by Freedonia Industry Studies
July 15, 2021
An executive order signed in early July laid out the Biden administration’s plan to reduce the strength of monopolies across the US economy. In the freight industry – namely, freight by rail and freight by waterway – the administration believes consumers and small companies are at a disadvantage due to the power of the limited number of major players.
In the rail industry, competition is largely limited by high concentration – the four largest firms control the vast majority of the market – and each rail company’s captive control of its rail system. The executive order encourages the Surface Transportation Board to adopt a system, known as “reciprocal” or “competitive switching”, which has been proposed many times in the past. If put in place, rail shipping customers that are served by one railroad are able to accept bids from competing railroads in the area. The bidding company would pay a fee to utilize the dominant railroad’s infrastructure, increasing the number of potential choices rail shipping customers have among railroad firms and placing downward pressure on shipping rates. Furthermore, it may open the door for smaller rail shipping firms to increase their market share.
For ocean shippers, the executive order encourages the Federal Maritime Commission to take further action to reduce export fees and allows the Justice Department to enforce their decisions.
For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, as well as Freedonia Focus titles such as Freight by Waterway: United States, Freight Services: United States, Freight by Rail: United States, and Freight by Truck: United States. Freedonia Custom Research is also available for questions requiring tailored market intelligence.