Property Carrier Brokers Fight Attempts to Make Public Their Pricing Documents
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The Transportation Intermediaries Association is asking federal regulators to sunset a decades-old regulation that the group argues is out of alignment with today’s brokerage marketplace.
The regulation in question is 49 CFR 371.3 in the federal rulebook. According to TIA Vice President of Government Affairs Chris Burroughs, the 1980 law stretches back to a very different time in the brokerage business.
“Motor carriers paid brokers a commission, and there was concern from the [Interstate Commerce Commission] of rebating and double-dipping in profits when brokers and shippers shared common ownership,” he told Transport Topics of the law’s origins. “The marketplace does not operate like that today. It is drastically different, with two separate business transactions between the broker-shipper and the broker-carrier.”
Burroughs
The TIA petition seeks elimination of the part of the rule that addresses sharing of financial information. Its request also seeks public guidance on what constitutes a legitimate “dispatch service” in order to remove, in TIA’s words, “unethical and unscrupulous actors from the marketplace.” FMCSA on Nov. 25 asked for comment on the TIA petition.
Meantime, a separate petition from the Owner-Operator Independent Drivers Association and the Small Business in Transportation Coalition asks FMCSA to toughen the regulation in question and require brokers to make public an electronic copy of transaction records automatically within 48 hours after a contractual service has been completed. The groups’ petitions also ask the agency to prohibit brokers from requiring motor carriers in their brokerage contracts to waive access to transaction records.
The groups argue that brokers have been “price gouging” motor carriers during the COVID-19 pandemic, and want to see how profits are structured in prices charged to motor carriers.
“The regulation requires brokers to make certain information available to carriers upon request,” Mike Matousek, OOIDA manager of government affairs, said in an interview. “What a lot of shippers do is require brokers to sign nondisclosure agreements on the rate that the shipper pays the broker.” Matousek argued brokers are using this practice to “subvert” the part of the regulation related to price transparency.
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Burroughs countered, “You do not walk into Walmart and ask them what they paid for an item, and get access to their distributor’s information. That is not how a free, open and competitive marketplace works.” He added, “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.’ ”
In written comments, American Trucking Associations said the access sought by OOIDA and SBTC does not fall under FMCSA purview.
“Forcing brokers to provide after-the-fact information about their gross would not just be an anachronistic intrusion into the freedom of carriers to negotiate with their customers, it would not give carriers any information they would not otherwise have available at the time they need to decide on a particular transaction,” ATA wrote. “In other words, it simply could not address the supposed problem petitioners complain of.”
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The National Industrial Transportation League said OOIDA and SBTC’s requests would include confidential pricing terms negotiated between brokers and their customers.
“Petitioners, if successful, would require property freight brokers to provide an electronic copy of each transaction record within 48 hours after contractual service has been completed and prohibit brokers from including a contractual provision that allows carriers to waive this right,” NITL wrote. “That record would disclose the rate that the shipper paid the broker for each transaction.”
Geoff Turner, CEO of Choptank Transport, wrote that the contracting language used in today’s broker-carrier contracts is legal per federal regulations.
“Requiring ‘margin transparency’ is contradictory to the principles of American enterprise,” Turner wrote. “What other business in the United States requires the amount of profit or gain they make on a transaction to be transparent? Is Starbucks required to put on every coffee receipt how much margin they make on each cup of coffee they sell? Of course not.”
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