Yellow-Roadway might not be monopoly

Jul 10, 2003 12:00 PM

Although the proposed merger of Yellow Corp. and Roadway Corp. that would form Yellow-Roadway would couple the nation's numbers one and two LTL carriers, analysts said that it might not be considered a monopoly.

Satish Jindel, president of Pittsburgh-based transportation consulting firm SJ Consulting, said the merger should be approved by the Dept. of Justice (DOJ) because last year's closure of Consolidated Freightways left still too much capacity in the LTL industry.

According to Yellow president & CEO Bill Zollars, his company is running at about 90% capacity. Roadway president & CEO James D. Staley said that its capacity is similar.

Martin Labbe of Martin Labbe Associates said that if the two trucking giants are measuring that by how much space is available when the truck leaves the dock, then the estimate of 90% capacity could be correct.

"Depending on what's on board when the truck leaves the terminal, it may not be completely full," Labbe said. "It depends on how the truck is packed and what kind of freight is on board."

However, according to DOJ's website, antitrust laws prohibit a variety of practices that restrain trade, such as corporate mergers likely to reduce the competitive vigor of particular markets. So if the merger means Yellow-Roadway would have the majority of the LTL market share, it could be seen as a monopoly.

"The government will have to look at the movement of Yellow and Roadway's national freight and decide if it will be compromised," Labbe said. "If they control 50 to 60% of a particular freight, it could lead to potential pricing strategies and antitrust."

Yellow's customers are mostly in retail, while Roadway's are generally in manufacturing. Therefore, Labbe said it is possible, especially since they have only a 30% customer overlap, that Yellow-Roadway would not control any particular freight.