Owner-operators seek DOT enforcement of broker regulations
In difficult times throughout history, people and groups have singled out segments of society to affix blame for their tribulations. Right now, a small minority of owner-operators are singling out freight brokers and third-party logistics providers as villains. Why would a group of truck drivers so dependent on the freight brokerage community lash out in anger over economic conditions that neither group created or controls? Why would the president fan the flames of discord with comments that cast freight brokers as predators? The primary reason is ignorance. Ignorance that fails to recognize an economy in disarray, where a government-imposed shutdown has led to unemployment levels never experienced in our history. Freight Brokers are middle-men that act as the small carrier’s sales force and as an extension of a shipper’s supply-chain management team. Freight Brokers do not set rates, freight volumes do. In a market economy, more freight equals higher rates, as shippers and brokers chase a scarce commodity, drivers and trucks. The market economy of 2018 is a great example of the above. We are now in an economic downturn. There is not enough freight for the number of owner-operators and carriers. Hopefully, when the government-imposed restrictions lift, freight volumes will begin to normalize and there will no longer be a need to scapegoat freight brokers and third-party logistic providers.
John Gallagher, Washington Correspondent Tuesday, May 19, 2020
Brokers assert their margins have declined in 1Q20. (Photo: Jim Allen/FreightWaves)
Owner-operators have stepped up their fight for greater broker transparency by formally petitioning the Trump Administration to levy fines on brokers for non-compliance.
“Brokers have been deliberately skirting federal transparency regulations for decades,” said Owner-Operator Independent Drivers Association (OOIDA) President and CEO Todd Spencer. “We certainly don’t think exempting yourself from federal regulations is legal, but this is precisely what is happening. It has to stop.”
A source familiar with the matter speaking on background told FreightWaves that Federal Motor Carrier Safety Administration (FMCSA) Acting Administrator Jim Mullen was scheduled to meet with White House officials to discuss the issue on May 20. The U.S. Department of Transportation (DOT) did not immediately respond to confirm the meeting.
In a May 19 letter addressed to Mullen and DOT Secretary Elaine Chao, OOIDA petitioned FMCSA for two provisions: require brokers to automatically provide an electronic copy of each transaction record within 48 hours after service is completed; and prohibit brokers “from including any provision in their contracts that requires a carrier to waive their rights to access the transaction records as required by 49 CFR §371.3.”
OOIDA made a similar request to all 535 members of Congress earlier this month. In its petition to DOT and FMCSA, OOIDA is also requesting that the administration add teeth to its enforcement measures.
“In order to dissuade brokers from knowingly skirting these regulations, FMCSA must levy and enforce a structured fine system that would penalize non-compliance,” the letter states.
“Furthermore, FMCSA must suspend or revoke the authority of unscrupulous brokers that exhibit a pattern of noncompliance. We believe this would improve transparency between brokers and carriers” as intended by the law. With rates on the decline, many truckers are concerned they are the only ones feeling the pain – or at least feeling a disproportionate share of the pain. This will not change until federal regulators enhance and enforce the broker transparency regulations.”
OOIDA pointed out in the petition that it has “long pushed” for greater broker transparency. However, downward pressure on rates exerted by the effects of COVID-19 led owner-operators to take their case to Washington, D.C., including an ongoing demonstration within sight of the White House that caught the attention of President Donald Trump.
The Transportation Intermediaries Association (TIA), which represents brokers, denies assertions of price-gouging – one of the allegations from the demonstrators – pointing out that “there is simply not enough freight to support all of the carriers,” TIA President and CEO Robert Voltmann has asserted. Following President Trump’s recent tweet alleging broker price gouging, TIA said it was willing to formally discuss the situation with the Administration.
In first-quarter performance measures released on May 18, TIA reported total broker and 3PL shipments from members declined 3.4% to 1.33 million compared with the same period in 2019. Total revenue declined 8.5% to $2.6 million, and gross margins dropped from 17.5% to 15.8%.