When truckers descended on Washington on Oct. 1 to demonstrate against what they believe is improper rate gouging and hiding of costs by the nation’s freight brokers, there was one ally they could count on: President Donald Trump.
Back in May, after Trump talked to truckers who were demonstrating at that time about the same issues, he said truckers were being “price gouged” by the brokers. “All they want is to be treated fairly,” Trump said in a TV interview. “And we’re going to treat them fairly. What they’re asking is almost nothing in many cases. We’re going to take care of them.”
U.S. Attorney General William Barr then directed the U.S. attorney for New Jersey to open an investigation into possible illegal price fixing and price gouging by brokers, which he is responsible for looking into during the COVID-19 national emergency, which was declared by the President in March..
The Federal Motor Carrier Safety Administration (FMCSA) then accepted a request from the truckers to look at adopting a possible rulemaking, and in late August opened a proceeding to seek comments on whether freight brokers should be required to maintain more detailed records of their transactions as has been sought by truck owner-operators and small fleet operators.
The notice is not a proposed rulemaking but instead a request for public comment that was issued by FMCSA in direct response to petitions filed by the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC).The petitioners hope such a rule eventually will help stem what they see as widespread broker abuses.
OOIDA’s petition requests that the FMCSA regulation would require property brokers to provide an electronic copy of each transaction record automatically within 48 hours after the contractual service is completed, and that FMCSA explicitly prohibit brokers from requiring carriers to waive their right to access such records.
SBTC wants FMCSA to amend its freight brokerage regulations to prohibit brokers from coercing or otherwise requiring parties to brokers’ transactions to waive their right to review the record of the transaction as a condition of doing business. It also asks that brokers be prohibited from including a stipulation or clause in broker contracts that exempts the broker from having to comply with the transparency requirement.
Freight brokerage grew up with the trucking industry in the early 20th Century and for most of the years it has existed it has suffered a stormy relationship with truckers. Regarded as an unnecessary evil by carriers who believed they could handle their own sales without the need for middlemen, the persistent plague of dishonest brokers also served to sully the name of their industry,
Following economic deregulation of the trucking industry in 1980, much of what had been all too common bad practices began to change. Large brokerage operations like C.H. Robinson became sophisticated businesses branching into other fields. Honest brokers gathered together to form the Transportation Intermediaries Association (TIA), creating a code of conduct. Also, laws and regulatory advancements like substantial bond requirements helped to largely clean up the industry.
But perhaps the greatest change came from innovations in high tech and the advent of third-party logistics as a dominant force in supply chain management. Today it is common for trucking and 3PL warehouse companies to hold broker licenses and run their broker operations along with serving as intermodal marketing companies and international freight forwarders, allowing them to offer as wide as possible an array of services to their customers.
Bad Feelings Persist
However, the resentment and distrust has persisted among owner-operators and small trucking companies who feel they are being exploited by brokerage services, and has grown more intense in the wake of economic disruption created by the COVID-19 pandemic.
OOIDA specifically requested that FMCSA require brokers to provide an electronic copy of each transaction record automatically within 48 hours after the contractual service has been completed. It also asked that brokers be explicitly prohibited from including any provision in contracts requiring a trucker to waive their rights to access transaction records.
The association also believes a major problem arises from brokers routinely evading regulations designed to provide transparency while FMCSA fails to enforce them. OOIDA’s proposal would require electronic accesses (instead of forcing the trucker to show up at the broker’s office). In addition, the updated rules would prevent brokers from retaliating against carriers who request the documents.
In its petition, SBTC asked FMCSA to prohibit brokers from coercing or otherwise requiring parties to a transaction to waive their right to review the record of the transaction as a condition of doing business. It explained that freight rates have dropped drastically and that truckers have reported instances of brokers engaging in ‘‘profiteering, price gouging and low-balling tactics.’’
The trucker group claims that in some instances, brokers are receiving commissions of up to 65% on loads due to a sudden shortage of freight and over-capacity in the transportation market. SBTC claims that, in order to evade regulations, some brokers have resorted to requiring carriers to waive their rights to obtain documents showing the amount the shipper is paying the broker.
Brokers represented by the TIA disagree. Earlier this year, when the proposal by OOIDA was first aired, then TIA president Robert Voltmann (since retired) explained that brokers sustain substantial costs needed to employ professional staff, invest in technology and maintain a sales force needed to find freight to give to the owner-operators. Brokers negotiate appropriately based on these costs, he argued.
Responding to President Trump’s comments about price-gouging made last May, Voltmann declared, “We too love the truckers. Our members can’t survive without them, and they need our members, too. No American business is doing well right now. President Trump should direct the Small Business Administration to take action to support them rather than pointing fingers at other American small businesses.”
FMCSA specifically requested comment on the following issues:
● Whether the agency has statutory authority to provide the requested redress.
● What actions FMCSA should take to ensure appropriate exercise of such authority (assuming it exists).
● Whether perceived roadblocks to receiving records are more common amongst large brokers, small brokers, or is the issue more widely spread.
● If large brokers only, what revenue threshold should be adopted with a rule (if one is adopted).
● How electronic records would be provided to carriers as OOIDA demands.
● Cost estimates related to complying with OOIDA’s request.
● Quantitative benefit to motor carriers if FMCSA adopted OOIDA’s and SBTC’s requests.
● A quantitative estimate of the economic costs to brokers or others if FMCSA adopted the rules OOIDA and SBTC request.
Interested parties have until Oct. 19 to comment. For more information on the request for comments and how to respond, see the FMCSA Federal Register notice.