ICC Again Bars Western Railroad Merger : 4-1 Ruling to Result in Sale of Santa Fe, Southern Pacific, or Both

The Interstate Commerce Commission today refused to reconsider the proposed merger of the Santa Fe and Southern Pacific railroads, forcing the sale of one, or possibly both, of the western rail lines.

The commission, by a 4-1 vote, said that it would stand by its decision nearly a year ago not to approve the merger because of potential competitive problems.

The decision not to reopen the case came despite a recommendation from the ICC staff that the commission should take another look at the merger because the new proposal includes various agreements with other railroads aimed at easing concerns about competition.

But four of the commissioners said that the two railroads’ parent company, the Santa Fe Southern Pacific Corp., had made no dramatic changes in its new proposal and that the same competitive problems cited a year ago remain.

The ICC ordered Santa Fe Southern Pacific Corp. to produce a plan within 90 days for selling at least one of its railroads within the next two years.

After the ICC decision was issued, John Reed, the chairman of Santa Fe Southern Pacific, said no decision has been reached on which of the two railroads the company will sell. He stopped short of ruling out the possibility that both rail lines might be disposed of.

Reed said he was disappointed that the merger was rejected and said he had no plans to appeal the ICC decision through the courts. “We’re simply going back to square one, running one railroad or the other or conceivably neither,” he said.

Last month, lawyers for the Chicago-based Santa Fe Southern Pacific Corp. argued before the commission that the ICC should reverse itself because of a series of concessions made to competing rail lines aimed at assuring continued competition in the two railroads’ market areas.

The Justice Department, however, has maintained its strong opposition to combining the two western railroads, calling the revised proposal “a thoroughly anti-competitive merger” providing little improvement over the proposal that was rejected in July, 1986.