September 21, 2020

Federal Motor Carrier Safety Administration Requests Public Comments on Broker Transparency Petitions

Holland & Knight Transportation Blog
Amanda Barbour Fantauzzo | Jameson B. Rice | William P. Byrne
Transportation Blog

The Federal Motor Carrier Safety Administration (FMCSA) requested public comments on petitions for rulemaking backed by owner-operator/small-fleet groups to address the transparency of broker rates. The notice is in response to petitions filed by the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC).

49 C.F.R. 371.3(a) requires brokers to maintain detailed records of their brokered transactions, including the amount of compensation received by the broker for the brokerage service performed and the name of the payer, and the amount of any freight charges collected by the broker and the date of payment to the carrier. 49 C.F.R. 371.3(c) gives each party to a brokered transaction the right to review the record of the transaction required to be kept.

OOIDA's Petition for Rulemaking

OOIDA's petition requests that the FMCSA adopt a rule requiring property brokers to provide an electronic copy of each transaction record automatically within 48 hours after the contractual service has been completed, and that the FMCSA explicitly prohibit brokers from requiring carriers to waive their right to access such records.

Motor carriers have expressed frustration about the lack of transparency between brokers and motor carriers. OOIDA believes the problem is that the regulations designed to provide transparency are routinely evaded by brokers or simply not enforced by the FMCSA. While the current rules require brokers to keep transaction records and permit each party to a brokered transaction to review the records, many brokers implement hurdles they know will prevent a carrier from ever seeing this information. Given that many business transactions now take place electronically, OOIDA believes that the rules need to be updated to improve transparency and prevent brokers from keeping their transaction records from motor carriers that are not located near the broker. The updated rules would also prevent brokers from retaliating against carriers that request the transaction information.

SBTC's Petition for Rulemaking

SBTC requests that the FMCSA amend 49 C.F.R. 371.3 to prohibit brokers from coercing or otherwise requiring parties to brokers' transactions to waive their right to review the record of the transaction as a condition of doing business. SBTC also requests that the FMCSA adopt regulatory language indicating that brokers' contracts may not include a stipulation or clause exempting the broker from having to comply with the transparency requirement.

SBTC explained that freight rates have dropped drastically and that motor carriers have reported instances of brokers engaging in "profiteering, price gouging and low-balling tactics." SBTC claims that in some instances, brokers are receiving commissions of up to 65 percent on loads due to a sudden shortage of freight and over-capacity in the transportation market. SBTC stated that, to evade regulations, some brokers have resorted to requiring carriers, as parties to broker transactions, to waive their rights to obtain documents that show the amount the shipper is paying the broker. SBTC further states that the provisions in 49 C.F.R. 371.3 should be strengthened to stop this abuse.

Transportation Intermediaries Association's Position

The Transportation Intermediaries Association (TIA), an industry group that represents brokers and other intermediaries, was not part of the FMCSA's request for public comment; however, it has addressed the topic. In a letter to members, TIA President Robert Voltmann responded to an article published by OOIDA regarding this issue. Voltmann emphasized that owner-operators rely on brokers to be their sales force to keep their trucks full and stay in business. Further, Voltmann pointed to the costs incurred by brokers in employing people, investing in their knowledge, investing in technology and maintaining a sales force to find freight to give to the owner-operators, and brokers negotiate appropriately based on these costs. From a statutory interpretation perspective, Voltmann explained that 49 C.F.R. 371.3(c) only requires brokers to make their transaction records available for review by "each party" to the transaction, which includes the shipper and the carrier, and maybe the consignee, but not the carrier's trade association or an owner-operator that is working for another company. Furthermore, in an unpublished portion of a Transportation Nation Network's interview, Voltmann argued, "The 371 rules were promulgated during a time when rates were highly regulated and brokers earned a commission from the carrier, rather than the current system where the broker negotiates a price with the shipper and then negotiates a separate price with the carrier. The rules are there as a failsafe, but are no longer applicable to a modern, deregulated marketplace."

FMCSA's Request for Public Comments

The FMCSA has specifically requested comment on the following issues:

  • whether the FMCSA has statutory authority to provide the requested redress
  • what actions the FMCSA should take to ensure appropriate exercise of such authority (assuming it exists)
  • whether perceived roadblocks to receiving records are more common amongst large brokers, small brokers, or is the issue more widely spread
  • if large brokers only, what revenue threshold should be adopted with a rule (if one is adopted)
  • how electronic records would be provided to carriers as OOIDA demands
  • cost estimates related to complying with OOIDA's request
  • quantitative benefit to motor carriers if FMCSA adopted OOIDA's and SBTC's requests
  • a quantitative estimate of the economic costs to brokers or others if FMCSA adopted the rules OOIDA and SBTC request

Interested parties have until Oct. 19, 2020, to comment.

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