Really? Then take this hypothetical. Landstar adjusts the percentage you get to 50% but you average $2.25/mile because freight rates everywhere have gone up. With some work you could go out and get close to the same rates on your own. It would still be worth paying Landstar $2.25/mile to provide the services they provide?

 

Absolutely.

It all comes down to the bottom line. If my bottom line is healthy, I don't really care what they are taking off the top. I believe the same should hold true for a broker. If they are providing a service to you that allows you to operate at what you feel is a healthy profit, it really shouldn't matter how much they are profiting from providing that service. If they aren't providing that for you, then move on to another option. Brokers are not the only game in town.

If I believed I could bypass Landstar altogether and get that $4.50 per mile (from your scenario), then by all means I would do it. The same holds true for brokers. If you think you can bypass the brokers and get the gross rates they are getting, then by all means go do it. But if you wanna play the brokers' game, then complaining about the rules of the game while you are playing it just doesn't cut it.

 

First, just to be clear, I'm not complaining. I'm doing just fine. That doesn't mean I think everything works like it could or should. That would be awfully narrow-minded of me.

Aren't these two statements contradictory? If you would bypass LS to get the full $4.50, that implies that you do care what they take off the top. It means that the services they are providing aren't worth $2.25/mile if you could secure the same rate yourself. So, in a given situation, there is some cap on what you're willing to pay, even if you're still making a nice profit. That's different than...

 

Excuse me for butting in, guys....

This is an excerpt from a legal paper regarding freight broker regulations.
If anyone would like to read the entire paper (which includes a working link to the footnoted PDF version), I would be more than happy to email it.


Regulation of Third Party Surface Transportation:
Who is a Third Party Provider and What Regulations
Cover Third Party Operations in the United States?

Matthias M. Edrich*




II. A BRIEF HISTORY OF THIRD PARTY SURFACE REGULATIONS
Regulatory efforts to supervise and guide third party surface
transportation over time look like a bell curve and are closely related to the
history of regulating motor carriers.
Until the early twentieth century motor
carriers enjoyed broad independence from any permanent federal or state
regulations.
While several states had implemented certain registration and
licensing requirements to encourage competition and improve the quality of
transportation services, the United States Supreme Court ended state regulation
abruptly in 1925.
In its holding in Buck v. Kuykendall, the Court decided
that state measures to regulate motor carriers significantly affected interstate
commerce – a power properly vested in the federal government. In response
to the Buck decision and “almost overnight,” independent operators and
individuals began overflowing the transportation market with transportation
services.
Undoubtedly, many of these transportation providers entered into
the business with the intention of offering honest services.
The depressions in the early 1900s attracted hardworking individuals who were able to start
their own business on a “shoe string” budget of a few hundred dollars.
Unfortunately, the growing abundance of trucks led to an oversupply of
transportation services that depressed prices and profit margins. Overzealous
salesmen aimed to take advantage of opportunities made possible in the
absence of regulation – often to the disadvantage of customers and the industry
overall. Unscrupulous operators skipped maintenance of their equipment;
operators discontinued freight services midway between load and unload
points to pick up more profitable freight; carriers avoided insurance coverage;
freight was stolen; drivers were pressured to work unreasonable and dangerous
hours.
During this period of lax regulation and fierce competition among
carriers, the need for brokers and freight forwarders grew substantially
particularly because these intermediaries offered carriers a method to
streamline their transportation services by facilitating communications between
shippers and carriers.
Unfortunately, “because there were no prerequisites to
entering the business, these agents were often shiftless and irresponsible.”
Third party intermediaries often profited heavily by contracting carriage
services with dishonest and irresponsible operators who would offer low rates
in return for the broker’s blind eye towards lacking business practices.
In addition, because brokers tended to focus heavily on lowering shipping rates
by engaging in numerous shady scams and tricks, “merchants could not tell
what allowances to make for transportation.”
Racketeering among brokers and between brokers and carriers to the
disadvantage of the public grew out of proportion and harmed the reputation of
the intermediary industry to such an extent that in 1935, Congress finally felt
compelled to provide for broad relief.
The solution appeared in the form of the Federal Motor Carrier Act of 1935
which gave the Interstate Commerce Commission the power to promulgate regulations for reigning in transportation
intermediaries.
Specifically, the policy underlying the Act was to “protect
carriers and the traveling and the shipping public against dishonest and
financially unstable middlemen in the transportation industry.”
Rigid regulation until 1980 met with only partial success.
While the 1935 Act and the ICC appeared to succeed in relieving shippers from dealing
with dishonest and corrupt transportation intermediaries, the regulations
imposed extreme regulatory burdens “that, among other impositions, required
anyone applying to become a broker demonstrate [that] their services would be
consistent with the public interest” and that its services would not
“unnecessarily duplicate existing brokerage services.”
At the height of this regulatory “bell curve,” federal oversight created virtual monopolies for select
intermediaries and consequently increased the cost to shippers for transporting goods.
It was not until 1980 that Congress decided to reconsider the effect that
federal regulation had on brokers. The legislature’s Motor Carrier Act of
1980 “ushered in an era of virtual deregulation” of the motor carrier
industry. While the Act did not go as far as to remove all restrictions on the
operations of intermediaries, Congress did decide to make it easier for
intermediaries to register and do business.
Current registration requirements for brokers and freight forwarders are outlined in section III of this article.

sound familiar?


Carry on...

 

The issue becomes the part I have highlighted. If an independent believes he can bypass the broker, and get brokerage rates, then he would be a fool not to. If I believed I could bypass Landstar, and get their gross rates, I would be a fool not to. I do not, however, believe that I can do that as a single truck operation. And besides, if that was really the answer, then there would be no real complaint regarding brokers anyway, because then all you would have to do is simply bypass them and deal with the shippers directly.

If Landstar was charging me 70%, and the load was still paying me $2.25 per mile, I wouldn't have an issue, because I would still be profitable. If I could bypass Landstar and get 100%, would I? You're damn right I would. I'm greedy.

 

Sounds familiar, just add a few zeros.

Yup. Sounds familiar.

Can't disagree yet.

BINGO!!!!!!!!

While today I doubt that most brokers even care about the business practices of carriers, it's clear that carriers are irresponsible by allowing brokers to peddle cheap freight. Which is why I place the blame squarely at the feet of the carrier, for allowing dishonest brokers to thrive.


So no regulation didn't work, and tons of regulation didn't work......

Which is something I already predicted would happen if you regulated brokers - you'd have a select few brokers still in business, and everyone else would fall by the wayside. That would certainly do nothing positive in the long run.

 

Oh really?

To all Independents who would like to see better regulations for brokers-

Please give this opinion (from a Lease O/O who doesn't deal with brokers) the amount of consideration it truly merits.

I see your BINGO, and raise you two YAHTZEES.

 

[quote="Rev.Vassago"]Now there is something I can agree on. Brokers today ARE turning a blind eye on carrier suitability if they can get the loads moved cheaper, to the point that they are doing a disservice to their shipper clients. I see it every day.

 

If the Rev can can a healthy cut of the rate and not have to pay for the trailer, find/solicit the customers, or worry about collecting from the customer, it can be a deal at whatever percentage.

 

Alright, now say you could get their gross rate, whatever it may be...how would you decide whether or not it would be worth it? You'd have to know what LS is getting for a rate, right? How are you going to get that information?

Except that's not what he's saying. That's only true for as long as he thinks he can't get a better deal himself.