CSX CORP.'S PROPOSED ACQUISITION of Sea-Land Corp., now before the Interstate Commerce Commission, would create the first international intermodal transportation company.

As pointed out in Thursday's editorial, CSX is seeking approval for the merger under the Panama Canal Act. This act concerns itself with the merging of a railroad and an ocean carrier. CSX has extensive railroad operations and Sea-Land is primarily a containership operator.Service provided by the $7.4 billion CSX and the $1.6 billion Sea-Land does not duplicate each other's, so the merger seemingly wouldn't reduce competition. Therefore, it seems clear to us that the ICC should not find the merger in conflict with the Panama Canal Act.

The critical point, as we see it, is Sea-Land's extensive railroad operations. But to our mind this does not make it a railroad, even though the ICC found the Road-Rail Transportation Co. to be a railroad back in 1982 when it operated a service somewhat similar to that of Sea-Land.

What makes a railroad is right of way. Those who own track are railroads. Those who do not are not railroads. Sea-Land merely hires railroads to move its railcars. It doesn't even have trackage rights.

Sea-Land owns double-stack cars and leases a major rail terminal, and it has revenue of more than $50 million a year from moving containers over tracks. But this no more makes it a railroad than the U.S. Postal Service is an airline company because it receives $50 million or more a year in revenue for moving freight by air.

The larger question here is one of antitrust. Will the merging of Sea-Land into CSX create a transportation monopoly and/or result in the reduction of competition and ultimately not be in the best interest of U.S. shippers?

By combining CSX with Sea-Land, the result would be a formidable international intermodal transportation company. Between them, they would be able to provide a through bill of lading and most of the transportation service between nearly every major country in the world above the equator and every major city in the United States.

CSX has $7 billion in railroad assets, including yards, tracks, locomotives and more than 200,000 cars. It operates 24,000 route miles and 37 intermodal facilities in 35 cities.

Sea-Land's assets exceed $1 billion and include 57 containerships, more vessels than any other containership operator in the United States. It has exclusive-use marine terminals in 12 premier world ports and preferential port arrangements at 11 other ports. No other containership carrier in the world has better access to freight than Sea-Land. It also owns or leases more than 100,000 containers and some 300 five-car articulated double-stack cars capable of moving some 3,000 containers.

The Sherman Antitrust Act, which became law in 1890, is blatantly general in what it defines as a trust or monopoly or conspiracy to restrain domestic or international commerce. The Clayton Antitrust Act, enacted in 1914 and amended thereafter, is somewhat more specific about what actually constitutes illegal restraint of commerce. Both acts can and have been used to justify the harassment if not prevention of just about any kind of merger.

However, until recently, the Justice Department under the Reagan administration has encouraged consolidations among companies. Given such loose guidelines on what restrains trade and commerce the critical question in the case of CSX and Sea-Land might come down to whether this merger is useful to the economic vitality of the country.

The problem, as we see it, is not with Sea-Land's operations so much as

CSX's operations.

In 1985 alone, the container traffic that CSX handled in conjunction with 32 ocean carriers generated $49.6 million. It's possible but not probable that

CSX might discriminate against one or more of Sea-Land's ocean competitors. The possibility for potential discriminatory practices also could take place at ocean ports and in-land intermodal terminals.

CSX directly serves six of the 11 ports that Sea-Land calls on and can provide intermodal rail service to seven of the 16 in-land terminals used by Sea-Land. Quite likely, from CSX's point of view, increased economies could be realized by redirecting the Sea-Land containers to the ocean and in-land facilities served by CSX.

Even with that in mind, The Journal of Commerce encourages the ICC to approve the merger and would discourage the Justice Department from taking issue with the merger.

We support the merger primarily for three reasons: (1) the extensive and pervasive competition in the U.S. rail, truck and ship industry; (2) the effectiveness of the U.S. shipping community in protecting its interests against a deregulated U.S. transportation industry; and (3) the globalization of the world economy.

The last point - the globalization of the world economy - is the most critical. Combinations like Sea-Land and CSX, from a technological and economic point of view, create a more efficient transportation service between the United States and other nations. It is in the best interests of this country and the shippers, in this country and abroad, to build better bridges between nations.

If it is approved, we doubt that the CSX-Sea-Land merger will be the last of its type.

For the full story: Log In, Register for Free or Subscribe