UPDATE 1-Canada watchdog halts probe into alleged CN Rail pricing strategy

Fri May 9, 2014 3:58pm EDT

(Adds company comment, background)

OTTAWA May 9 (Reuters) - Canada's Competition Bureau said on Friday it has halted a probe into alleged unfair pricing practices by Canadian National Railway due to insufficient evidence.

The watchdog investigated allegations that CN had implemented a rail pricing strategy that would lessen or prevent competition in a Vancouver facility for transloading lumber shipped by rail.

"It is the bureau's view that, at this time, there is insufficient evidence to support further investigation into this matter," the independent law enforcement agency said in a statement.

Lumber from mills in Western Canada that is bound for overseas markets is often shipped by rail to Vancouver, on the Pacific Coast, where it is transloaded into ocean shipping containers.

The bureau said it believes certain mills rely heavily on CN to transport their products and it considered allegations that CN used that market power to gain an unfair advantage in the transloading business by pricing its rivals out of the market.

It believes CN "considered implementing a pricing strategy intended to exclude certain of its transloading competitors," it said. But it concluded that CN's conduct did not result in a shift of activity away from its competitors, nor did it affect prices.

CN Spokesman Mark Hallman said CN was pleased with the decision and noted that the company owns just two of 22 lumber transloading facilities in Vancouver that handle about 7 percent of Western Canadian lumber bound for export.

"While CN freight rates for some of its transload competitors in Vancouver rose after it started its own transload operations there in 2012, the majority of competing transloads experienced the same or lower rates in comparison to what CN charged," spokesman Mark Hallman said.

"CN believes this is a strong indication that it has not pursued a strategy of favoring its own transload facilities." (Reporting by Louise Egan and Solarina Ho; Editing by Chizu Nomiyama and Diane Craft)

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