Can President Trump Alone Approve UP-NS Merger?

COMMENTARY & ANALYSIS

President Trump appeared to endorse the proposed merger of the Union Pacific and Norfolk Southern railroads in a recent Oval Office chat with Jim Vena, CEO of UP. The endorsement could carry a lot of weight if the U.S. Supreme Court approves of Trump’s attempt to exert control over independent federal agencies like the Surface Transportation Board (STB), which is responsible for adjudicating the merger proposal.

The UP-NS merger has drawn both concern and outright opposition from rail unions and shippers who are still dealing with a legacy of poor service and abusive financial practices which since 2017 have continued to plague the nation’s rail system as it is currently constituted.

In the past—at least as far back as anyone can remember—Presidents have chosen to stay respectfully silent about railroad merger proposals, and certainly have exhibited enough self-restraint to refrain from venturing an opinion that could interpreted as interference in the regulatory review process.

If eventually approved by the STB, the UP-NS merger would create a continent-spanning rail system said to be worth a total of $85 billion. The merger also would lead to further concentration of major freight railroads in North America, from the current six down to four, and is creating pressure for a further merger by two of the other railroads so they can be in a better competitive position regarding the UP-NS combination, which most likely would be a combination of BNSF and CSX.

The most recent rail merger—last year’s combination of Kansas City Southern and Canadian Pacific—turned out to be a disaster when the failed attempt to combine the two railroads’ computer systems created a nightmare for their customers. An earlier wave of rail mergers that took place back in the 1990s similarly resulted in a huge meltdown in rail service.

“In one of the most dramatic consolidations in U.S. transportation history, the number of Class I railroads serving the nation has plunged by over 70% in recent decades thanks to a massive wave of rail mergers,” declared the Rail Customer Coalition. “The proposed UP–NS merger threatens to supercharge rail consolidation—choking off competition and leaving U.S. producers with even fewer options to move goods efficiently and affordably. Policymakers must act before this deal locks in monopoly power across key freight corridors and puts our nation’s economy and supply chains in jeopardy.”

The coalition added that past rail mergers showed what happens when consolidation goes unchecked: “Service suffers, costs increase and jobs disappear.”

The situation today is not much better, according to Chris Jahn, president of the American Chemistry Council (ACC), “The freight industry continues to fail to meet even the lowest of standards, putting shippers at a distinct disadvantage. It’s clear to the countless industries that rely on freight rail that a merger will not fix these challenges but only serve to expand the market power and profit margins of a few carriers to the detriment of their customers.”

John Samuelsen, president of the Transport Workers Union of America International (TWU), didn’t mince words: “There is no world where Union Pacific should be controlling a coast-to-coast rail network. A supersized Union Pacific would be catastrophic for TWU rail workers, shippers and the safety of millions of Americans who live and work near freight rail lines.”

Ultimately Trump’s Decision?

These are just a few of the public comments that already have been made regarding the merger proposal. As easy as it is to see that there is widespread opposition to the combination, can that do any good in a situation where the President has voiced his support for the merger and ultimately exercises control over the process?

The President chose to meet with UP CEO Jim Vena in the Oval Office on Sept. 12 and no one else from outside the White House was included in the visit, giving the UP executive the perfect opportunity to lobby Trump alone to promote the merger proposal.

A video of the meeting between the two men shows Vena first flattering the President by heaping praise on his sending the National Guard into Washington, DC, to stop crime, and encouraging Trump to go further by deploying the guard to other “crime-ridden cities,” like Memphis, TN.

UP reportedly issued a statement following the meeting in which it said the President and Vena discussed “how creating an American transcontinental railroad is a win for U.S. competition, consumers, and the unionized workers whose jobs will be protected when the merger is approved.”

Reports from the White House press corps quoted the President telling them that the merger “sounds good to me, to be honest with you. Union Pacific is a great railroad.” The White House released little other information on the meeting, and the Vena statement is no longer available on the UP company website.

“American success relies on President Trump working with railroads, manufacturers, agriculture, and industry to craft a bigger and better deal for America,” commented ACC’s Jahn after he heard about the meeting, although he didn’t hesitate to say he remained opposed to the merger.

“While UP-NS claim the merger will help, it’s a bad deal for America because the facts tell a different story,” Jahn added. “This deal would lead to a monopoly—crushing competition, raising costs and undermining the progress President Trump has made on American manufacturing, farming and energy production.”

The question is: What effect (if any) will Trump’s meeting with Vena have on the STB’s deliberations regarding the proposed merger? The board, like its predecessor the Interstate Commerce Commission (ICC), had previously been viewed as an independent agency created by Congress, but that status has been challenged by the Trump Administration’s assertion of executive branch control over the STB and other supposedly independent regulatory bodies created by Congress over the years.

In August, Trump fired the Biden-appointed STB Chairman Robert Primus, who was the only board member to vote against approving the KCS-CP merger in 2023. Trump recently re-nominated Michelle Schultz and nominated Richard Kloster, a rail industry consultant, to join Republican Patrick J. Fuchs, who Trump named chairman on inauguration day.

Since taking office, Trump has aggressively asserted control over boards and commissions that had previously been created by Congress to serve as independent agencies, firing Democrat members before they had completed their terms.

The President’s legal team argues that it is unconstitutional for Congress to establish independent administrative agencies that exist outside of the control of the federal government’s chief executive. The U.S. Supreme Court has agreed to hear arguments on this issue with a decision expected sometime next year, in a case involving the removal of Federal Trade Commission (FTC) Commissioner Rebecca Slaughter without cause.

Earlier this year, the President chose to remove members of the National Labor Relations Board (NLRB), Merit Systems Protection Board (MSPB) and Consumer Product Safety Commission (CPSC), actions that were allowed to stand by the Supreme Court after lower courts had ordered that the fired individuals be reinstated.

If the Supreme Court justices choose to uphold Trump’s legal theory, this would grant him direct control over these federal agencies as well as the STB, and give him the ability to fire any board members who choose to go against his wishes (even assuming that hiring new ones would still require Senate approval). If this turns out to be the case, then this could make him the ultimate deciding voice over rail mergers and other issues that were the previous responsibility of the STB members alone.