Legal Implications of Railroad Interline Pricing Arrangements

The author argues that there is potentially broad liability in the discriminating ratemaking authority of a Class I carrier, to its shortline connections' detriment. Breach of a Class I carrier's shortline connection fiduciary duty may result in liability, which the aforementioned encompasses. Liability potential may also be found in the Class I carrier's shortline connection's local stations and Class I carrier's local stations where discriminatory commodity prices result by differential pricing arrangements' disadvantages and advantages. Differential commodity pricing arrangements in which the Class I carrier participates may result in damages where disadvantaged shortline shippers and purchasers may also claim trade restraint against the favored purchasers, commodity sellers, and Class I carriers. As a consequence of the rate making authority's discrimination, there may be judicial imposition, on a state-by-state basis, of remedies and legal duties. These need to be carefully examined by connecting carriers in their interline agreements as they contemplate rate-making authority grants. Class I carriers should also assess if, under their interline agreements, fair dealing and good faith fiduciary duties are breached through failure to reflect cost saving deficiencies in rate making practices. There may be short term revenue gains through Class I carrier incentives for local traffic revenue maximization by short line traffic differential pricing, which also provides short line efficiency optimization which can, on a long term basis, secure traffic revenues and volumes. In interline arrangements in both short line and Class I carriers, commercial objectives can be frustrated and disrupted through legal intervention through short-sided pricing policies. The author discusses differential pricing transactions, tariffs, the Robinson Patman Act, fiduciary duties, and an alternative approach.


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  • Accession Number: 01052019
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jun 27 2007 12:33PM