A Shipper’s Guide to the Proposed UP-NS Merger

The proposed merger between Union Pacific (UP) and Norfolk Southern (NS) represents a monumental shift in the North American rail landscape. If approved, it would create the first truly transcontinental railroad in the United States, fundamentally altering freight movement and competition. For supply chain leaders, understanding the intricacies of this merger is essential for future network planning, cost management, and competitive positioning.

This guide, informed by insights from former Surface Transportation Board (STB) Chairman Daniel Elliott, breaks down the UP-NS merger process.  

Key takeaways

• A new regulatory hurdle: This is the first major rail merger to be reviewed under the STB's stricter 2001 guidelines, which require applicants to prove the deal enhances competition, a significantly higher bar than simply not harming it.
• Divergent shipper impacts: The merger could create a more efficient, single-line service for intermodal carriers, potentially improving transit times. However, captive shippers and others fear the consolidation will lead to a duopoly, reducing competition and driving up rates.
• Shippers can voice their opinion: The STB’s review process includes a formal period for public and shipper comments. This is a critical opportunity for supply chain leaders to voice concerns, ask for conditions, or state their support for the transaction.
• Market context matters: The merger is occurring in a market where intermodal rates have been largely flat amid soft freight demand. While the merger could create new efficiencies, the near-term economic environment will continue to influence rate dynamics.

The Surface Transportation Board’s decisive role

Unlike most corporate mergers reviewed by the FTC or DOJ, large rail mergers fall under the exclusive jurisdiction of the Surface Transportation Board (STB). The STB is the economic regulator for U.S. freight railroads, with authority over rates, service, and transactions—including the UP-NS merger.

According to former STB Chairman Daniel Elliott, the board’s primary responsibility is to weigh the public benefits against potential harm. The STB will conduct a rigorous analysis of the application, focusing on two key areas:

1. Competition: The central question is whether the merger will enhance competition. This is the first time this stringent standard will be applied to a merger of this magnitude. The STB will analyze the impact on rail-to-rail competition, as well as competition with the truckload market.
2. Service: The board is acutely aware of the massive service disruptions that followed past mergers like the Conrail split. A top priority will be ensuring that the integration of UP and NS does not degrade service levels for shippers and the broader freight ecosystem.

The official timeline and review process

Navigating the merger’s approval process requires understanding its key stages. While timelines can shift, the general process follows a structured path once the official application is filed.

• Application filing: UP and NS will submit a comprehensive application detailing every aspect of the transaction and its projected impact on the rail industry.
• Public comment period: Following the application, a window will open for any interested party—including shippers, labor unions, government entities, and competitors—to file comments. These can be in support, in opposition, or can request specific conditions be placed on the merger if approved.
• STB hearing: The board will hold a public hearing to gather testimony and further vet the arguments from all sides.
• Final decision: Approximately 90 days after the hearing concludes, the STB will issue its final decision, either approving, denying, or approving the merger with conditions.

For shippers, the comment period is the most direct opportunity to influence the outcome.

How the UP-NS merger could impact your transportation network

The proposed merger will not affect all stakeholders equally. Different segments of the transportation industry are viewing the transaction through very different lenses.

Competing rails and alliances

Rival Class I railroads have been vocal. As noted by Elliott, BNSF and CSX are strongly opposed, fearing the competitive disadvantage of a single transcontinental competitor. In response, BNSF and CSX have already formed their own intermodal alliance, a move designed to demonstrate that similar efficiencies can be achieved through partnership rather than consolidation.

Intermodal Marketing Companies

The intermodal industry has been generally favorable. A single-line service from coast to coast eliminates the need for interchanges between UP and NS, which could lead to greater efficiency, faster transit times, and more competitive service. This aligns with the goal of converting more freight from highway to rail.

Shippers and the fear of a duopoly

For many shippers, especially those captive to a single railroad, the merger raises significant concerns. The Rail Customer Coalition and other trade groups have come out in opposition.

The primary fear is not the immediate loss of a direct competitor—the UP and NS networks have very little direct overlap. Instead, the concern is the creation of a massive duopoly. If the UP-NS merger is approved, many analysts believe BNSF and CSX will be pressured to merge as well. This would leave two dominant, transcontinental railroads controlling over 90% of U.S. rail freight, a scenario shippers worry would stifle competition and lead to higher rates and diminished service leverage.

Navigate the evolving rail landscape with Breakthrough

The rail landscape highlights the critical importance of transparency and industry expertise. Shippers require not just insights but a trusted transportation management partner to guide them through the potential UP-NS merger.

Breakthrough delivers unbiased, data-driven analysis that empowers shippers to evaluate potential impacts and make informed, strategic decisions. With a commitment to transparency and partnership, Breakthrough ensures shippers remain agile, competitive, and confident in their strategies, no matter how the market shifts. For tailored insights and strategic guidance on optimizing your transportation network, contact us today to start a conversation.

UP-NS merger frequently asked questions (FAQs)

Q: What does the UP-NS merger mean for the rail industry? 
A: The UP-NS merger would create the first coast-to-coast railroad in the U.S., potentially streamlining intermodal traffic and creating new efficiencies. However, it also threatens to consolidate the industry into a duopoly, which could reduce long-term competition and give the remaining railroads immense market power.

Q: How is this merger different from the Canadian Pacific and Kansas City Southern (CPKC) merger? 
A: The primary differences are size and regulation. The CPKC merger combined the two smallest Class I railroads. The UP-NS merger involves two of the four largest. Furthermore, this merger is the first to be judged under the STB's new, stricter rules that require the applicants to prove the merger enhances competition.

Q: How can shippers influence the STB's decision? 
A: Shippers can formally participate in the STB's review process during the designated public comment period. By filing comments, shippers can provide data-driven evidence of potential harm, request protective conditions, or express support. Working through industry trade associations is another effective way to ensure your voice is heard.

Q: What are the potential long-term consequences if the merger is approved? 
A: If the UP-NS merger is approved, it is widely expected that BNSF and CSX would pursue their own merger to remain competitive. This would consolidate the North American rail network into two dominant transcontinental systems, fundamentally changing the competitive dynamics for shippers across all industries,