Edited by Peter C. Carstensen and Susan Beth Farmer
Chapter 5: Merger Analysis in the Post-Staggers Railroad Industry
Curtis M. Grimm1 INTRODUCTION There has been a signiﬁcant trend towards microeconomic reform worldwide, manifested largely as deregulation in the United States. Traditional regulation in the public utility framework has given way to greater reliance on markets across a number of industries. Substantial merger activity has accompanied deregulation in most industries. This has been the result in some cases of ﬁrms unable to merge under regulation exercising their postderegulation freedom. If regulation had prevented a more eﬃcient or proﬁtable conﬁguration of ﬁrms, it is natural to experience a merger wave following deregulation. In other instances, the introduction of competition in conjunction with market reforms prompted multifaceted strategic change, including mergers and other ﬁrm reconﬁgurations to align with the newly competitive environment. Financial pressures from competition may be a factor prompting post-deregulation mergers as well. Finally, the merger waves could, in part, be unrelated to deregulation. Instead, they may be a response to forces such as technological change and globalization, which are prompting mergers to occur in large numbers throughout the economy. Regardless of the precise antecedent, the United States railroad industry has indeed mirrored the overall trend of substantial merger activity following regulatory reform. The second section of this chapter will review the nature of deregulation in the railroad industry, the institutional structure of merger approval in the deregulated environment and the major mergers which have taken place since 1980. The third section explores how horizontal competitive eﬀects have been evaluated in railroad mergers,...
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