A CP-KCS combination would create a new Class 1 railroad that would still be the smallest of the six, whereas a CN-KCS combination would leave Canadian Pacific significantly smaller than the new CN-KCS entity.
The United States Department of Justice has now weighed in on these merger talks, stating that the Canadian National bid for KCS posed a greater risk to competition. In a filing with the Surface Transportation Board, the DOJ that although it had not yet formed a final position on a CN-KCS combination, the “proposed acquisition raises sufficient competition concerns on first blush that the CN should be prohibited from using a voting trust”. The filing went on to say that “CN’s proposed acquisition of KCS appears to pose greater risks to competition than the risks posed by a CP-KCS merger.
The DOJ has taken issue generally with the STB’s policy around the use of voting trusts, stating that “even two railroads that are ‘end to end’ – i.e. that do not compete to offer parallel single-line service between the same origin and destination pairs – may still compete with one another in important ways”. In the case of CN, there are some parallel routes, the filing notes, such as between Baton Rouge and New Orleans.