The last surviving U.S. veteran of World War I died at the end of February. If Wisconsin's Herb Kohl has his way, another legacy of the conflict soon could be laid to rest as well.

The chairman of the Senate Judiciary Committee's antitrust subcommittee is again pushing legislation that would remove antitrust exemptions enjoyed by the country's major freight railroads. At the urging of utilities and major shippers of coal, grain and other commodities, Sen. Kohl on March 3 was able to persuade all but one of his Judiciary Committee colleagues to approve legislation that would give the Department of Justice authority to review railroad mergers and require that rail companies' pricing practices comply with antitrust laws.

Kohl's Railroad Antitrust Enforcement Act passed 14-1, with John Cornyn, R-Texas, the sole lawmaker opposing. The bill has a fair chance of passing the full Senate. Although its chances of passing the Republican-controlled House are slim, the railroad industry isn't taking the legislation lightly.

Kohl has been pushing to remove the antitrust exemptions for freight railroads since 2007. He argues that the exemptions, which date to the 1920s, are obsolete in the wake of railroad consolidation over the past 30 years. Today, he says, a handful of major lines have been able to impose rate hikes on domestic shippers that are well in excess of inflation.

Indeed, the BNSF Railway Co., Union Pacific Corp., Norfolk Southern Corp. and CSX Corp. dominate rail shipping in the U.S. after three decades of consolidation that followed the passage of the deregulatory Staggers Rail Act in 1980. The four carriers account for nearly 90% of the freight handled in the U.S., followed by Canadian National Railway Co. and Canadian Pacific Railway Ltd. Kohl says they are abusing their dominant market position and fueling price increases in "dozens of vital commodities," including coal and agricultural products.

"Our bill will ensure that railroads play by the same rules as all businesses in our economy and give those injured by anticompetitive conduct strong remedies under antitrust law," Kohl told his fellow committee members the day of the vote.

Supporters of Kohl's legislation say an agreement between Senate leaders to permit an open amendment process has greatly improved Kohl's chances of getting a vote in this session despite continued resistance by Democrat John Rockefeller of West Virginia. Kohl has said he plans to offer his bill as an amendment to a major bill that reaches the floor.

The exemption, which dates to the Transportation Act of 1920, would subject rail mergers to antitrust reviews by the Department of Justice, but supporters of the bill are primarily determined to impose greater regulation of railroads' pricing practices. Current law and the policies of the Surface Transportation Board, the railroads' primary regulator, permit railroads to have exclusive tie-in arrangements with short-line railroads that prevent the smaller lines from doing business with another major carrier. As a consequence, shippers are unable to transfer a particular shipment from one rail line to another. The Edison Electric Institute, a trade group for utilities, has complained that such policies allow railroads to create a "paper barrier" that blocks shippers' access to competition.

Kohl's bill would allow the Department of Justice and the Federal Trade Commission and state attorneys general to challenge anticompetitive mergers, forbid collective rate setting and allow government and private lawsuits for collusion and other anticompetitive practices.

It's not just freight customers that oppose the exemptions. The Justice Department in 2004 stated that such practices would violate antitrust laws if they were applied to railroads. In 2007 attorneys general from 19 states asked Congress to remove the industry's exemption. Meanwhile, the congressionally appointed Antitrust Modernization Commission and the antitrust section of the American Bar Association, both of which oppose all industry-focused exemptions, called on Congress to subject railroads to full antitrust enforcement.

However, given the anti-regulatory mood of the Republicans controlling the House, the bill's prospects for enactment are slim. According to analyst Chris Krueger of MF Global Holdings Ltd.'s Washington Research Group, House GOP leaders plan to kill the bill. "It will not see the light of day in the House," he wrote in a recent client alert. Whatever glimmer of hope there is in the House comes from a number of Republican lawmakers, including Judy Biggert of Illinois, who have criticized the STB for perceived failings regarding enforcement of safety and traffic volume restrictions in their districts.

The railroad industry isn't taking the House dynamic for granted, making a serious effort to prevent the legislation from gaining traction. To build support for retaining the exemptions, the Association of American Railroads on March 9 issued a report detailing how much of their profits the major lines are planning to plow back into their infrastructure in 2011.

According to the AAR's report, the industry will spend $12 billion on capital expenditures, up from the $10.7 billion in capital spending made in 2010. It also said railroads spent 17% of total revenue on capital expenditures between 2000 and 2009, more than 3 times the 5% spent by the average U.S. manufacturer.

AAR also contends that U.S. freight rail rates are the lowest in the world and, adjusted for inflation, are 51% lower than they were when rates were deregulated in 1980. Eliminating antitrust exemptions might lower rates for a few select shippers, the group says, but the overall effect will be to raise them for the rest of the industry's customers.

AAR spokeswoman Holly Arthur notes that railroads' exemptions from antitrust law are "limited" and the industry is prohibited from colluding on setting rates, allocating markets or unreasonably restraining trade.

"Eliminating the railroads' exemptions does not fill any void in the legal oversight of the railroads, it only creates a second layer of unnecessary and redundant regulation," she says.

A consolidation wave since 1980 reduced the number of long-haul freight railroads serving the U.S. from more than 40 to six today. Few believe that the antitrust exemption is necessary to prevent further consolidation -- the last attempt to join major haulers was an unsuccessful effort to merge Canadian National with BNSF in 1999. The STB effectively killed the deal by placing a 15-month moratorium on rail mergers.

Although Warren Buffett was able to acquire BNSF in 2009, industry officials predict a major merger would generate such a political backlash that the STB would put a stop to it too. But, says Robert Szabo, executive director of Consumers United for Rail Equity, a coalition of utilities and other shippers, Buffett's purchase "makes a lie" of STB's contention that the industry needs special treatment in order to attract capital.

Indeed, industry analysts are very positive on the railroad industry, not only because of its high profits but low cost per mile and unparalleled efficiencies. Arthur Hatfield, a transportation analyst at Morgan Keegan, predicts that the industry's revenue growth will exceed overall U.S. GDP growth for the next half decade or more. The industry is currently trading at 12 times earnings; that's the low end of its historical ranges of 12 to 15 times earnings.

That's a fact not lost on Buffett, as well as the railroad's customers.