Opinion ID: 421082
Heading Depth: 2
Heading Rank: 5

Heading: Canadian National's Competitive Leverage

Text: 131 The ICC's final reason for believing that Guilford would not downgrade interchange service was Canadian National's power to take effective opposing steps. The Commission explained: 132 [Canadian National (CN) ] possesses sufficient competitive leverage to adequately combat any possible diversions of traffic. The CN-[Maine Central] connection still affords shippers the best transit time between Maine and the Midwest. By virtue of operating a single-line system between these two regions of the country, and the ratemaking flexibility inherent in such a system, CN is able to assert a great deal of influence in the routing of traffic. 133 Boston & Maine Merger, 366 I.C.C. at 352. This reasoning is none too clear, but we understand the Commission to suggest two sources of Canadian National's competitive leverage. First, Canadian National's route is the fastest. Second, Canadian National's long haul over a single system gives it ratemaking flexibility. 134 We fail to understand the first claim. That Canadian National can potentially provide the fastest route to the midwest will not do it much good if Guilford unilaterally destroys that advantage. As for ratemaking flexibility, we are not sure what the Commission means by the term, but we can see two possibilities. First, Canadian National can recoup lost traffic by cutting its prices to shippers. Second, Canadian National can pay Guilford to maintain current interchange service by giving Guilford a larger share of the total Maine-to-midwest freight charge. 135 Price cuts to shippers, however, will not restore the Canadian National's current fast, efficient service to the midwest. Moreover, price cuts offer scant promise of returning the Grand Trunk Eastern to profitability. In the long run, if the Grand Trunk Eastern loses money, Canadian National will presumably close it down. 136 Canadian National may temporarily preserve fast service by giving Guilford a larger share of joint revenues. Such payments, however, can only reduce the Grand Trunk Eastern's profitability, which in the long run is essential to service of any kind, let alone fast service. 51 We conclude, therefore, that the Commission unreasonably relied [229 U.S.App.D.C. 43] on Canadian National's competitive leverage to preserve existing service. 137