For a number of years, the term "freight broker" has conjured up visions of Joe Bob parked in a booth at the Flying Z truck stop with his cellphone, pad and pencil, and a generous helping of chicken-fried steak. In a few instances, that might still be the case, but for the most part, Joe Bob and his shady cohorts have joined the ranks of the dinosaurs. Today, freight brokerage has grown into a much more sophisticated multimillion dollar industry. The leader in the field is the venerable C.H. Robinson, which along with a handful of select players, presides over a marketplace of thousands of small mom-and-pop-like firms.
While Joe Bob may be history, the industry's image problems persist—particularly with the smaller brokers. Although some shippers have found the small businesses to be financially responsible and excellent partners, others have complained of fraud at the hands of less-than-honorable players. In an effort to curtail abuses in the industry, Congress included in the Moving Ahead for Progress in the 21st Century Act (MAP-21) a provision increasing the surety bond for brokers to $75,000 from $10,000. This change, which took effect Oct. 1, 2013, was supported by the American Trucking Associations (ATA), Transportation Intermediaries Association (TIA), and others.
The measure also has its detractors. Perhaps the most vocal opponent is the Association of Independent Property Brokers and Agents (AIPBA), which represents the smaller, independent brokers. AIPBA sought an injunction of the new bond requirements before they became effective. The injunction was not granted, and that decision has been appealed.
AIPBA sees the new MAP-21 provision not as an anti-fraud measure, but as an attempt to drive smaller brokers out of business. According to the group, almost 40 percent of the industry's freight brokers have been forced to shut down because of the legislation, and a rather emotional statement on its website suggests that smaller brokers will be eliminated, carriers will suffer, consumer prices will rise, and jobs will be lost due to the "megabrokerages' new oligopoly." It also suggests that the legislation resulted from the multimillion dollar companies' "hooking up with small truckers and their trade groups to cut a deal," along with some other veiled insinuations.
One of the proponents of the new requirements, TIA, has stated that the issue is not the large vs. the small, but a question of good management, regardless of size.
Still, AIPBA isn't letting go of the matter. In a brief filed on Feb. 14, 2014, in Association of Independent Property Brokers and Agents v. Anthony Foxx, Secretary of Transportation and U.S. Department of Transportation Federal Motor Carrier Safety Administration, AIPBA asked the U.S. Court of Appeals to find that the FMCSA had failed to follow the provisions of the Administrative Procedure Act in publishing the new rule and to set it aside. There has been no decision.
The latest move by AIPBA seems to be a desperate attempt that has little chance of success. It does not appear that the industry has been harmed by the loss of brokers and arguably has been significantly bolstered by the fact that the brokers with which shippers deal are likely to be more financially responsible.
I believe the TIA summed it up well. The argument is not about the size of the broker. It is simply a question of whether when they contract with firms in this important segment of the industry, shippers can be reasonably assured that they are dealing with responsible, financially sound companies.
Shippers just have to follow one simple rule: Exercise the same care in selecting a freight broker as you would in securing any other logistics service.
