Lobbying Loopholes and Antitrust

Lobbying Loopholes and Antitrust

Copyright 2008, Traffic World, Inc.

Captive rail shippers are lobbying Congress to trim the railroads'' antitrust immunity - but oddly enough it''s through their own antitrust immunity they may lawfully collude to do so.

In fact, American industry - and especially influence peddlers - can thank railroads for this near wholesale freedom to collude in seeking to saddle a competing industry with restrictive legislation.

So how did it come about?

In 1949, 24 eastern railroads hired a public relations firm to design and execute a grassroots campaign to pressure lawmakers to limit the maximum weight of competing trucks on highways.

Front groups emerged - Garden Clubs against Big Trucks, Save Our Highways Club, and Taxpayers Opposed to Pavement Destruction - peppering lawmakers with letters, and flooding newspapers and magazines with letters and advertising.

But when a disgruntled employee of the PR agency leaked particulars of the orchestrated campaign, 41 Pennsylvania motor carriers filed suit against the railroads, alleging an unlawful conspiracy against trade. The trial began in October 1956.

Railroads, it was alleged, had conspired in violation of the antitrust laws to persuade the governor of Pennsylvania to veto a bill that would have increased highway load limits.

Alas, discovery revealed that the Pennsylvania Motor Truck Association had hired its own PR firm to disseminate equally disparaging information about railroads.

The courts subsequently noted "the truckers [were] as guilty as the railroads" in the use of invective and front groups; although an appellate court observed that the railroads'' PR agency "was more vigorous, more vocal and more effective."

Railroads lost round one in federal court, where they were found to have conspired to "injure the truckers in their competitive position in the long-haul freight industry." The court held the truckers'' counter campaign was merely "defensive."

An appellate court agreed it was the intention of railroads "to hurt the truckers in every way possible ? it was their purpose to restrict the activities of the truckers in the long-haul industry to the greatest possible extent ?

"To accomplish this," said the district court, the railroads would "seek out or create ''independent'' organizations favorable to the railroads'' point of view and opposed to the truckers; use these groups to focus attention upon the trucks as destroyers of the highways ? and interest writers of important magazine articles [to attack] the truckers."

Had that decision been permitted to stand, it is probable that influence peddling would be quite different today. But the decision did not stand.

In a unanimous rebuke, the U.S. Supreme Court in 1961 reversed the lower-court decisions, holding the antitrust laws should not be construed to deprive citizens of their right to petition government - that the railroad-trucker dispute was merely a "no-holds barred fight" between two industries "seeking control of a profitable source of income ? It is neither unusual nor illegal for people to seek action on laws in the hope that they may bring about an advantage to themselves and a disadvantage to their competitors."

The Supreme Court expanded upon its decision in 1964, holding that even concerted efforts to influence public officials (including administrative agencies) for the purpose of eliminating competition are shielded from antitrust prosecution.

One wag opined afterward that what the court really said is that the legislative process is so corrupt already, that any amount of corporate collusion to influence the process further cannot matter.

Whatever, thanks to the railroad industry, joint activities of competitors - such as member companies of Consumers United for Rail Equity - to influence public officials do not violate the antitrust laws. And that, influence peddlers can and do take to the bank.

To read the cases, see: Noerr Motor Freight v. Eastern Railroad Presidents Conference, 155 F.Supp. 768 (E.D. Penn., 1957); Eastern Railroad Presidents Conference v. Noerr Motor Freight, 273 F.2d 218 (3d Cir., 1959); Eastern Railroad Presidents Conference v. Noerr Motor Freight, 365 U.S. 127 (1961); and United Mine Workers v. Pennington, 381 U.S. 657 (1964).

-- Wilner is director of public relations for the United Transportation Union. He is the author of four books on railroad economics and labor and was an assistant vice president at the Association of American Railroads, a chief of staff at the Surface Transportation Board, president of the ICC/STB bar association and editor of its publications and an associate editor at Traffic World.