Railroad deregulation movements

Railroad deregulation movements

More than 80 years of expanding federal regulation of railroads began to unravel in the 1970s. Beginning May 1, 1971, the National Railroad Passenger Corporation (Amtrak), established by Congress the previous year, took over operation of most intercity passenger trains. To give government-subsidized Amtrak more flexibility, Congress granted it freedom to raise and lower rates without ICC approval and removed ICC authority to review proposed discontinuation of trains.

The ICC's power over abandonment of lines was suspended briefly during the mid-1970s, when seven bankrupt railroads in the Northeast and Midwest were combined into a new company, Consolidated Rail Corporation (Conrail). To plan and set up this new railroad, Congress created the U.S. Railway Association, with authority to decide which parts of the seven railroads would be included in Conrail and which parts would be offered for sale or abandoned.

In the Railroad Revitalization and Regulatory Reform Act (1976), Congress sought to give railroads more freedom to set rates. The ICC was not to deny any rate equal to or exceeding variable costs unless the railroad was found to have "market dominance," which was left to the commission to define. Railroads were allowed to raise or lower their rates by as much as 7 percent a year for two years without ICC sanction. The commission was empowered to deregulate hauling of commodities if it found that regulation was no longer in the public interest; for example, the ICC deregulated the hauling of fresh fruits and vegetables in 1979. The act also banned discriminatory state taxation of railroads and mandated that all proposed rail mergers be approved or denied by the commission within two years' time.

Unhappy at what it considered overrestrictive interpretations by the ICC of the 1976 law, Congress enacted sweeping regulatory changes in the Staggers Rail Act (1980). This law curtailed activities of the industry's regional rate bureaus and provided for the phasing out of general rate increases by 1984. It empowered the ICC to establish a railroad cost index and allow carriers to raise rates every three months by the same percentage amount that the index rose. Also, through 1984, rates could be raised an added 6 percent a year above the index (to a maximum of 18 percent). As for rate decreases to meet truck or barge competition, Congress declared that any rate that contributes to the "going concern value" shall be considered reasonable. Contract rates were specifically permitted; surcharges on unprofitable traffic allowed; and existing provisions against rate discrimination withdrawn in the case of contracts, surcharges, separate rates for distinct services, rail rates applicable to different routes, or business entertainment expenses. The ICC's authority to issue car-service orders to railroads was greatly restricted, and time limits of from 75 to 330 days were set for decisions on route-abandonment cases.

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