There's a disconnect between what you're addressing and what dispatch and I, and probably Paul, are saying. A broker's role, in almost all industries, has always been to facilitate the transaction. They are needed in certain markets to help bring buyers and sellers together. They work on behalf of one party for a set commission that is disclosed upfront. Tell me any industry where a broker doesn't disclose his fee. There may be some, though I'm not familiar with any. This is the role envisioned when the regulations governing property brokers were written.

The problem is that the role the regulations were originally meant to cover is nothing like the role most brokers play today. This is one of the reasons that case law plays such a vital role in freight cases today, the regulations simply don't reflect the modern industry.

The business conducted by most brokers today more closely resembles the above example of a middleman than that of a broker. The primary role is that of a wholesaler trying to maximize profit. A broker's primary responsibility is to provide a fee-based service. A broker is supposed to represent the interests of a client. If a freight broker is trying to get as much as he can from a shipper and pay as little as possible to a carrier, just whose interests is he representing? His own, of course. Several people here have bought real estate, I'm assuming most used a realtor. Did the realtor spend any time trying to educate you about the market in the area? Has anyone bought a boat through a broker? The ones I know spend a good deal of time explaining the market to clients. How many have had this experience with a freight broker? How many of you shippers have? It's simply not the role they play anymore.

Let's look at the broker bond. $10,000 doesn't go very far, does it? But consider the market it was originally intended for. The broker was not seen to have fiduciary responsibility. The regs were written under the assumption that the broker arranged transport and collected a fee for the service. Actual payment for transport was between the carrier and either the shipper or consignee. Those regs were never meant to govern a relationship in which the broker was ultimately responsible for payment.

This is why there is very little regulation regarding broker liability. Look how much language there is related to the relationship between shipper/consignee and carrier and their corresponding obligations and liabilities. Isn't it curious that there is almost none governing brokers? It's simply because the role of the broker was relatively benign decades ago. The industry's changed and brokers play a much more prominent role but the regulations simply don't reflect that fact. The result is that many regulations that used to exist for carriers' protection and to ensure the efficiency of the market are rendered nearly impotent.

For those that say regulation isn't the answer, you're being naive. There are very few markets that can operate efficiently in the complete absence of regulation. I'm not advocating over-regulation, but there needs to be a modernization of the current regs to reflect the modern market. Paul is absolutely right in his characterization of economists' views on laissez-faire principles. Most of the people found spouting such rhetoric today are found on radio talk shows.

As for rates, I don't haul cheap. At least I hope not, because if I do, then I've been sitting an awful lot this year for nothing. You also won't hear me complaining about what brokers make because I only take a rate I can work with. But if you think that wide margins at the broker/middleman level resulting from an opaque market don't affect you as a carrier, then you simply don't understand or severely underestimate the importance of efficiency.

 

Rev,

You are arguing your value system, not economics. There is nothing about free markets which precludes: "honesty, decency, fair-dealing and commonsense" even if those concepts are foreign to your belief systems. Sadly many people do believe that capitalism and free markets are devoid of honesty, decency and fair dealing and this accounts for the popularity of socialist systems in Europe and the growing trend towards socialism in the USA.

Teddy Roosevelt, whom I quoted, helped to preserve capitalism in the USA in the face of a growing tide of socialism precisely because he did show us how capitalism and free markets could be bent to the goals of honesty, decency and fair-dealing. If I did not believe that was true I would most assuredly abandon free markets and advocate socialism myself.

But I would think that a tyranical socialist dictatorship without any pretext of "honesty, decency, fair dealing and commonsense" would seem to be just the place for someone with your worldview. Perhaps a system like the one in China where Christians are forced into re-education camps and used as slave labor for the the enrichment of the elite would provide the proper amount of "inequality" to satisfy your desire for an uneven playing field. That is as long as you are one of the elite of course.

 

no_worries

Well thought out reasoning. Yes, I think you and I are on the exact same page, paragraph and sentence. You explained the practical nature of the problem beautifully. I was trying to address the theoretical nature of the problem.

I do think that with well thought out regulation it would probably not be necessary to control the actual percentage charged. What do you think?

