By David Shepardson
WASHINGTON (Reuters) -A group of nine Republican state attorneys general on Friday raised competition concerns about Union Pacific's plan to buy smaller rival Norfolk Southern in an $85
billion deal to create the first U.S. coast-to-coast freight rail operator.
The officials, led by Tennessee Attorney General Jonathan Skrmetti and Kansas Attorney General Kris Kobach, in a letter to the Surface Transportation Board, which was seen by Reuters, said they were concerned the deal "will result in undue market concentration that stifles competition and therefore creates higher prices, lower reliability, and less innovation at the expense of America’s manufacturers and, ultimately, America’s consumers."
The tie-up, if approved, could reshape the U.S. freight rail industry and help streamline operations and eliminate interchange delays in key hubs like Chicago.
The attorneys general of the states - which also include Ohio, Florida, North Dakota, South Dakota, Mississippi, Montana and Iowa - said the merger could result in high internal shipping costs that could "kneecap American companies’ ability to compete with foreign manufacturers."
They also warned that the "downstream impact of the merger poses significant risk not just for our industrial base but also our agricultural producers. Ultimately, then, this merger could compromise our national security."
Union Pacific said in response on Friday that it looks forward to submitting its application to the STB "to detail how this combination is good for America, meets the threshold of advancing public interest and enhances competition." The railroad added it had won support from key unions and others to "ensure rail is not left behind."
Norfolk Southern did not immediately comment.
Earlier on Friday, the railroads said that more than 99% of shareholders at both companies voted in favor of the deal. The STB review could take about 12 to 18 months.
The railroad industry has struggled with volatile freight volumes, rising labor and fuel costs, and growing pressure from shippers over service reliability.
In September, President Donald Trump said the merger "sounds good to me" after he met with Union Pacific CEO Jim Vena to discuss the deal for the biggest U.S. rail merger in decades.
Union Pacific dominates freight rail operations in the Western United States, while Norfolk Southern is a leading carrier in the East. Together, they form two of the four major U.S. Class I railroads, alongside BNSF Railway and CSX Corp.
(Reporting by David Shepardson in Washington; Editing by Leslie Adler and Matthew Lewis)
