Railroad Revitalization and Regulatory Reform Act - Initial Reaction To The Act

Initial Reaction To The Act

Many of the members of the Interstate Commerce Commission (ICC) at the time of law's enactment were highly unsympathetic to the aims and provisions of the 4R Act. The regulatory provisions had been enacted over several commissioners' objections, and the Commission's implementation of the Act initially had little impact on the way the rail industry functioned.

When President Jimmy Carter nominated A. Daniel O’Neal (originally appointed by President Richard Nixon) to chair the ICC, O’Neal began to develop the possibilities for opening up the rail market to competition and innovation. Also, in 1978 a group of major railroads formed an organization called TRAIN (Transportation by Rail for Agricultural and Industrial Needs) to support further deregulation of the industry. These carriers’ perception was that with collective rate making limited, and a Commission apparently more interested in letting their rates go down than go up, the regulatory system, as a whole, in the net, no longer favored them.

Large shippers of goods by rail also wished to have more flexibility in the rail market. The net result of compromise between the carriers and the shippers, and the Jimmy Carter administration’s push for a more competitive transport was the Staggers Act of 1980. The Staggers Act worked from the 4R Act template, but extended its provisions. One of the key changes from the 1976 Act was allowance of secret contracts between carriers and shippers, not limited to large-investment situations and not effectively subject to regulatory review. According to former Congressional Budget Office analyst Christopher Barnekov, such contracts allowed the rail carriers and their shippers much more opportunity readily to develop more efficient transport arrangements which lowered costs for the carriers, yielding better returns for the carriers and lower rates for the shippers.

Thus railroad "deregulation" was a two step process, starting with the 4R Act and concluding with the Staggers Act. In substance, the railroad regulatory reform legislation, in the 1970-1980 period, turned toward greater use of market systems to deal with the problems of the rail industry in the United States, rather than resorting to nationalization, which had been considered from time to time.