In the context of logistics, market dominance refers to the absence of effective competition for railroads from other carriers and modes for the traffic to which the rail rate applies.
The Staggers Act stated that:
- Market dominance does not exist if the rate is below the revenue-to-variable-cost ratio of 160 percent in 1981 and 170 percent in 1983.
- In other words, if the rate charged by the railroad is below this ratio, then there is no market dominance and competition is allowed.
- However, if the rate exceeds this ratio, then the railroad is considered to have market dominance and competition is not allowed.
This Act was put in place in order to ensure that railroads were able to compete fairly with other modes of transportation. It is important to note that market dominance is not the same as a monopoly. A monopoly exists when there is only one provider of a good or service.