review incorporated in NERSA. to review the Conrail transaction. Moreover. it appears that such a review would be duplicative. unnecessary and an illadvised expenditure of scarce resources. Sincerely.