December 9, 2020

Brokers, Carriers Comment on Federal Motor Carrier Safety Administration Broker Transparency Petitions

Holland & Knight Transportation Blog
Shemario O. Winfrey | Amanda Barbour | Jameson B. Rice | William P. Byrne
Transportation Blog

The Federal Motor Carrier Safety Administration (FMCSA) recently requested public comments on petitions for rulemaking backed by owner-operator/small-fleet groups to address the transparency of brokerage rates. The petitions – filed by the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC), together known as the petitioners – request that the FMCSA adopt rules that 1) require freight brokers to automatically provide motor carriers with transaction records within 48 hours after brokered services have been completed and 2) prohibit freight brokers from requiring that motor carriers waive their rights to access such records. See our previous analysis of this issue here.

The FMCSA received approximately 1,380 comments from interested parties. A majority of the comments received came from small trucking companies and independent owner-operators in support of the proposed rules to provide motor carriers with greater transparency and increased access to transaction records. The comments echoed the petitioners' arguments that freight brokers are disproportionately profiting from brokered transactions while limiting motor carriers' access to information about the profitability of such transactions.

In contrast, the FMCSA also received comments from numerous freight brokers and brokerage trade associations that were opposed to the proposed rulemaking. The brokerage industry generally believes that imposition of the proposed rules would lead to increased costs for both freight brokers and motor carriers. Freight brokers' opposition is largely based on their belief that there are already sufficient mechanisms in place to provide motor carriers with information about the underlying economics of the freight market. They highlighted the extensive list of platforms that provide real-time market data on freight spot rates as an example of such mechanisms. They also highlighted the potential risk to the market posed by the sharing of proprietary customer contract rates with motor carriers.

Freight brokers also expressed their belief that the proposed rulemaking exceeds the scope of the FMCSA's mission, because the agency's focus is that of safety and not financial transaction regulation. They noted that the existing rules under 49 CFR 371.3(c), which allow access to transaction records for each party to a brokered transaction, were enacted at a time when the Interstate Commerce Commission (ICC) had significant oversight of financial matters. They noted that the FMCSA, as a successor agency, has been primarily tasked with the promulgation and enforcement of safety regulations.

In response to the petitions for rulemaking, the Transportation Intermediaries Association (TIA) filed its own petition for rulemaking, seeking the elimination of the requirements of part 371.3(c) and clarification on what legally constitutes a "dispatch service." The TIA argues that the market dynamics necessitating the requirements under part 371.3(c) no longer exist, and therefore, the rule should be eliminated in its entirety. The FMCSA has requested comments on the TIA's petition.

In addition to the general opposition from the freight brokerage industry, some trucking industry members also filed comments in opposition. The American Trucking Associations (ATA), a national association representing 30,000 companies engaged in various types of motor carrier operations, filed comments in opposition. The ATA believes, as many within the freight brokerage industry commented, that the proposed rulemakings are outside the scope of the FMCSA's authority. The ATA also opposes the petition because it believes that the proposed rulemaking would be a "radical departure" from Congress's policy that the national economy is best served by free market forces rather than by economic regulation. The ATA noted that despite the fact that the proposed rulemaking would ostensibly benefit motor carriers, no members have expressed support for the petitions.

Conclusions and Considerations

There remains a large divide between some segments of the motor carrier industry and freight brokers on the issue of access to transaction records. While some within the motor carrier industry have long advocated for increased access to brokerage transaction records, not all motor carriers support such rules. As evidenced by the ATA's comments, a significant group of motor carriers oppose such rules. As the FMCSA has now requested comments on TIA's petition for rulemaking, the agency is unlikely to make a final determination on the petitions filed by OOIDA and SBTC until after the agency has had an opportunity to review comments on TIA's petition.

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