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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

ArcBest operates LTL carrier ABF Freight. (Photo: Jim Allen/FreightWaves)

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.

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  1. Bryan Horn

    Brokers and freight companies are trying to protect their golden egg. You cannot operate a truck at 67 cents a mile.Until brokers percentages are capped were gonna keep getting the same thing that were getting right now.Yes there needs to be transparency. But the brokers just gonna say OK here’s what we got. Here’s what you get. If you don’t like it take it or leave it. All transparency is going to do is show us in black-and-white how much we’re getting
    screwed for. Brokers percentages need to be capped otherwise the transparency is not gonna work.

    1. KP

      So as an industry we want less regulation, but we want brokers to be more regulated? And how many drivers were out there bragging at the beginning of this pandemic that they could get “emergency” loads that were paying great? Drivers want to make as much money as possible, but brokers should have their ability to make money restricted? How does that make sense? I don’t see anyone complaining when there is a shortage of capacity and rates go up.

  2. David W. Owens

    We are in the year 2020 there is no reason at all to be having back room deals on loads and owner operators picking through scrap loads or having to call brokers for loads. Brokers should not “own” or control this industry for owner operators. Owner operators have been lied to about load times, pick up and delivery times AND rates for YEARS.
    There is an old saying. “The way you can tell when a broker is lying is when they answer the phone” The name of the game for brokers is to get maximum money on EVERY SINGLE LOAD that comes across their desk. Since owner operators pull the majority of the loads, who’s getting controlled? You guessed it, owner operators.
    Owner operators are getting smart to this. They are tired of working for big corporate trucking companies and being controlled by brokers. They are tired of hearing, “If you don’t like the rate then pull something else”. What options does an owner operator have except to call another broker in hopes they will offer a better rate. It’s begging at its finest. Meanwhile brokers and big corporations are rejoicing in their windfalls at expense of owner operators. This whole system is a unfair game with owner operators playing the Patsy.
    Sure an owner operator can book loads directly from shippers and sign contracts but there is the catch. Usually owner operators have 1 or in some cases 2 maybe 3 trucks. It’s unfair to even think that a single owner operator can compare to a trucking company with 14,000 trucks on the road and a huge asset base of professional sales teams that corporate trucking companies employ. Owner operators go load to load and city to city, day to day. If they get in an area where freight is scarce, then oh well, that owner operator eats the costs to go to a heavier concentration of loads, even if the load they just delivered barely pays for their costs of doing business. It’s time for fairness.
    There is no reason why a national loadboard doesn’t exist. Right now there is 100’s of loadboards in place and EVERY SINGLE ONE is controlled by brokers and corporate trucking companies. There is no way for a shipper to “post” loads directly for owner operators to bid on loads and level the playing field with brokers and trucking companies. Owner operators that consider themselves “independent” are still at the mercy of trucking companies. With a national loadboard a shipper could post a load on a loadboard that reaches out to thousands of owner operators. The owner operators could ACTUALLY see a “window” of when a load picks, delivers and could see an ACTUAL rate at which the load has been paying and bid against the ACTUAL market rate, instead of the way it is now, listening to a broker on the phone with a sales pitch. There doesn’t need to be a “spot rate” or a “tender rejection rate” aka “linehaul rate” aka “corporate trucking company ONLY rate”. There needs to be a “shipping rate” that is FAIR to ALL that have a dot number. We need to drive a wedge between the shippers and brokers and corporate trucking companies and the federal government needs to get out of bed with corporate America that scratches their backs. Lady Liberty is supposed to impose blind justice, not cater to elbow rubbing.

  3. Rhonda

    Why are brokers shifting blame. It’s their grimy dishonest practices that need to be exposed. Maybe shippers will see they are not necessary and figure out how to eliminate the broker all together. A long time ago direct ship was the name of the game. Brokers, dispatch services all have there hands in the truck drivers pockets.

  4. Mark

    I do not see how any of you people can bitch, U-Haul the Freight quit hauling the stuff, let it sit if the brokers don’t have any trucks than the rates go up, but you guys are too stupid to realize this, you rather go do a rolling roadblock and piss off grandma trying to go to the grocery store, why the brokers back there looking at the TV set saying god look how stupid these truck drivers are

  5. Steven

    If brokers are so honest,why they are so afraid of transparency?
    And in regards of 48 hours transparency?
    Very simple….a carrier will know next time to accept or to refuse a load based on charges made by a specific broker and who is honest and who is a crap broker including those that double or even triple a load.

  6. Ilnur

    Everything can be solved very simply and no 500,000 are needed.

    An open letter to the FMCSA Administrator and to whom it may concern.

    Double brokerage problem? This can be solved very easily.
    The recent Mayday 2020 Owner strike revealed the following:
    1. Double brokerage is widespread, although prohibited by law. This law does not work.
    2. Traffic safety deteriorates.
    The broker holds the load until the last minutes in the hope of a large margin,
    and then the driver rushes to the pickup.
    3. Brokers alter the rules of the game for themselves. Wave 371.3 or the broker’s mocking offer to the carrier in the style: “If you want to see the transaction, come to the broker’s office during business hours.” Complete confusion with detention (hours, pay),
    Layover, not using truck, etc.
    4. During the pandemic, brokers’ margins surged to 70% and freight rates dropped to 67 cents per mile, leading to the Mayday 2020 protest. DOJ opened an investigation into brokers

    Now, in the information age, these problems can be solved quite easily.

    Here’s one solution:
    Under FMCSA, a “Monitoring Center” site is created, where Carrier registers through its MC and enters transportation transactions, transaction coordinates – bill of lading number, broker name, pickup place (city, state).
    Carrier registration and transactions should be made mandatory for Carrier, so that the Broker cannot make the wave of this rule, as it was with 371.3. (Make it necessary to make a quarterly statement from the site monitoring center at the annual registration of the truck).
    Only spot market transactions are entered. Transactions of direct contracts (Customer-Carrier), dedicated contract cargo are not entered.
    BOL (bill of lading) number, broker name, pickup place (city, state), transportation price, detention (hours, price), lumper (price) are entered into the transaction.
    The following are not entered into the transaction: Customer name, Carrier name, pick up and delivery address, date.
    Carrier creates a transaction at any time within 45 days with the option of making additions (detention, etc.)
    Any Customer by bill of lading number, broker name and pickup place (city, state) will easily find the required transaction.
    The site is paid. A subscription fee or a few cents per transaction.
    Because only BOL number, name of the broker, pickup place (city, state), detention, lumper are indicated in the transaction, then the trade secret of the broker and the customer is fully preserved.
    As a result:
    1. Double brokerage automatically disappears.
    2. Traffic safety is improved.
    The broker does not sit on one load in anticipation of a larger margin, but tries to sell loads as much and as quickly as possible.
    3. The project is profitable.
    4. Full transparency for the customer regarding the transportation price, broker’s margin, detention (hours, price), lumper (price),
    which has a positive effect on the market.

    This letter was published on social networks for discussion.

    Sincerely, US citizen, Ilnur Abdulov.

    P.S. Continuation to “Open Letter to the Director of FMCSA”

    Questions arose during the discussion.
    1. What will stop a broker from lying about transactions?
    Answer – Registration via MC. Any lies are reported to the administrator and penalty points for that MC.

    2. How does the customer know about the Monitoring Center site?
    Answer – FMCSA sends out flyers by email to all MC owners about this site and rules.
    Carrier prints this flyer and just leaves it in place of pick up and delivery, for customer.

Comments are closed.

John Gallagher

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.