The Problem Wasn’t Just the Joke

The viral clip was just 25 seconds. The real story is 25 years in the making.

If you follow the railroad industry even a little bit, chances are you’ve seen the video by now. Jim Vena, the chief executive of Union Pacific, is addressing hundreds of railroad customers at an industry conference. He’s talking about his company’s proposed $85 billion takeover of Norfolk Southern...the biggest in American history if it goes through. And as he concludes his remarks, he suggests that customers who oppose the merger might find themselves paying more for railroad service — “by three or four extra percent to teach you a lesson.”

The Brotherhood of Locomotive Engineers and Trainmen helped make the 30-second clip go viral, and understandably so. It’s a remarkable thing to hear from the chief executive of one of America’s biggest railroads, particularly when that company is asking Federal regulators for permission to get even bigger.

Union Pacific says Vena was joking. Vena himself subsequently described his remark as humor. The railroad insists that it doesn’t retaliate against customers for their positions on the merger. Those statements deserve to be included in any fair account of the controversy.

But I think we’re missing something important if we spend all our time debating whether Vena was trying to be funny. Honestly, I think whether he was trying to be funny or not is somewhat beside the point. And that larger context is what has been gnawing at me since all of this surfaced this week, to the point where I’m spending a Saturday afternoon writing about it instead of raking leaves (sorry, babe, I promise I’ll get to it when I’m done).

Vena’s full presentation runs nearly 53 minutes, and the closing remark is hardly the only revealing moment. Across the presentation, Vena expresses frustration with regulators and critics of the merger, challenges the positions taken by industry groups, and tells a colorful story about playing aggressively, maybe even unfairly, competitive racquetball with his brother. He complains about a sluggish regulatory process in all areas, not just this transaction, and argues for speed at the Surface Transportation Board. He declares that shippers in the room who are silent or don’t ask questions are effectively consenting to the transaction. His recurring message is that Union Pacific knows what it’s doing, that the deal will benefit its customers and the country, and that people standing in its way are failing to recognize the opportunity.

Now look, there’s nothing inherently wrong with a railroad executive vigorously defending his business strategy. Vena has every right to advocate for his takeover of Norfolk Southern. Union Pacific and Norfolk Southern have also offered substantive arguments about improved service, more efficient freight movements, and stronger competition against trucking, removing trucks from congested highways, and so forth. Those arguments deserve real and honest consideration.

But let’s also agree there’s a difference between making a zealous case for your proposal and treating disagreement as something that ought to come with consequences. And that difference is an even bigger deal when your customers might well have nowhere else to go.

In the railroad industry, there’s a term for customers who depend on a particular railroad because they have no practical alternative: captive shippers. And it’s just what it sounds like. Imagine operating a grain elevator, a chemical plant, or a manufacturing facility served by a single railroad, and you aren’t happy with the rates or the service you’re getting. You can’t just move your factory or your grain elevator to another set of tracks. Trucking may be prohibitively expensive or impractical for the quantities involved. Your economic fortunes are tied, sometimes quite literally, to the company whose CEO is addressing you.

Now imagine that same CEO suggesting that customers who oppose his takeover plan might pay another three or four percent for the privilege.

Was he joking? Maybe. I can’t pretend to know what’s in his heart, really. But the more relevant question is whether a customer in that audience could reasonably have understood the remark as a warning. A three- or four-percent rate increase isn’t some wildly exaggerated number chosen for comic effect (“I’ll double your rates to teach you a lesson” wink-wink, impish grin). Instead, it’s a perfectly plausible commercial consequence. And for a business moving millions of dollars in freight, it could be a substantial one.

This is where I think the controversy stops being about Jim Vena’s sense of humor and starts being about corporate power, and why I think the online commentariat’s focus on those final 25 seconds of a nearly hour-long presentation kind of miss the mark.

It also explains why the Surface Transportation Board exists in the first place.

Twenty-five years ago, the STB substantially strengthened its rules governing major railroad mergers. And the history of those rules is particularly instructive today, because the Board was anticipating almost precisely the situation now confronting us.

