Former STB Chief Economist, Dr. William Huneke, Believes CN/KCS Combination Will Enhance Competition and That Voting Trust Should Be Approved

CN (TSX: CNR) (NYSE: CNI) and Kansas City Southern (NYSE: KSU) (“KCS”) today announced that Dr. William Huneke, the former Director of the Office of Economics and Chief Economist at the Surface Transportation Board (“STB”) has written an op-ed, which was published by Railway Age. In the op-ed, Huneke emphasizes the pro-competitive benefits of a CN/KCS combination, resulting from the companies’ commitment to keep gateways open on commercially reasonable terms. Huneke also points out that, for these benefits to be realized, the CN voting trust must be approved by the STB. The full text of the op-ed can be found below:

CN Open Gateways Offer Means New, Enhanced Rail-To-Rail Competition, but STB Must First Approve the CN/KCS Voting Trust

Written by Dr. William Huneke

Canadian National Railway Company’s (CN) offer to keep gateways open on commercially reasonable terms is not getting the attention that it is due. This offer is a key part of its proposal to combine with Kansas City Southern (KCS)—a transaction which significantly enhances competition.

CN’s open gateways offer is a big deal. It means new, enhanced rail-to-rail competition. But for this to even be considered, the STB must first approve the CN/KCS voting trust.

I was STB’s chief economist for 10 years, and I am surprised by the lack of attention to the open gateways commitment. This commitment ensures that shippers who today enjoy competitive joint line routings with either CN or KCS will continue to have those routings available to them in a post CN/KCS merger environment, even if a merged CN/KCS could handle the entire movement via a single-line routing. This means continued competition and we know that competition encourages lower rates, better service and innovation.

The commitment is not just about maintaining physical routings, but also about ensuring that the routings are commercially reasonable to the shipper. What is meant by “open on commercially reasonable terms”? This means all market participants, railroads and shippers will benefit: they will get a fair chance to compete. They will pay and receive remunerative rates and get efficient service. If a shipper is not happy with their service, they can switch to another carrier because they will still have a choice.