Reciprocal Switching Is a Bad Idea at a Bad Time

The Surface Transportation Board has resurrected a bad idea it considered in 2012 and 2016—mandated reciprocal switching for freight railroads. For background, you can’t do better than former CEI scholar Marc Scribner’s 2014 OnPoint on the topic.

Reciprocal switching essentially involves the Board mandating forced access to railroads’ property at below market rates. Reasons why the proposal is a bad idea include:

• It rides roughshod over property rights.
• By reducing income, it will lower investment; price controls don’t just lead to fewer service, they decrease the quality of those services.
• It erodes railroads’ competitive advantage over other forms of freight transport.
• It will lead to higher costs for consumers.

Under current law, shippers can complain to the Board if they feel they are being treated unfairly as a matter of competition. However, the Board has been unable to find a single example of anticompetitive behavior under current law, so the proposal simply removes this requirement.

At a time when competition law is a matter of significant national debate, it is perplexing that the Board wants to remove any discussion of competition from its regulation in this area. This may be a sign that the Board wants to remove discussion of consumer welfare from its consideration.

Furthermore, the timing is terrible. At a time when supply chains have faced massive disruption, introducing another rule that will further disrupt the supply chain is questionable, to say the least.

If passed, the rule would significantly reduce the benefits that the rail industry and America have seen since the passage of the Staggers Act in 1980.

CEI has assembled a coalition of free market groups and scholars opposed to this reregulation. You can view the letter here and our previous comments here.