By 2000, successive waves of railroad consolidation had reduced the number of major carriers dramatically. The Union Pacific–Southern Pacific merger had been followed by devastating service disruptions, and the division of Conrail between CSX and Norfolk Southern had created its own operational difficulties. Meanwhile, another proposed combination, between BNSF and Canadian National, raised the prospect of a final round of consolidation that could leave the North American rail network dominated by just two transcontinental railroad systems.

The STB was sufficiently concerned that it imposed a 15-month moratorium on major mergers while it reconsidered the rules. Think about that: Federal regulators deliberately stopped the process altogether because they recognized that the consequences of getting the next generation of mergers wrong could be extraordinarily difficult to reverse.

The resulting 2001 rules weren’t designed merely to preserve existing competition. They significantly raised the burden on merger applicants to demonstrate that their proposals would affirmatively serve the public interest, including through enhanced competition. They called for detailed service assurance plans, consideration of how one merger might trigger further consolidation, greater opportunities for public participation, and continued oversight after approval.

And the Board was emphatic about the need for adequate time. When BNSF argued during the 2001 process that major merger proceedings should be completed within 12 months, the STB warned that even that might be insufficient to develop a complete evidentiary record, provide meaningful opportunities for public participation, and complete environmental reviews of transcontinental mergers.

So, the 2001 rules weren’t written for some abstract regulatory problem. They were written in anticipation of the very kind of giant, consequential transaction Union Pacific and Norfolk Southern are proposing today.

That makes Vena’s frustration with regulatory delays especially difficult to reconcile with the history of the industry’s own consolidation.

To be clear, Vena is not wrong that there’s plenty of room to make government work faster. I’ve made that argument myself. And indeed, STB Chairman Patrick Fuchs has made streamlining and regulatory efficiency central elements of his chairmanship. Under his leadership, the Board has launched a public case-status dashboard that provides regular updates and projected action dates, improved electronic access to filings and case records, and expanded the authority of agency officials to resolve routine, uncontested matters without requiring full Board action. He’s also championed an overhaul of environmental permitting procedures aimed at reducing unnecessary paperwork and delays, while retaining meaningful review and public participation. That broader permitting proposal remains under consideration.

These are tangible efforts to make a small but consequential regulatory agency more responsive, transparent, and efficient. And they demonstrate an important distinction: speeding up routine decisions and eliminating unnecessary bureaucratic friction isn’t even remotely the same thing as relaxing the scrutiny applied to the largest railroad merger in American history.

Don’t forget, Union Pacific’s initial merger application was rejected in January because it was incomplete. Requiring an applicant to supply the information the law demands isn’t bureaucratic obstruction. It’s how responsible oversight works.

And this brings us back to Vena’s speech.

On November 4, the STB ordered Union Pacific to make the video public and produce additional information concerning possible retaliation, including responses to allegations by CPKC railroad that UP is engaging in that kind of behavior. The Board hasn’t determined that retaliation occurred. But it made clear that concerns about retaliation — whether actual or perceived — could undermine the integrity of its proceedings.

Obviously, the Board needs candid information from shippers, railroad workers, communities, competing railroads, and the public to evaluate the merger. It can’t do that job properly if the people most directly affected are reluctant to speak freely.

Passenger rail belongs in this conversation, too. Amtrak and state-supported passenger services depend on freight-owned infrastructure across much of the country. Communities hoping to restore or expand passenger service generally have little practical choice about which railroad controls the tracks they need. In our own examination of the proposed merger, we’ve raised serious concerns about what concentrating control of those tracks could mean for existing trains and future passenger corridors.

From our point of view, those questions deserve answers supported by actual evidence, not assurances that everything will work out. Union Pacific is entitled to advocate for its merger. Its customers are equally entitled to disagree. And the public is entitled to expect that the Federal regulator charged with protecting its interests will be able to hear from everyone without fear or favor.

So yes, watch the viral video. Make up your own mind about whether Jim Vena was joking. Better yet, watch the complete presentation and consider what it tells us about how the people running our largest railroads understand competition, accountability, and their relationships with customers and the larger public.

Because the real issue isn’t whether a railroad CEO can make a joke. It’s whether the people who depend on his railroad can afford to disagree with him.