As the industry attempts to navigate the turbulent waters of economic recovery, a monster lurking almost invisibly in the shadowy depths is preparing to rear its ugly head within the year and wreak havoc upon shippers, consumers, brokers, small carriers and owner-operators. This monster — known as disintermediation — will attack competition, free enterprise, opportunity and even liberty. The cost will be severe and come in the form of:
* Increased freight charges to shippers.
* Decreased pay to owner-operators.
* Elimination of tens of thousands of jobs.
* Increases in consumer prices for all Americans at the hands of some greedy and stingy asset-based third-party logistics providers.
Some players representing the big 3PLs already have begun spreading rumors — perhaps in the spirit of the Mayan 2012 doomsday prophecy so popular with grocery store tabloids and the History Channel — that the End of Days will arrive as early as Jan. 1. Despite this flagrant attempt to deter shippers from continuing to use small brokers in their final hours, the truth is that trucking’s Armageddon is expected next year between July 6 and Oct. 1.
Transport Topics already has reported on the recent move by shippers toward working more directly with asset-based carriers in lieu of 3PLs that do not own assets (“Shippers Turning to Asset-Based Carriers Ahead of Expected Tightening of Capacity,” 9-24). I suspect that trend is the handiwork of the big asset-based 3PLs.
As a loyal soothsayer to the industry, I warned Congress in back in 2010 to tread lightly when tinkering with the delicate balance of competition as it considered raising the broker bond beyond the $25,000 identified by Federal Motor Carrier Safety Administration during household goods broker rulemaking as the proper adjustment for inflation (Transport Topics Opinion: “Congress Should Tread Lightly With Brokers,” 5-26-10).
However, it is now clear that Congress has failed to heed that warning and has set the clock for a Pandora’s box of doom and destruction to be unleashed upon our country and our industry.
At the forefront of what I believe has been an outright assault on small business brokers has been the Owner-Operator Independent Driver Association and the Transportation Intermediaries Association. While it is clear OOIDA has sought to eliminate brokers for years with its ridiculous $500,000 bond proposal, beginning in 2004, I find it quite ironic that the primary source of “disintermediation” actually comes from TIA, an organization whose middle name is “intermediaries.”
What isn’t entirely clear is why the two groups would team up to attack small brokers. OOIDA and TIA are strange bedfellows with only one thing in common: the sale of insurance-related instruments to their respective memberships. OOIDA sells commercial trucking insurance (not traditionally accepted by all 3PLs) and TIA in recent years has been selling $100,000 bonds.
After making a deal with OOIDA to come down from their proposed $500,000 figure to TIA’s recommended $100,000 bond amount — allegedly to “fight fraud” in the best interest of the industry — TIA drafted and then began peddling its $100,000 bond bill in Congress in 2010. Their bill failed in the Senate in 2010 and in 2011 made little progress in the House. TIA then convinced Sen. Harry Reid to slip the $100,000 broker bond into the Highway Bill as an amendment.
According to lobbying reports, TIA spends more than $900,000 a year on lobbying, and although they have purported this was OOIDA’s issue, clearly they were at the helm driving up the bond amount.
Neither group offered much in the way of evidence as to the extent of the alleged “widespread fraud” and even less evidence that raising the bond would actually fight fraud. When our members have asked TIA for this information, there requests are denied. In fact, it was pointed out during this campaign that TIA actually claimed in 2004: “Fraud exists in both the brokerage and the motor carrier industries, and increasing the bond will have no effect on fraudulent operators” before flip-flopping and then stabbing the small brokers in the back (Transport Topics 5-13-04).
But a number of groups reacted promptly, including the Association of Independent Property Brokers & Agents, a trade group I founded in 2010 to represent the bona fide interests of small- and mid-size brokers. We managed to convince the Conference Committee to reduce the bond to $75,000 — but the damage will still be the same.
What should the industry learn from all this? Perhaps we should beware of the anticompetitive effects of the large asset-based 3PL complex. Most of the players in this industry, especially small business brokers and truckers, need to realize they will lose when competition is attacked and unrealistic barriers to entry are established.
What can small brokers do? Well, there is strength in numbers. About 1,700 people have signed our petition to keep the bond reasonable. Rather than rolling over and quitting because they cannot get approval for a higher bond or go to work for the large 3PLs and earn 40% less, small brokers can join AIPBA and stand their ground as we head for ‘Brokergeddon.’
AIPBA is pooling its resources and its legal team is currently contemplating a legal challenge. We believe this $75,000 bond poses significant questions about Congress’ own stated intent to expand opportunities, and we think it violates existing Federal Transportation Policy already codified in title 49 of the United States Code.
The Association of Independent Property Brokers & Agents, Fort Lauderdale, FL, looks out for the interests of small business brokers and truckers.
About the Author:
James Lamb is a former New York State Department of Transportation Motor Carrier Investigator. Mr. Lamb is a Transportation Practitioner authorized to appear and represent client companies before various Federal (U.S. Surface Transportation Board & Federal Maritime Commission) and state (New York State Department of Transportation) regulatory agencies in licensing, tariff and adjudicatory (violation) matters. See Mr. Lamb’s site: www.JamesPLamb.com