Farmers Take Union Pacific and K&O to Court Over Alleged Rail Fee Scheme

Several farmers, along with Weskan Grain and the Colorado Pacific Railroad, both subsidiaries of Soloviev Group, filed an antitrust lawsuit last week in the U.S. District Court for the District of Kansas against Kansas & Oklahoma Railroad LLC and Union Pacific Railroad, the nation’s largest railroad by market value, according to a Reuters-attributed account of the news release.

The lawsuit, brought by the law firms Ajamie LLP and Sharp Law LLP, alleges that the two rail companies worked together to restrict competition from a refurbished rail line and keep control over westbound shipments of grain coming from counties in western Kansas and from Kiowa County, Colorado. Per Reuters, the plaintiffs argue that this conduct has left farmers with fewer options and higher transportation costs when moving crops to western markets.

Stefan Soloviev, chairman of Weskan Grain and the Colorado Pacific Railroad, said the case is meant to protect the long-term health of American agriculture, emphasizing that fair access and fair pricing are essential for rural economies. According to a Reuters-style attribution, the farmers and rail operators aligned with Soloviev contend that their ability to reach large mills and West Coast export terminals has been undermined by practices that favor the incumbent railroads.

The complaint centers on what Tom Ajamie, managing partner at Ajamie LLP, described as a secret agreement between Union Pacific and Kansas & Oklahoma Railroad. Ajamie said this arrangement imposed unusually high fees on rail traffic moving from western Kansas into eastern Colorado, creating financial and competitive barriers that made it harder for farmers to get a fair return on their crops. According to Reuters reporting based on the lawsuit, these alleged fees have increased both transportation costs and delivery times.

Related: DOJ Antitrust Chief Flags Rising Concerns Over Competition in Agriculture

Ajamie also linked the dispute to Union Pacific’s broader strategy, noting that the railroad is pursuing a merger with Norfolk Southern to address congestion and delays across the national rail network. Per Reuters, the plaintiffs argue that allowing more rail traffic to move freely across multiple lines, rather than being restricted to Union Pacific-owned routes, would improve efficiency in freight rail service.

In their court filing, the farmers and rail companies accuse Union Pacific and Kansas & Oklahoma Railroad of violating the Sherman Antitrust Act as well as state competition laws in Kansas and Colorado. According to Reuters, the lawsuit claims that a so-called “paper barrier” and other tactics were used to fix or stabilize prices, divide up markets, and eliminate competition, leading to higher costs and lost profits for grain shippers.

The case focuses heavily on a stretch of track known as the Towner Line, owned by Colorado Pacific Railroad, which connects western Kansas and eastern Colorado to other rail networks. For more than a decade the line was in poor condition, but it was purchased by Colorado Pacific in 2018, rehabilitated, and reopened for freight service in 2019, per Reuters.

Soon after that purchase, the lawsuit alleges, Union Pacific and Kansas & Oklahoma Railroad quietly amended their lease agreement in a way that added an interchange fee that could exceed $500 per railcar for any car moving between the UP Lease Track and the Towner Line. According to Reuters, the plaintiffs say that this charge effectively made it too expensive for farmers to ship grain westward using the revived line.

The impact of that fee, the complaint claims, has been dramatic. In the six years since it was adopted, no westbound railcar carrying any commodity has traveled over the Towner Line from the affected market, a fact the plaintiffs say shows how the fee has been used to preserve the defendants’ dominance over westbound grain shipments, according to Reuters.

Source: Feed Stuffs