• ITVI.USA
    13,670.690
    -217.880
    -1.6%
  • OTRI.USA
    22.060
    -0.040
    -0.2%
  • OTVI.USA
    13,638.790
    -223.800
    -1.6%
  • TLT.USA
    2.800
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    2.480
    -0.170
    -6.4%
  • TSTOPVRPM.CHIATL
    3.070
    -0.210
    -6.4%
  • TSTOPVRPM.DALLAX
    1.370
    -0.090
    -6.2%
  • TSTOPVRPM.LAXDAL
    2.280
    -0.210
    -8.4%
  • TSTOPVRPM.PHLCHI
    1.900
    -0.070
    -3.6%
  • TSTOPVRPM.LAXSEA
    2.720
    -0.270
    -9%
  • WAIT.USA
    127.000
    0.000
    0%
  • ITVI.USA
    13,670.690
    -217.880
    -1.6%
  • OTRI.USA
    22.060
    -0.040
    -0.2%
  • OTVI.USA
    13,638.790
    -223.800
    -1.6%
  • TLT.USA
    2.800
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    2.480
    -0.170
    -6.4%
  • TSTOPVRPM.CHIATL
    3.070
    -0.210
    -6.4%
  • TSTOPVRPM.DALLAX
    1.370
    -0.090
    -6.2%
  • TSTOPVRPM.LAXDAL
    2.280
    -0.210
    -8.4%
  • TSTOPVRPM.PHLCHI
    1.900
    -0.070
    -3.6%
  • TSTOPVRPM.LAXSEA
    2.720
    -0.270
    -9%
  • WAIT.USA
    127.000
    0.000
    0%
Driver issuesNewsTrucking Regulation

ArcBest: Broker costs increase to $500,000/year if owner-operators have their way

Push for transparency by OOIDA and others will lead to shippers and consumers footing the bill, company warns

Truck brokers will see a huge upswing in costs if federal regulators make a broker transparency change requested by owner-operators, according to logistics company ArcBest [NASDAQ: ARCB].

Barney Long, deputy general counsel for the Fort Smith, Arkansas-based company, told the Federal Motor Carrier Safety Administration (FMCSA) that the revisions being sought by the Owner-Operator Independent Drivers Association (OOIDA) will increase equipment, software programming and personnel costs to at least $500,000 annually for every broker. Brokers, in turn, will look to the market to recover those costs.

“Essentially, any benefits received from carriers in modifying [the regulation] will result in a substantial detriment to shippers, consignees and consumers and most likely to carriers as well,” Long warned in a letter filed last week with the FMCSA.

The FMCSA in August agreed to consider a petition filed by OOIDA in May to improve broker transparency by:

  • Requiring brokers to automatically provide an electronic copy of each transaction record within 48 hours after the contractual service has been completed
  • Explicitly prohibiting brokers from including any provision in their contracts that requires a carrier to waive their rights to access the transaction records as required by 49 CFR §371.3.

FMCSA is also looking at a similar request by the Small Business in Transportation Coalition (SBTC) that the agency require broker contracts to exclude any stipulations or clauses that exempt brokers from having to comply with transparency requirements.

“With freight rates reaching historic lows, small-business truckers are struggling,” OOIDA stated in its petition. “Many have expressed frustration about the lack of transparency between brokers and motor carriers. The problem is that the regulations designed to provide transparency are routinely evaded by brokers or simply not enforced by DOT.”

As of Monday, the OOIDA/SBTC petition has generated more than 800 comments, the majority of which are from small owner-operators that support the petition (a significant number of these appear to be from a replicated form letter). A smaller number of brokers – with some operating midsized fleets – oppose it.

Daily OTRI over last six months (as of Sept. 20). Tender rejection rates are highly correlated with spot market rates
(Source: SONAR)

In addressing OOIDA’s “48-hour” request, ArcBest, which specializes in less-than-truckload freight, asserts that knowing what a broker is getting paid for a load within 48 hours after the carrier delivers the shipment “seems senseless and will simply result in additional costs” for the broker.

