The roots of regulation of the transportation industry go back to 1887, when Congress created the interstate Commerce Commission to oversee the railroad industry. The purpose of the ICC was to ensure that small communities, or communities with limited transportation access, would not be charged excessive rates and be held financially captive by their transportation providers. The ICC approved and set rates that controlled how much a product could be hauled for.
Trucking came under the control of the ICC in 1935, partly due to lobbying from the railroads, which were losing business to the trucking industry. By the 1930's, trucking was no longer just an urban and short haul transporter, but was now competing head to head with the railroads for long haul transportation.
Under the Motor Carrier Act of 1935, new trucking companies had to seek a "certificate of public convenience and necessity" from the ICC. Companies already operating prior to 1935 were grandfathered in, and got their certificates automatically if they could document their prior service. New trucking companies found it extremely difficult to get operating authority.
The law required companies to file their rates or "tariffs" with the ICC 30 days before they became effective. Anyone was allowed to protest these rates, including competing companies or the railroads.
The regulatory landscape changed again in 1948 with the passage of the Reed-Bulwinkle act which exempted both the railroads and the trucking industry from anti trust laws. This allowed trucking companies to collectively set rates for cargo.
Trucking was broken down into three categories of freight. "Common carriers" were the large pre 1935 existing companies, that could apply for a tariff to haul any freight for any customers. "Contract carriers" could only haul for a maximum of 8 customers, which severely limited the growth of the trucking companies to the size of their customer. Unless the customer grew, the trucking company could not grow. And "Exempt Freight" was things that could be hauled by anyone, at whatever price was negiotiated, but only covered a few products such as logs, produce, cattle, and a few other items that were either very time sensitive or the big companies did not want to handle.
Under this system, one of the biggest issues became that of one compny buying the authority of another in an effort to expand their business. To understand the concept of "authority" lets look at a hypothetical situation. You have a trucking company in Philadelphia, and you have the authority to haul drywall to Buffalo. You find another company that has the right to haul drywall from Buffalo, to Pittsburgh. You buy the second company, and now you would seem have the authority to haul drywall between Philly and Pittsburgh. In truth, the only way you can haul is by going through Buffalo, transferring the load to another truck, and making up a second bill of lading. You do not have authority to haul directly between Philly and Pittsburgh. You also would need a separate authority for another product for the return trip, or the truck would have to return empty.
So from 1935 until 1980, the only way to grow a trucking business was to buy up other companies with authority to haul the products you wanted to the location you wanted to serve. Other companies or the railroads would fight this, claiming that they already served this market, or that they could serve that market but the demand was not there.
By the 1970's, the handwriting started to appear on the wall that the system of regulation was outdated and ineffective. Products that were exempt from regulation were able to move at prices as much as 20-40% less than regulated commodities. For example, regulated prices for hauling cooked poultry were almost 50% higher than the rates for carrying unregulated fresh dressed poultry.
One of the most famous cases illustrating the absurdity of regulation was the "Yak Fat" case filed by a trucker in Omaha Ne. He had authority to haul meat, but when the customer asked him to haul drums of lard, he submitted an application to the ICC to haul the product and the railroads protested, claiming that they were serbing the customer and the area already. So they next filed an applcation to haul "Tibetan Yak Fat", and of course, the railroads protested the application. They claimed that they were already hauling millions of tons of yak fat, and that allowing a trucking company in would cut into their business. They also claimed that the truckers could not haul yak fat for the rate they proposed and the lower rate would devastate the market.
Of course, the ICC rubberstamped the railroads protest and ruled in their favor. The story appeared in various newspapers and business magazines, and the owner of the trucking company was pictured with a yak at the Omaha zoo. The Yak Fat issue was one of the prime arguments for deregulating the trucking industry.
In the 1970's, the Ford and Carter administrations altered the membership of the ICC by adding commissioners who were committed to deregulation of the trucking industry. In 1977, the ICC began to administratively deregulate the trucking industry. between 1975 and 1979, the number of companies applying for entry grew by over 700%, and the number approved climbed by over 800%. In 1980. the Motor Carrier Reform Act of 1980 basically ended the regulation of most trucking companies and commodities, and paved the way for the basic forms of trucking as we know it today.
The deregulation of the trucking industry led to the loss of power from the hands of unions, the end of many of the big unionized LTL companies that prospered under regulation, and the rise of the large truckload carriers that we see today. Companies that fought deregulation and free market rates died, companies that embraced deregulation prospered.
How We Got Here: A History Of Regulation
Discussion in 'Trucking Industry Regulations' started by Burky, Oct 26, 2006.
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I just miss the good old days before qualcom and all that! Logs was so much funner!
I have only been working in logs for 18 years, not near as much as you all, but hey that is all I do LOGS LOGS AND MORE FREAKEN LOGS! Can you imagine log after log after log. 
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