The Broker Empire Strikes Back
October 9, 2020
Did you know that if brokers had to reveal their margins as OOIDA has proposed in a petition to the FMCSA, it will cost every broker at least $500,000 a year?
That’s what an in-house lawyer at ArcBest Logistics said in a filing opposing the OOIDA proposal. It’s beyond ridiculous, way beyond. But it is in keeping with the nuttiness that erupted back in May when OOIDA asked the FMCSA to make brokers obey existing transparency rules. Rules require brokers to make transaction records available to truckers. Most brokers simply don’t.
In a cynical nod to the rule, brokers might make records available with impossible conditions. They’ll show you the records at their home office in Chattahoochee between the hours of 2 and 4 a.m. on Tuesdays during the rainy season. Even worse, many broker contracts require you to sign away your right to see those records at all. You want the load? Shut up and sign. No subtle nod here, just a legal steamroller.
In May, OOIDA petitioned the FMCSA for two rule changes. One would make brokers obey their longstanding obligation by electronically sending a record of each transaction to the carrier – just as they would send a rate confirmation. The second would forbid contracts that take away a carrier’s right to see those records.
Neither suggestion would limit what a broker can charge nor what his margin can be.
They would simply let carriers – and shippers for that matter – know what that margin is. It is hardly re-regulation or an assault on the free market, as the brokers claim.
Truckers have long complained about brokers, but most had no idea they were entitled to see transaction records. For those who did, getting the next load was more important than outing a bad broker. That changed when freight got scarce this spring. Truckers demonstrating in D.C. and other cities claimed brokers were gouging them in the collapsed market. Undoubtedly, some brokers were. Small-company trucking can be a desperate business – in no small way due to brokerage. Suddenly, broker transparency was a serious issue.
In the months that followed, the lack of freight became a glut, and broker transparency seemed less important to truckers trying to make up for lost revenue. Nevertheless, in August the FMCSA published a request for public comments on the proposal. The comment period ends Oct. 19.
As of last week, according to their website, the FMCSA received 841 comments. All but a few support the proposal. The few include big brokers like Trinity Logistics, Choptank Logistics and ArcBest. All argue they shouldn’t have to disclose margins in the first place. They likely see this as a chance not to improve transparency but to eliminate it altogether.
The most recent transparency rule is from 1980 and is “not applicable to today’s marketplace,” said Trinity in its filing.
In fact, the rule goes back to a 1945 inquiry by the old Interstate Commission that resulted in the original transparency rule being adopted four years later in 1949 – 71 years ago.
Trinity and the others are right. Things are different today, especially after deregulation in 1980, when freight brokers sprouted like dandelions. The new world of negotiable, unpublished rates and the radical new truckload carriers overwhelmed shippers, rendering traffic departments obsolete. Brokers simplified things. Got a shipment or a dozen? Never mind poring through all the possibilities. Just call a broker.
In the last 40 years, brokerage has seeped into every corner of trucking, lowering costs for shippers and holding those costs down. Brokerage is now an increasingly dense layer of bureaucracy between shipper and carrier communities. Of course, brokers provide valuable services. That’s the least they can do for the resources and wealth they soak up. Today, brokers include publicly traded companies with revenue in the billions.
Guess where all that money came from.
You can track the growth of brokerage directly to the relative decline in pay for trucking workers, including drivers and owner-operators.
All those lower costs are not necessarily passed on to shippers and consumers.
Let’s get back to ArcBest’s looney $500,000 per-broker, per-year assertion. In contrast, Choptank and Trinity say costs would range from $2,500 to $10,000 on a one-time basis. In reality, there would be no setup costs at all. All that’s required to meet the proposed rule is email – the method used to trade documents with carriers 99% of the time. Brokers already have the resources to meet the proposed requirement.
More nonsense? Take the assertion that truckers turn to brokers because they don’t want to “risk” working directly for shippers, or that shippers “typically only work with motor carriers that have 10 or more power units.” Nonsense, all of it.
I love this one: “This petition puts shipper information at greater risk of falling into the hands of their competitors and takes away free enterprise.” Huh? Carrier rates were once public information, and enterprise was totally free then. A notification rule would not make it any less free now.
Are these people kidding? They’re saying this stuff with a straight face and in writing as though the people at FMCSA are morons. There are more outrageous claims, but you get the idea.
There is one argument from brokers, though, that truly pisses me off.
Guess how brokers defend contracts that waive a carrier’s right to see transaction documents? They simply said it’s legal, so shut up and go away.
All kinds of evil, dangerous, and disgusting things were legal until they weren’t. That’s why we have legislatures, rulemaking agencies, and – for that matter, police – in the first place. It’s the whole point of the petition.
Is there any doubt what they’re trying so desperately to hide? LL