“It is the carrier’s responsibility to determine during contract negotiations or prior to picking up a shipment whether the offered pricing for a load is sufficient for the carrier to transport it,” Long wrote. “What good does receiving transactional information within 48 hours after services have been completed? The receipt of transactional information after transportation services are completed does not provide any assistance to the carrier. If a carrier cannot recover its costs and an acceptable profit level on a shipment, the carrier should not haul the shipment. This is basic business sense.”

Long also took issue with assessment of the freight market by owner-operators after the onset of the COVID-19 pandemic in March, with many subsequently accusing brokers of price gouging.

However, Long asserts, “what is really being disguised and disregarded is that carrier capacity exceeds available shipper loads. Due to such excessive carrier capacity levels, carrier load pricing diminished during a short period during this pandemic. Carrier pricing has since rebounded and is near the historic pricing levels reached in 2018. COVID -19 just happened to be an event that for a short period created a glut of capacity that drove rates down in favor of the shipper, not the broker.”

Data compiled from FreightWaves’ SONAR Outbound Tender Reject Index (OTRI) reflects this trend (see chart above). Tender rejection rates are highly correlated with spot market rates and other financial measurements: When rejection rates increase, spot rates do as well. When spot rates increase, carrier revenues increase as well as profit margins and cash flow.

Related articles:

Click for more FreightWaves articles by John Gallagher

John Gallagher, Washington Correspondent

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.

45 Comments

  1. ArcBest AKA ArcWorst they treat their contractors like CRAP. Show no respect, talk down to them. A very HATEFUL company. Same goes for the other companies they own like Panther.
    Small wonder they don’t want to disclose anything.

  2. Transparency, as always been a issue. I am having a hard time seeing how cost will soar to 500,000. Broiers should really not be needed. Eliminate the middle man.

    1. Should we also eliminate real estate agents, retail stores, all sales positions, car dealerships, etc? All are but a few examples of “middle men”.

      Nothing prevents a owner operator from developing their own direct customers and not to use a broker. Most don’t, but then want the government to get involved in private industry to add regulation and expenses and pick winners. Terrible idea.

    2. Heh, if carriers would pick up their freight and not kick 25% of the freight to the curb whilst increasing rates 300% during a pandemic, then shippers would have no need of brokers. Carriers’ actions over the past 3 months have cemented the role of brokers for years to come.

    3. I am sorry Anthony but brokers are a necessity for both shippers and for carriers. Shippers need brokers in order to move their product to market and carriers need brokers to market their services to the shippers. Many carriers both large and small have been getting on the bandwagon of utilizing freight brokers as a cost effective way of replacing expensive in house sales functions.

  3. In my 21yrs as an owner operators,it’s always been beat the rate down to the truck or another company did it for this amount. The more money not to the truck is more money in the broker. Every year equipment,repairs,parts etc goes up but brokers wants the load moved for less. How does the truck rate increase and not drop in this market? All we’re wanting and asking is a FAIR RATE to so we can live the great American dream too.

  4. There is low price freight. Companies want to see the cost so they can ask for more on the line haul the next time around. Me personally I don’t haul cheap freight and I’m as busy as ever. Covid 19 did not slow me down. Everyone has to eat.

  5. We are a trucking company with a brokerage. The brokerage is a value add to our business so regardless of what the freight capacity is, the cost of operating a truck doesn’t change. Having the knowledge of what it costs to run a truck I think is extremely important as well. You have to build that trust and in the end, come up with responsible pricing that is not only consistent, but is profitable for both parties. Unfortunately It’s hard to develop those relationships because too may people have been burned in this business.

  6. You bunch of liers !!!!
    You just want to keep hiding your millions earnings from the government at truck owners!!!!
    I dont haul dollar freight either!!!!

  7. Requiring brokers to automatically provide an electronic copy of each transaction record within an hour (1) before the contractual service has been completed….

  8. If you’re so burned up and jealous of what someone else makes, don’t use brokers. We don’t. We eliminated that middleman years ago and our profits, and quality of loads, increased. Then a funny thing happened; some of those same brokers came back crying to us, begging us to take their “hot” loads at any price.