The Surface Transportation Board rejected the merger of Union Pacific and Norfolk Southern because the application is incomplete.
The board unanimously found that the application does not contain certain information required by the board’s regulations. Under the law, the board had to reject the application with prejudice so the applicants can refile a revised application to remedy the deficiencies. The board said the decision was based solely on the incompleteness of the application and should not be read as an indication of how the board would assess the revised application.
According to the board’s regulation, the application for a merger must contain a full system impact analysis to include market share projections for the created entity, and the entire merger agreement, including the submission of any contract or other written instrument that pertains to the transaction.
A full system impact should include actual and projected market shares of certain revenues and traffic volumes that demonstrate the impacts of the transaction on competition. However, in their application UP and NS projected that the full impacts of the transaction will not be realized until three years after the merger is consummated. And, the board said, the application only projected market shares of the actual 2023 UP and NS estimated market shares. Additionally, the board said, the application does not contain future market share projections showing the combined effects of merger-related growth, diversions, merger-influenced and other changes to market conditions that the applicants anticipate.
“Today’s decision finds that Applicants’ market impact analyses must necessarily project market shares beyond the transaction’s consummation date, and therefore that the application does not include the “projected market shares” as required,” the board said in its finding. “These market-share projections are necessary because ‘[a]ny railroad combination,’ including an end-to-end combination, ‘entails a risk that the merged carrier would acquire and exploit increased market power.’”
Additionally, the board said the application does not include contract or other written instrument entered into or proposed to be entered into pertaining to the proposed transaction, including certain schedules and documents that are part of the merger agreement and that define the two railroads’ obligations under it.
The board said the railroads did not justify why those contracts had not been included in the application.
The board’s decision also identified other application deficiencies, such as the railroads’ related application for acquisition of control of the Terminal Railroad Association of St. Louis. The board identified that as a significant transaction, and not a minor transaction as submitted the application to the Board suggested.
The railroads have until Feb. 17, 2026 to file a letter indicating when they anticipate filing a revised application.