A call for transparency

The Federal Motor Carrier Safety Administration’s highly anticipated broker listening session was held in October, with both sides debating OOIDA’s petition for more transparency.

FMCSA hosted a virtual broker listening session to obtain views from the public. Specifically, the administration has been seeking input on the regulation of property carrier brokers in general, and on three pending petitions concerning specific property carrier broker regulation issues. OOIDA is among the petitioners.

During opening remarks of the Oct. 28 listening session, OOIDA President Todd Spencer emphasized the importance of broker transparency regulations.

“Recordkeeping and transparency requirements have been a central component of broker regulations since their inception and were written to serve the greater public interest,” Spencer said. “Ever since Congress first called for broker regulations 85 years ago, the objective has been to protect the public’s interest in an adequate, economical and efficient transportation system free from unjust discrimination and destructive competitive practices of unscrupulous middlemen. Therefore, as part of the agency’s mandate to ensure that brokers do not avoid their legal responsibilities by contract or impose unreasonable burdensome disclosure conditions, if implemented FMCSA would not experience any new burdens by adopting the new provisions we are seeking.”

Opposing broker transparency rules, Chris Burroughs, vice president of government affairs for the Transportation Intermediaries Association, called OOIDA’s petition “a solution in search for problems.”

“TIA strongly opposes the OOIDA and SBTC petitions that would codify burdensome regulations that will negatively impact carriers, brokers and the general public,” Burroughs said. “These petitions came to fruition because of a temporary economic downturn that upended the supply chain because of a global pandemic. Let me be crystal clear. This was not broker price fixing or price gouging. This is an attempt to undermine the free market.”

Both brokers and truckers chimed in during the broker listening session to express their views on broker transparency regulations.

Truckers’ comments

Truckers offered examples of their experiences.

“Those of us, like myself, in the industry, we have heard, we have seen, we have experienced the double brokering, the false quotes, the inflated prices from the broker to the shipper and by the time we get it. This federal regulation was meant to protect the trucker, the shipper and the end-user, who is the consumer.”

“(The federal regulation) is designed to promote transparency, which promotes free market competition. The notion here is visibility, and we’re dealing with transactions when an intermediary exists in a typical transaction between two parties. Obviously, both parties know what they’re transacting to. But when you insert an intermediary, you create the opportunity for one of those parties to be in the dark. And that’s what (the federal regulation) tries to deal with, to make sure that all the parties to the transaction have all of the information.”

“One: Broker transparency requirements of (the federal regulation) should be made nonwaivable, and their required information should be required to be produced to the prospective driver before the load is booked. I believe this is how (the federal regulation) already reads, but that should be clarified/enforced. Two: Double brokering rules should be enacted to prohibit the act of double brokering where loads are brokered from one broker to another before reaching the drivers.”

“This affects all people. When the carrier does not know the rate the shipper pays, then we do not know how to properly negotiate the rate. Almost all the time we end up grossly shorted and the shippers are grossly overcharged. We do have the right to accept or not accept the load. However, the brokers are bullies. If you ask too many questions you will be blackballed and put on a ‘do not use’ list.”

Broker comments

Brokers focused their comments on the free market and protection of trade secrets/confidential information. They claimed there is more transparency than the regulations already call for.

“Congress has expressed a manifest desire to allow parties to broker a transaction to waive rights, including the right to contract out of disclosure requirements. This was done in part to protect against disclosure of rates, to bolster the concept of freedom of contract and the free marketplace. Again, in 2016, Congress enacted the Federal Defense Trade Secrets Act to protect and preserve trade secrets.”

“If the broker is forced to share the right information to the carrier, it will perilously affect the shipper, which will also affect the broker and ultimately affect the carrier. Without the shipper, a carrier is not needed.”

“A vendor should not have the legal right to see the contracts of its customers. The freight broker carrier interaction is a free market transaction based completely on supply and demand. No broker forces a carrier to take a load. Carriers are free to pursue their own customers and/or avoid using brokers altogether.”

“While allowing carriers to see the pricing brokers receive on loads sounds reasonable, is it really? Do we get to see what retailers pay for their products? The carrier has the final say on what they will haul a load for. The dollar amount the broker receives for their services and dealings with the shipper is frankly none of the carrier’s business. The carrier can source and find their own shippers if they choose. This is what free enterprise is all about.”

“Rates in the spot market are already incredibly transparent. Transportation services providers like (Truckstop.com) provide real time visibility to both capacity demand and pricing. This is more transparency than 49 CFR 371.3 was ever designated to generate. This transparency gives carriers more than enough to assess current market rates without having to dive into specifics on the growth of gross margin on a load-by-load basis. Carriers may choose to accept the rate or move on to another load.”

The fight for more broker transparency

FMCSA’s broker listening session comes after OOIDA filed a petition for rulemaking to amend certain requirements for brokers.

Specifically, OOIDA wants FMCSA to require brokers to provide an electronic copy of each transaction record automatically within 48 hours after completion of the contractual service. The petition also wants FMCSA to explicitly prohibit brokers from including any provision in their contracts that requires a motor carrier to waive its rights to access the transaction records.

On the other hand, TIA’s petition calls for the complete elimination of the regulation. Instead, the broker association wants FMCSA to develop guidance on what legally constitutes a “dispatch service.”

As of press time, there were more than 1,200 comments on the docket. The deadline for comments was Nov. 18. FMCSA will review the comments and reach a decision on the petitions on a date yet to be determined. LL