The petrochemical and refining unit of the French energy major Total is the latest big freight shipper to accuse the nation’s four biggest railroads of price fixing by adding fuel surcharges to cargo prices.
Total Petrochemicals & Refining USA, which is headquartered in Houston, joins 37 other companies, including the Houston refiners Phillips 66 and Motiva Enterprises, suing the railroads that control 90% of the nation’s rail freight traffic for allegedly conspiring to impose fuel surcharges from as early as 2003.
The companies allege that Burlington Northern Santa Fe Railway of Fort Worth, CSX Transportation of Florida, Norfolk Southern Railway of Virginia and Union Pacific Railroad of Nebraska violated federal anti-trust laws by coordinating the fuel surcharges through meetings, phone calls and emails.
The surcharges generated billions of dollars in additional revenue for the railroads, according to Total, which filed its lawsuit in late December in federal court in Houston. The surcharges are added to shipping rates when fuel prices rise above a predetermined trigger price.Total alleges that the fuel surcharges were not tied to the cost of fuel but instead calculated as percentage base transportation rates, essentially allowing the fuel surcharges to become an across-the-board price increase, according to court documents.
Total estimates that it spent about $300 million transporting chemicals and other freight on the four railroads between 2003 and 2008, including nearly $30 million in fuel surcharges, according to court records. Total declined to comment.
Strong evidence
Lawsuits by companies shipping on the railroads were filed in federal courts nationwide after an appeals court in August rejected a request to reconsider a class-action claim. Six such suits were filed in Houston.
Eight companies brought a class-action suit against the railroads on behalf of 16,000 shippers in 2008, but a federal trial court in Washington determined in 2017 that the plaintiffs didn’t meet the criteria to be certified as a class because they didn’t share the same level of damages.
The court, however, noted strong documentary evidence of conspiracy and injury to companies as the railroads imposed the fuel surcharges, according to court records.
BNSF denies the allegations and said it is reviewing the latest lawsuit filings. Union Pacific said the claims are without merit and that it plans to vigorously defend itself in court. CSX and Norfolk Southern declined to comment.
Social occasions
Representatives of the railroads allegedly colluded at social occasions, business meetings and through a trade association to hammer out details of how surcharges would be imposed on customers, according to court documents. By 2010, the four rail carriers had nearly doubled their profit margins to 13%, compared with a decade earlier, according to the lawsuits of Phillips 66 and Motiva.
Phillips 66 declined to comment. Motiva did not respond to requests for comment.