 

HAS BEEN one of the best debates?? It ain't over, Ridge Runner. I owe you a response on your comments from the previous page, but it's time for Friday night activities. We'll take this up tomorrow.

 

The broker system is an example of a perfect free market. The buyer of the job(trucker) sets the market price by accepting the load. If the buyers are continuously setting the market price below your cost of operation, you have to look at your costs and see if you can remain in the business.

The ease of entry into this business has led to it being priced as a commodity. You either need to provide a specialized service not readily available (less competitors) or operate at a lower cost to generate profit.

 

I read in landline a few months back in the monthly column, this particular about brokerage and rates. He said a independent has up to 2 years to demand to know what a load booked for. He said something along the lines of "it may change your mind about doing business with that broker in the future", or renegotiating a better rate.. I am pretty sure you can demand the full rate booking. I know for fact you can demand the rate if you are leased to a carrier under percentage.

 

I read all of the last two pages of this discussion, before writing...just to clarify.

I like what Paul has brought into the topic, and the manner in which he has phrased it.

But on this one thing..the topic of "Brokers whom take the money and run, as IE has suggested". For a "Independant Carrier" such as Steve Booth or Paul when he was running under his own authority, there was and is legitimate recourse, that each had /has, when it comes to Brokers whom "underpay" on a load...and when a Broker takes the money and runs...that is exactly what they have done, is underpaid. For Reefer and Dry Van, if a broker fails to fullfill all "terms of the contract for drayage", a carrier can solicite the Shipper and Receiver directly, for future business. There are limited things a Carrier can do, to recoup their lost monies, on food stuffs and dry goods.

For Flatbed /Stepdeck carriers as well as "Heavyhaul" carriers, there are other means of legal recourse, to receive monies that a "Broker" has not paid. All a "Carrier" need's to do, is go to Court and file a "Drayage Lien" against what ever the commodity the carrier delivered was. Be it lumber, dry wall material, pipe, steel, or motorized equipment. (A carrier should always instruct the driver whom is picking up "equipment" to note the "serial number" of each piece of equipment loaded, on the "Carrier's Bill of Lading", and have that BOL signed by the shipper.) With material such as lumber, drywall and steel, a lien is placed against a "Manufacturer's" entire inventory, which includes the manufactures' finished goods, while with "serialised" equipment, and lien can be placed on each seperate "serialised piece". In the case of equipment a Carrier doesn't even need to travel from their home terminal to place a lien, it can be done at the nearest US District Court. The Court will have the "Lien Notification" delivered by the US Marshall Service, if the equipment was carried "interstate".

Once a carrier has taken "Court Action" against a Broker, Brokerage, and Shipper / Consignee, for unpaid drayage, the Carrier is free to solicite work directly from the Shipper as well as the Consignee. I know this, because in 02, 03 and in 04, I had to file on unpaid drayage accounts. A "Shipper" whom I had contacted about an unpaid freight bill, is whom helped me learn all of the above.(as pertains to flatbed / stepdeck / heavyhaul). The US District Court, in Tacoma WA, was whom taught me what happens and why, when filing a lien on equipment transported interstate. Lien filing takes time and money...but is justified in the end.


Something I learned in 01 & 02 about "Brokerage Contracts" is, most of those contracts prohibit the "Carrier" from soliciting both the Shipper and Consignee. Now....there is a significant difference when using a "Broker" between the "TERM" Shipper and Consignor . When a Carrier enters into a "drayage agreement" with a Broker, with the Broker or Brokerage paying the Carrier, the broker in effect becomes the "Shipper of record" (Consignor) for the Carrier. When a carrier enters into an "Agreement of Drayage" with a product shipper, then said shipper is the "Consignor", and responsible for "drayage payment", unless an agreement has been reached, in which the "Consignee" is responsible for "drayage payment".

