What is LTL shipping and how did it develop? History of Trucking Regulation and De-RegulationPosted On 15th July 2015
LTL, or Less Than Truckload shipping, is the consolidation of many shipments from various shippers from one geographical area going to various receivers in other geographical areas. The shipments usually pass through a terminal system, including at least one “sort station” in between the origin terminal and final destination terminal.
In the United States, LTL trucking companies operate via the “Common Carrier” authority granted by the Federal Motor Carrier Safety Commission, a separate administration of the U.S Department of Transportation. A prospective Common Carrier has to prove they are fit, willing and able to provide the services required in order to receive authorization from regulatory bodies. Originally, whether a bus service for people or an LTL trucking service, common carriers operated on defined routes, fixed schedules and rate tables (“Tariffs”) that were approved by regulators in advance. Public airlines, bus lines, taxi cab companies, cruise ships, motor carriers and other freight carriers were all regulated under this system.
Originally, most of the freight in the United States was moved by railroad – as evidenced by the railroad sidings you will still see today at old warehouse locations – many of them abandoned now. In 1935 the railroad industry and state regulators convinced the Interstate Commerce Commission (ICC) to extend their authority over the trucking industry. The Motor Carrier Act of 1935 accomplished that in an extremely restrictive way, which made it easy for existing trucking companies to get licensed but almost impossible for new entrants to do so. Further, licensed truckers had to get their price Tariffs approved, and in the 30 day review period anyone, including their competition, could protest their legality and this could delay publishing for extended periods of time. The Reed-Bullwinkle Act was published in 1948 and it exempted trucking from antitrust regulation, so the only way into the industry was to buy a license from an existing company – similar to the Taxi Medallion phenomenon that you still see in cities like New York.
All this ICC regulation, and the subsequent intractable trucking interests supporting it, created high costs and inefficient and ineffective trucking networks throughout the country. Often a trucker could haul one particular commodity like rubber gaskets between two areas but lacked the authority to legally haul anything back, so had to return empty. Some trucking lines would make 30 percent premiums when they hauled one commodity and 30 percent less for other commodities of the same value and density for the same lane. The “market” was not allowed to rationalize the system – and economic reports showed that rates were higher in regulated trucking markets by approximately 75% compared to trucking rates in deregulated markets.
It took from the Kennedy Administration until the Carter Administration for any real change to take effect. The Motor Carrier Act of 1980 signaled the beginning of deregulation of the trucking industry in the United States. The net results were rate decreases, reduction of the unionized Teamster workforce previously dominating the industry, better service to remote areas of the country, increased efficiency by reduction of empty miles, and better use of capacity inside each truck. However, some argue that deregulation is also responsible for increased safety issues, driver exploitation, de-unionization, and the “Wal-Mart effect” in USA where big box retail is almost too easy to roll out. It is also argued that deregulation led to the decline of the “independent trucker culture” (others argue it didn’t exist until deregulation) and also the end of the Teamster Union as a national economic and political force.
If you are interested to learn more about this here are couple of recommended links: