Kansas City Southern de Mexico Files Response to The Investigating Authority of the Mexican Federal Competition Commission Pr...
April 20 2017 - 3:52PM
Business Wire
Today, Kansas City Southern (KCS) (NYSE:KSU) wholly-owned
subsidiary, Kansas City Southern de Mexico, S.A. de C.V. (KCSM)
filed its arguments and evidence with The Mexican Federal
Competition Commission challenging the March 15, 2017 Preliminary
Report of the Commission’s investigating authority on effective
competition in the Mexican railway system of interconnection
services. In that Preliminary Report, the Commission found a lack
of effective competition with respect to interconnection services
for trackage rights for KCSM, Ferromex, Ferrosur, and
Ferrovalle.
The Preliminary Report does not have any legal or regulatory
implications with respect to the rights of KCSM under its
concession title or applicable law, nor the current operations of
the railway system. Notwithstanding, KCSM’s response argues that
the investigation which supports the conclusions in the Preliminary
Report was conducted contrary to the rule of law, the rules of
procedure, and relied upon faulty economic analysis.
The Organization for Economic Cooperation and Development
(OECD), a forum in which governments work together to share
experiences and of which Mexico is a member state, has issued three
reports regarding the Mexican rail system. These include “Peer
Review of Railway Freight Development in Mexico” in 2014
http://www.itf-oecd.org/sites/default/files/docs/14mexicorail.pdf,
“Establishing Mexico’s Regulatory Agency for Rail Transport” in
2016
http://www.itf-oecd.org/sites/default/files/docs/16cspa_mexico-rail_regulation.pdf,
and “Review of the Regulation of Freight Transport in Mexico” in
2017
http://www.oecd-ilibrary.org/governance/review-of-the-regulation-of-freight-transport-in-mexico_9789264268364-en. While
these reports are not binding upon Mexican authorities or
regulators, KCSM believes they represent important conclusions and
findings that should have been considered by the investigative
authority of the Competition Commission.
The conclusions in all three OECD reports are substantially
similar. In its 2016 report, the OECD found, “In general,
Mexican railway concessions face more competition from trucking
than US or Canadian railways” (page 6) and “…In short, the
concessioning system has worked well. Since transfer to private
operators in 1998, rail tonne-kilometres have grown by over 50
percent, … Traffic density has grown in line with traffic and labor
productivity is over six times higher. By a rough estimate, average
Mexican rail freight costs have fallen by about 20 percent since
concessioning … Without question, the Mexican concessions have
become world class performers.” (page 17)
In its 2017 Report, the OECD said, “The concession system
adopted was adapted to Mexican geography and freight markets…The
approach relied on competitive forces, not only on stiff
competition with other modes of transport (principally road
transport), but on competition between railways operating on
separate lines….Overall, the system design relied for effective
competition on intermodal direct competition in key locations,
parallel and source competition, supplemented by trackage rights in
specific situations.” (page 81).
The Panel of the Competition Commission has 110 business days
from today’s filing to analyze the evidence and arguments submitted
by parties in response to the Preliminary Report and issue a Final
Report. KCS believes that KCSM’s response to the Competition
Commission’s Preliminary Report filed today is compelling and
should lead to an amended Final Report.
Headquartered in Kansas City, Mo., KCS is a transportation
holding company that has railroad investments in the U.S., Mexico
and Panama. Its primary U.S. holding is The Kansas City Southern
Railway Company, serving the central and south central U.S. Its
international holdings include KCSM, serving northeastern and
central Mexico and the port cities of Lázaro Cárdenas, Tampico and
Veracruz, and a 50 percent interest in Panama Canal Railway
Company, providing ocean-to-ocean freight and passenger service
along the Panama Canal. KCS' North American rail holdings and
strategic alliances are primary components of a NAFTA Railway
system, linking the commercial and industrial centers of the U.S.,
Mexico and Canada.
This news release contains “forward-looking statements” within
the meaning of the securities laws concerning potential future
events involving KCS and its subsidiaries, which could materially
differ from the events that actually occur. Words such as
“projects,” “estimates,” “forecasts,” “believes,” “intends,”
“expects,” “anticipates,” and similar expressions are intended to
identify many of these forward-looking statements. Such
forward-looking statements are based upon information currently
available to management and management’s perception thereof as of
the date hereof. Differences that actually occur could be caused by
a number of external factors over which management has little or no
control, including: competition and consolidation within the
transportation industry; the business environment in industries
that produce and use items shipped by rail; loss of the rail
concession of KCS’ subsidiary, Kansas City Southern de México, S.A.
de C.V.; the termination of, or failure to renew, agreements with
customers, other railroads and third parties; access to capital;
disruptions to KCS’ technology infrastructure, including its
computer systems; natural events such as severe weather, hurricanes
and floods; market and regulatory responses to climate change;
legislative and regulatory developments and disputes; rail
accidents or other incidents or accidents on KCS’ rail network or
at KCS’ facilities or customer facilities involving the release of
hazardous materials, including toxic inhalation hazards;
fluctuation in prices or availability of key materials, in
particular diesel fuel; dependency on certain key suppliers of core
rail equipment; changes in securities and capital markets;
availability of qualified personnel; labor difficulties, including
strikes and work stoppages; insufficiency of insurance to cover
lost revenue, profits or other damages; acts of terrorism or risk
of terrorist activities; war or risk of war; domestic and
international economic, political and social conditions; the level
of trade between the United
States and Asia or Mexico; fluctuations in the
peso-dollar exchange rate; increased demand and traffic congestion;
the outcome of claims and litigation involving KCS or its
subsidiaries; and other factors affecting the operation of the
business. More detailed information about factors that could affect
future events may be found in filings by KCS with the Securities
and Exchange Commission, including KCS’ Annual Report on Form 10-K
for the year ended December 31, 2016 (File No. 1-4717) and
subsequent reports. Forward-looking statements are not, and should
not be relied upon as, a guarantee of future performance or
results, nor will they necessarily prove to be accurate indications
of the times at or by which any such performance or results will be
achieved. As a result, actual outcomes and results may differ
materially from those expressed in forward-looking statements. KCS
is not obligated to update any forward-looking statements to
reflect future events or developments.
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version on businesswire.com: http://www.businesswire.com/news/home/20170420006571/en/
KCSAshley Thorne, 816-983-1530athorne@kcsouthern.com
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