Rail customers urge regulators to block Union Pacific-Norfolk Southern deal, FT reports

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(Reuters) -U.S. railroad customer groups have demanded regulators block or put onerous conditions on the proposed merger of Union Pacific and Norfolk Southern, the Financial Times reported on Sunday.

Seven associations of shippers have expressed concern the planned deal would significantly increase the power of the merged railroad to raise prices or reduce service standards, the report said.

Union Pacific said it had spoken with more than 100 customers about “low cost rail options” adding they would provide all details to stakeholders in their upcoming Surface Transportation Board filing.

Last month, Union Pacific said it would buy smaller rival Norfolk Southern in an $85 billion deal to create the first U.S. coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the country.

The two railroads are expected to have a combined enterprise value of $250 billion and would unlock about $2.75 billion in annualized synergies, the companies said.

Norfolk Southern did not immediately respond to Reuters’ requests for comment.

Previously, the transportation division of SMART, the International Association of Sheet Metal, Air, Rail and Transportation Workers, said it plans to oppose the merger when it comes before the Surface Transportation Board for review.

Major railroad unions have long opposed consolidation, arguing such mergers threaten jobs and risk disrupting rail service.

Senate Democratic leader Chuck Schumer also criticized the merger saying the deal would push “us even further down the road of dangerous consolidation and monopoly power … This is a hostile takeover of America’s infrastructure.”

(Reporting by Harshita Meenaktshi in Bengaluru; Editing by Chris Reese)