EFFECTS OF U. S. RAIL DEREGULATION ON PRICING ACTIVITIES OF CANADIAN RAILROADS

The U.S. Congress, in an effort to assist the country's railroad industry that was suf- fering from a restrictive and outdated regulatory system, passed legislation aimed at revitalizing the troubled industry. In passing the Staggers Rail Act of 1980, Congress introduced deregulation to the railroads, granting them the freedom that allowed them to operate in a more competitive environment. The revised regulatory structure has had widespread implications for the pricing strategies of both U.S. and Canadian railroads. The effects of the U.S. rail deregulation on the pricing activities of both U.S. and Canadian railroads are examined in this paper. The railroad industry in Canada had operated under considerable price freedom since the National Transportation Act was passed in 1967. U.S. railroads, in comparison, appeared to be overregulated and increasingly unable to compete with other modes of transportation. Legislation passed in the 1970s was unsuccessful in creating the stimulus the railroads required. The Staggers Act did indeed relax many of the rail carriers' obligations, but it also drastically curtailed the degree of antitrust immunity the industry had enjoyed for many years. The railroads have been forced to operate in a much more competitive manner since October 1980, and contracts and rebates are becoming commonplace. The Canadian railroads have been forced to respond to the revival of competition south of the border or risk losing a significant proportion of their international traffic. Deregulation has also had legal ramifications for Canadian carriers because the laws governing the movement of freight traffic in the two countries are now in conflict. There is a distinct possibility that the Canadian railroads will lose their immunity to anticombines laws, an event that has already occurred in the United States.