STAGGERS RAIL AND MOTOR CARRIER ACTS OF 1980

In enacting the Staggers Rail Act of 1980, the U.S. Congress "recognized that railroads faced intense competition from trucks and other modes for most freight traffic" and that "prevailing regulation prevented railroads from earning adequate revenues and competing effectively" (Association of American Railroads, 2003). Survival of the railroad industry required a new regulatory scheme "that allowed railroads to establish their own routes, tailor their rates to market conditions, and differentiate rates on the basis of demand" (Association of American Railroads, 2003). In the early twenty-first century, Congress was debating the effectiveness and impact the act.

Prior to the Staggers Rail Act and the Motor Carrier Act of 1980, the railroad industry was suffering. Many railroads had financial problems, and the conditions of rail facilities had deteriorated. Public demand for a better rail system caused Congress to take action and pass the Staggers Rail Act, which has resulted in rail profits and improved service. The act marked the most significant change in rail policy since the Interstate Commerce Act of 1887.

"The basic principle of the Staggers Rail Act was simple: Railroads should be permitted to act much as other businesses in managing their assets and pricing their services" (Association of American Railroads, 2003). It eliminated most common-carrier obligations, granted railroads greatly increased commercial freedom, and generally reversed previous policy. The act deregulated the nation's railroads. In deregulating the nation's railroads, Congress intended (1) to return the nation's railroads to financial health, (2) to replace government regulation wherever possible with the powers of competition, and (3) to continue to provide captive shippers with protection from "unreasonable" rates.

The system of economic regulation of railroads in the United States that was put in place by the Staggers Rail Act has provided a balance between allowing railroads the freedom to compete effectively in the marketplace and protecting shippers from abuse of railroad market power. In 2005 W. C. Vantuono reported that twenty-five years after it was passed, the Staggers Rail Act was doing exactly what it was supposed to do: help move the railroads toward revenue adequacy.

Railroads have been able to increase their profitability since passage of Staggers in the face of strong competition from trucks and declining rates only through increased productivity. The flexibility Staggers provided "has enabled railroads to upgrade their systems, reinvest in productive rail infrastructure, generate higher levels of service and greater volumes of traffic, dramatically increase productivity, improve profitability from once anemic levels, and improve safety—while at the same time sharply lowering rates for shippers" (Association of American Railroads, 2003).

Until 1995 the regulating agency for the railroads was the Interstate Commerce Commission (ICC). The intent of the Staggers Rail Act was to replace federal regulation with market competition. The ICC was charged by Congress in the Staggers Rail Act to promote rail-to-rail competition. Unfortunately, the ICC did not fully succeed in its charge.

The ICC's successor, the Surface Transportation Board (STB) of the U.S. Department of Transportation, was created by Congress in 1995. The STB retained authority to set maximum rates or take other actions if a railroad was found to have market dominance or to have engaged in competitive behavior. The STB is also responsible for railroad mergers, consolidations, and track age rights. Railroads largely control their pricing; changes, however, must be approved by the STB and, if they are, the railroad is not subject to antitrust regulations.

Since its beginnings in the 1830s, "the U.S. freight rail industry has seen many market improvements, making today's industry competitive against other modes of transport and vital to the economic health" (Association of American Railroads, 2003) of the U.S. economy. The Staggers Rail Act of 1980 has helped that happen.

see also Transportation

bibliography

Association of American Railroads. (2003). A trip through railroad history. Retrieved December 10, 2005, from http://www.tomorrowsrailroads.org/industry/history.cfm

Association of American Railroads. Policy and Economic Department. (2005, June). Why the rail reregulation debate is important. Retrieved December 10, 2005, from http://www.aar.org/About_AAR/about_aar.asp

Deregulations anniversary. (2005, October 10). Traffic World, 269 (41), 8.

Vantuono, W. C. (2005, July 7). Twenty-five years after Staggers: New challenges, huge opportunities. Railroad Age, 206, 22–26.

Phyllis Bunn

Laurie Barfitt