NS and UP do not meaningfully compete today, their networks have very little overlap.
A different regulatory attitude in the 50's, not just towards M&A but rates and routes, and mandatory services, would have prevented the bailouts we had to do in the aftermath of the Penn Central. Nearly every Class I carrier was in poor financial shape by the time the industry was deregulated in the late 70's, much of the 'capacity crunch' we have today in the rail industry is related to the contraction the industry went thru in that period, where they shed assets and lines in an attempt to resize their cost structure to the amount of revenue they were allowed to realize from their route networks.
Other than some of your head office folks (accounting, HR, etc) there wasnt much of a greater operating efficiency to be gained, nor do I think they would have gotten significantly lower costs (but for maybe fuel) by squeezing their vendors either.
I think that rationale holds true today too.
When we allowed the UP-SP and BN-SF lashups, we created two western colossuses, if we still had four roads in the west, and had they encouraged east/west mergers at that time, things would be better off today.