Now...there are going to be those whom cry "BS" on this...but most of the payment terms I have described, are printed on the "Short Form Bills of Lading" you can buy at most Office Supply stores. I have filed liens in UT, NV, OR, and CA, as well as in the state of Washington, for unpaid freight charges by Brokers and one shipper (based in las Vegas NV). The shipper in NV was pissed when he went to move his crane from San Diego CA back to Las vegas NV, and it was impounded at the scales on I-15 between San Diego and Temecula. The impoundment though, gave the Carrier hauling the crane back to Vegas advance warning about what they needed to do..which was demand full payment, before the crane was unloaded from the trucks. Once the crane was impounded at the scales...the "shipper" FEDEX'ed us our money. My sister (whom I had been in business with at the time) had been pissed at me for accepting the crane loads from that shipper (becasue of the non-payment)...then was completely shocked when FEDEX knocked at the door at 10PM with a certified check and a release document for her to sign, so that the crane could be released from the CA scales.
One other "Lien" I filed, had to do with earthquake repair work, done on the I-80 "Bay Bridge". We received our monies, in full, 5 hours after filing the lien on the bridge, and the brokerage involved was put out of business for good. The shipper involved gave us consistent work, the third week after we started calling for our monies, but before we filed the lien, to recoup our money from the brokerage.

Trucking isn't easy by any means. Everything, including payment collection, takes time. Persistance and honesty does pay though.

 

I always check out a new broker or shipper before I do business with them. If you don't take the time to check them out, you are taking a big risk. It it the carrier's responsibility to check out anyone with whom they do business. Even larger brokers can have cash flow problems. I stay on top of my receivables. I usually don't extend credit to anyone who has a credit score less than 92. I don't stop at just looking at the credit score. I talk with their references. You will never take all of the risk out of doing business, but you can minimize it by doing your homework.

 

When push comes to shove, those concepts are irrelevant. I know you want them to be, but they just aren't. You always have the right to challenge that by choosing who you will and will not do business with. But it isn't up to the government to legislate morality. If someone chooses to be dishonest, indecent, unfair, and doesn't use common sense, your only option is to not deal with that person, and that is the way it should be.

I think your real argument isn't against dishonest brokers, but is against carriers who choose to do business with them. And just like you can't legislate morality, you can't legislate against the stupidity of some carriers.

 

I didn't read all the posts so if I regurgitate cut some slack.

If you want to force change in the way brokers operate the government is not the answer, the change will have to begin with you.

I feel the indie of today is lazy, they would prefer to work load boards and deal with brokers than actually get out there and sell their service, it has become too easy to let someone, the broker, do their selling for them. The problem is when the broker takes a commission for their service the lazy indie cries about it.

I'll bet most of you don't know what it's like to pick up the phone and call transportation managers to sell your service, you don't know the hollow feeling of being hung up on repeatedly, knowing that you have to keep going or you will fail.

The way most indies operate today is much like leasing, the difference is they have no idea what the load actually paid till after they haul it and then only if they demand the original invoice on the load they hauled, which is legal by the way. If you demand the original you'll most likely never haul for that brokerage again as you will have effectively pull their pants down and nobody likes that.

For those of you that want to continue using brokers your best course of action would be to lobby for tougher licensing procedures and higher bond limits, this would weed out some of the bad actors but it will never change the way a broker takes a commission. You the independant will have to know your cost, you will have to know what the supply and demand situation is and you will have to grow a pair when it comes to negotiating with people.

I would suggest you indies shut down your load boards and start knocking on doors, you know who you're dealing with, you build relationships that spawn loyalty and trust me on this, transportation managers talk to each other in specific industries. Rely on brokers to get you home or to get the area you need to be to haul the freight for the company you have a relationship with, quit relying on them for your outbound loads.

I'll tell you right now, what I just suggested is damn hard at first, I got so worked up before I made my first call I threw up in a garbage can. Also be prepared to work, I mean work far above and beyond the 40,50 or 70 hours you already put in.

I'm talking about getting on the phone when you're home. You'll have to get in the car and go to the places you call and physically meet some of these people, they will want to see an outline of your operation, they might want a contract, you will be buying lunch or dinner, you might find yourself buying a round of golf or a fishing charter.

Eventually, after spending hundreds of hours and thousands of dollars you will see the reward for your effort, then things will get really crazy, your phone will ring off the hook and your customers will get very demanding as they have come to rely on your good service and name.

That's the way it was done when I was an indie, I didn't have load boards and brokers aside from CH and a few large carriers were still in their infancy.

One more thing, anybody that agrees to haul a load to Canada for 1.80 is a bigger problem than the brokerage that laughed all the way to the bank.