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Finally!

By Clifford F. Lynch

DC Velocity, July 2007

By now, everyone who cares knows that on May 7, 2007, the Surface Transportation Board (STB) finally snipped off one of the last remaining regulatory loose threads. In a ruling many shippers have awaited for over a quarter of a century, the board terminated its approval of the agreements among 11 motor carrier bureaus to collectively determine and set truck rates.

To understand the significance of the board’s decision, you have to go back to the origins of motor carrier regulation in 1935. That year, the Motor Carrier Act brought carriers under the purview of the Interstate Commerce Commission (ICC), which was given oversight over who could enter the trucking business, what routes they could serve, and what rates they could charge. The 1935 law, however, left the legal status of collective ratemaking unclear. After a number of investigations and lawsuits, Congress settled the matter by passing the Reed-Bulwinkle Act in 1948, which allowed motor carrier rate bureaus to set rates collectively and granted them antitrust immunity for doing so.

And that’s exactly what the carriers did for the next 30-plus years. Rates were set via a two-art procedure: First, the National Classification Committee (one of the 11 bureaus that were a part of this proceeding) established ratings for all products based on their transportation characteristics. Then, the bureaus established the rates. Those rates were what most shippers paid.

Then the deregulatory winds began to blow through the industry. With passage of the Motor Carrier Act of 1980, Congress for the most part deregulated the trucking business. It did not, however, lift all pricing restrictions. Nor did it rescind antitrust immunity for the collective ratemaking process. The practice was allowed to continue, although after 1980, many carriers chose not to participate.

In 1995, Congress passed the Interstate Commerce Commission Termination Act, which lifted the remaining restrictions on trucking rates with three exceptions: rates for household-goods moves, rates for certain joint motor-water movements, and rates set collectively by motor carrier bureaus. But in drafting the law, Congress also made provisions for the collective ratemaking issue to be revisited in the future. The law mandated a periodic review of existing motor carrier bureau agreements under a "public interest" standard – a task that would fall to the STB. The May decision is the result of the board’s most recent review.

In that review, the STB concentrated, as it should have, on whether its continued approval of collective ratemaking agreements would be consistent with the public interest – specifically to fostering such national transportation policy goals as encouraging fair competition (with reasonable rates); allowing a variety of quality and price options to meet changing market demands and the diverse requirements of the shipping public; and maintaining a sound, safe, and competitive privately owned motor carrier system. After more than two years of deliberation, the STB concluded, among other things, that the current system put certain shippers at a disadvantage in bargaining and that collective rate increases had probably artificially inflated rates. From there, it wasn’t much of a stretch to decide that the current arrangements fell short of meeting the national transportation policy’s requirements.

As might be expected, this decision will not be welcomed by some carrier rate bureaus. But the fact is, there’s still a role for them to play. I believe we will continue to need some form of classification to use as a benchmark and that rate bureaus will be able to provide other useful services.

All that notwithstanding, the big news is this: Finally, 27 years after deregulation, we will have a truly competitive, free motor carrier market.

 

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