A listening session held Wednesday by the Federal Motor Carrier Safety Administration revealed rather stark differences between the views of owner-operators/other small carriers and their freight broker counterparts about the existing regulations surrounding brokered transaction transparency.
Whereas the owner-operators and carriers highlighted the importance of those laws within the existing marketplace, brokers instead expressed seeming concern about the new attention the regs have drawn this year. Those regulations, codified in 49 Code of Federal Regulations 371.3, require a federally regulated broker to keep records of a transaction. Subpart (c) gives any party to the transaction, including a motor carrier, the right to review the record, including any freight charges.
At bottom for carriers who commented, the issue seems one of due compensation and a culture of dishonesty or bad faith in some corners of the brokerage world. For example, a disclosure requirement that was actually enforced, or one that was even beefed up to the point of being automatic in any brokered transaction, would “prevent brokers selectively retaliating against carriers” who exercise their right under the reg as written today, said Owner-Operator Independent Drivers Association President Todd Spencer. Such retaliation, Spencer contended, occurred when a broker put a carrier “on a ‘do not use’ list as a consequence of exercising their right” to review the record
OOIDA was one of two groups requesting, also, a provision of regulation that would prevent the use of contract language that required a trucker to waive his/her right to that review.
Nearly every broker commenting on the regulation noted these required waivers stemmed from shippers requiring brokers themselves not to disclose rates in their broker-shipper contracts. As noted Transportation Intermediaries Association Vice President of Government Affairs Chris Burroughs, the 1995 act of Congress that terminated the ICC gave shippers, carriers and brokers the ability to waive such regs in the interest of promoting a more free market for business. Changing 371.3 in TIA’s view is a “solution in search of a problem,” he said, reiterating the broker group’s own petition to remove the (c) subsection of 371.3 entirely.
C.H. Robinson Director of Government Affairs Jason Craig, echoing the TIA’s petition, believed the existing regulations should be reviewed, ultimately siding with the view that (c) should be removed if not clarified. He felt truckers who wanted it to be beefed up to mandate an automatic disclosure (among the requests in OOIDA’s petition to the agency) “failed to take into consideration the context of the original regulation.” It “applied to the transaction where the trucker actually paid a commission to the broker” based on a percentage of the overall load, a process that in today’s world just doesn’t apply in most cases.
Craig recommended that the reg be applicable only in those cases, for those kinds of transactions, which he suggested were not the majority of brokered transactions today. When it comes to any one load or series of loads, many brokers view their contracts with shippers and their agreements with truckers as “separate transactions” altogether,’ he added. “The price paid by the shipper does not affect the price paid to the carrier any longer.”
Owner-operator William McKelvie objected to the notion that there was no problem here in the brokered-freight market — particularly obvious and onerous during the depths of the second-quarter lockdowns, among some brokers. “We know who the main complaints are about in the industry,” he said. “The thing I’m not hearing is the solution to protect the driver and the company owner. When we push them off and give them lower than market rates, they get to decide what they’re not going to pay attention to,” which could include safety-sensitive items like maintenance, hours of service and more.
One owner-operator, speaking via phone to the virtual panel assembled, noted “these brokers have become like bad police standing out amongst the good police. There must be a mandate for transparency for the bad brokers in this business.”
OOIDA’s Spencer noted he felt the reg as written, and even more so if changed as the association has called for, is an assist for motor carriers in making “better informed decisions about the loads they choose to haul,” and the brokers they choose to do business with. New measures, if implemented, he believed, would also “facilitate compliance with current rules.”
Shippers’ non-diclosure interests, of concern to so many brokers, he said, “should be satisfied by broker-carrier agreements” also insisting on nondisclosure — just as they so often insist today on noncompete clauses (prohibitions on back solicitation of shippers, for instance).
The session was attended by an FMCSA panel made up Deputy Administrator Wiley Deck, leading the agency in an interim role following Jim Mullen’s departure, Associated Administrator for Policy Larry Minor, and several other reps from the agency. Truckers’ petitions to the agency are under an open comment period that has been extended through November 18. You can comment via this link.
Overdrive included audio from much of the listening session in this subsequent edition of the Overdrive Radio podcast.