OPINION:
The proposed merger between Union Pacific and Norfolk Southern isn’t a test of corporate power. It’s a test of whether regulators still trust free market principles — the very principles that have powered American innovation and prosperity for generations.
Merger-related decisions should face only one question: Does it have a reasonable chance of improving outcomes for consumers and the economy?
Too often, merger reviews and regulators drift beyond their statutory purpose. Instead of examining economic efficiency and consumer benefit, regulators increasingly view private enterprise through an ideological lens that assumes consolidation is inherently harmful and that bureaucrats, not markets, know best. When regulators take that path, they undermine the free market and impart to themselves an unrealistic level of knowledge.
The Surface Transportation Board must remember its charge: to ensure that the merger enhances competition and serves the public interest. Staying true to that mission will protect consumers and the constitutional balance that underpins our economy.
Understanding that legal boundary helps clarify the first issue: how this merger affects consumers and the broader economy. Combining Union Pacific and Norfolk Southern stands to deliver real, measurable benefits to businesses and customers alike. Streamlined operations and reduced interchange delays would translate to lower transportation costs, faster delivery times and a more reliable supply chain for American consumers.
Furthermore, the merger would encourage a greater share of freight to shift from long-haul trucking to rail. The more freight that moves by rail, the greater the advantages for the environment and our highways. Freight railroads are more fuel-efficient and put less pressure on our roads, lowering costs for taxpayers and cutting overall emissions.
These benefits come through private investment, not public spending. Freight rail is one of the few infrastructure sectors in America that finances its own upkeep, investing roughly $23 billion of private capital each year, or six times more than the average manufacturer. In 2023 alone, Class I railroads reinvested nearly $26.8 billion into their systems, thereby strengthening supply chains without burdening taxpayers.
By combining their resources, the merged company would be able to reinvest even more in technology, capacity and infrastructure.
The decision to approve this merger should be centered entirely on dynamic competition and the fundamental economic forces that drive innovation and growth, not the static measurements of market concentration.
The core competitive challenge facing the railroad industry is trucking. By stitching together complementary networks into a seamless transcontinental system, this merger acts as a dynamic innovation that facilitates the reallocation of resources to more productive uses. This displacement of older, segmented services is what drives aggregate productivity growth. Accordingly, competition policy should not focus on maintaining static market structures but instead on maintaining contestability: ensuring that potential innovators, even within incumbent industries, can challenge others.
The regulatory error is often rooted in overlooking this dynamic nature of rivalry. Nobel Prize-winning economist Friedrich Hayek criticized the notion of “perfect competition” because it assumes the facts are already known, thus mistaking a static state for a dynamic process. Hayek also emphasized the “knowledge problem”: that no central authority possesses the dispersed, ever-changing information needed to judge entrepreneurial decisions from above.
By blocking the merger, regulators would be claiming to know more than the market about whether this integration will produce better service, lower costs or improved efficiency. It is knowledge they simply do not have.
Competition is, first and foremost, a discovery procedure that continuously uncovers knowledge about market possibilities. Regulators who focus exclusively on structural appearance (i.e., whether the merged entity looks “too big”) engage in the hubris of central planning, attempting to impose a preferred market structure rather than letting rivalry and discovery run their course.
The creation of a truly transcontinental rail system is an entrepreneurial maneuver rooted in Israel Kirzner’s concept of entrepreneurial alertness. Competition is a process of entrepreneurial discovery wherein imaginative entrepreneurs are alert to opportunities for profit by serving the market better than competitors.
This merger discovers a new way to deliver goods more efficiently across the continent, stitching together complementary networks to eliminate costly handoffs. Freedom of entry, unhindered by legally imposed barriers, ensures that this entrepreneurial profit-seeking process has the opportunity to generate economic coordination and value for consumers.
The Surface Transportation Board should enable this powerful market mechanism of discovery and creative destruction.
• Jeffrey Depp is senior counsel for law and policy at the Committee for Justice.
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