Mexican antitrust authorities find rail competition lacking
Kansas City Southern (KCS) said in a statement it “respectfully disagrees” with a preliminary report from Mexico's Federal Economic Competition Commission (COFECE) that found a lack of competition between KCS and other operators in the country.
A preliminary report from Mexico's Federal Economic Competition Commission (COFECE) has found a fundamental lack of competition between Kansas City Southern (KCS) and other freight rail operators in the country.
According to the report, conditions of effective competition are lacking in the market of trackage rights in the rail networks operated by Kansas City Southern de Mexico, S.A. de C.V. (KCSM), Ferrocarril Mexicano, S.A. de C.V., Ferrosur, S.A. de C.V. and Ferrocarril and Terminal del Valle de México, S.A. de C.V., an entity partially owned by KCSM.
KCS said in a statement it “respectfully disagrees” with the preliminary findings and “will exercise its rights within the next 20 business days to file evidence and arguments to support its position, as provided in the Mexican Federal Economic Competition Statute.”
“After the end of the aforementioned 20 business-day period, the Commission has an additional term of up to 110 business days to issue a final report in connection with effective competition conditions in the Relevant Market,” the company said.
The Kansas City, Mo.-based Class I railroad noted that the Mexican government is not imposing any sanctions or penalties on it or any other railway based on the findings of the report.
Should COFECE confirm the findings in its final report, expected later this year, the commission would have authority to consider specific remedies, which could include “imposition of limited mandatory trackage rights on KCSM and other concessionaries, for specific commodities, routes or segments thereof, in addition to the mandatory trackage rights already provided in their corresponding concession titles,” according to KCS.
“Should the Commission’s final report affirm the preliminary conclusions and the Railway Regulatory Agency consider specific remedies for such findings, KCSM will exercise all of its rights under its concession and the law to ensure that any actions considered by the Agency are workable and consistent with KCSM’s rights under law and under its concession,” the company said.
Investment analysts with UBS reiterated its “Buy” rating and $99.00 price target on Kansas City Southern's stock following the COFECE preliminary report, according to a report from StreetInsider.
“The findings of the report were broadly negative from a rail perspective, as the Commission reported a lack of competition between KSU and other railroads in Mexico,” said UBS analyst Thomas Wadewitz. “There are likely multiple steps in the review process, including a public comment period during which interested parties (rails, shippers, etc.) can respond to the Commission's findings.”
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