The TIA's Disingenuous Excuse Why Brokers Cannot be Transparent

It is Saturday morning, May 23rd-- Memorial Day Weekend 2020-- and I just read TIA CEO Bob Voltmann's feeble and I contend arrogant excuse as to why brokers cannot be transparent.

Shippers require confidentiality, Voltmann purports. Wow. Just wow.

Let's start the SBTC response to this claim with how there is already a duly-promulgated rule that requires brokers make their invoices to the shipper available to the carrier who is a party to the transaction. Now, take notice here that this is (1) a lawful Federal rule; and (2) it confines the right to know to a "party to a brokered transaction."

Next, let's look at Federal Law...

There are two statutes that come into play. First, there is 49 USC §14906, the evasion of regulation statute. It sets a minimum $2,000 civil penalty each time a broker evades a duly- promulgated regulation. And it infers there can also be criminal penalties. If a rule says you must be transparent and you circumvent that rule by requiring your carriers to contractually waive their rights under that rule, guess what... you just violated the statute and are liable for a civil penalty. Do it twice, and you're facing $5,000.

The second statute states what Congress expects to be confidential. 49 U.S. Code § 14908. Unlawful disclosure of information... is all about routes. Not rates.

As we digest Voltmann's argument, we can't help but point out that there is a difference between a broker complying with Federal law and rules by disclosing what the shipper paid to the broker only to the carrier who is a party to the transaction, on the one hand... and, on the other hand, disclosing this information to the rest of the people on the planet. Now, we contend that the TIA is actually a master of this distinction because they have already crafted an eloquent letter for their members to use as a template to deny leased owner-operators access to the broker's invoice to his shipper on the basis that they are not a "party" to the transaction; that is, the carrier they are leased on to is (for more on the rights of owner-operators in this area see the Truth in Leasing regulation, which requires the carriers to show the freight bill when they pay owner-operators based on a percentage).

So how can a broker reconcile his obligation to follow Federal Law and regulation yet still meet shipper expectation of confidentiality? As you might expect, it doesn't take a rocket scientist to figure this one out. If you are a broker and your shipper requires confidentiality so that their competitors do not find out what your shipper's transportation costs are, you simply help your shipper understand that while you will have to comply with 371.3 when your carriers ask, your contract with your carrier will restrict what they can lawfully do with that information. In other words, the broker's invoice to the shipper will be "for your eyes only" and cannot be divulged to any third party. Presto! Problem solved.

Now, are you wondering why Voltmann and the TIA haven't figured this solution out? In reality, they already have. You see, TIA has put out to their membership a "model broker carrier contract." You can take a look at it here. Lo and behold, guess what appears inside it... a confidentiality clause:

F. CONFIDENTIALITY: 

i. In addition to Confidential Information protected by law, statutory or otherwise, the Parties agree that all of their financial information and that of their customers, including but not limited to freight and brokerage rates, amounts received for brokerage services, amounts of freight charges collected, freight volume requirements, as well as personal customer information, customer shipping or other logistics requirements shared or learned between the Parties and their customers, shall be treated as Confidential, and shall not be disclosed or used for any reason without prior written consent.

ii. In the event of violation of this Confidentiality paragraph, the Parties and agree that the remedy at law, including monetary damages, may be inadequate and that the Parties shall be entitled, in addition to any other remedy they may have, to an injunction restraining the violating Party from further violation of this Agreement in which case the prevailing Party shall be liable for all costs and expenses incurred, including but not limited to reasonable attorney’s fees.

According to Transport Topics, this contract has been in use by TIA since 2006. So Voltmann knows the solution. He created it himself. Now, he appears to have amnesia. As you read the contract, I ask you please note that there is no waiver of 371.3. So, TIA represents to the industry and government that this waiver is not recommended as a matter of "best practices" in their own contract. Otherwise, they would have put it in there. The issue we find problematic, is TIA's own big broker members do not use this model contract. Instead, they sneak in the 371.3 waiver clause.

In classic bait-and-switch style, there is the TIA publicly displaying a fair and balanced model contract knowing full well, their members are using an entirely different contract. And if multiple big brokers are all doing the same thing, then that, we believe, is evidence of a conspiracy to evade regulation and collusion. There is no way the waiver language appears in multiple brokerage companies contracts without there having been a discussion to do so secretly as the TIA shines the light only on their fake model contract. No wonder these people are obsessed with groundhogs. They are running around hoping no one will shine a light on this practice because they are all afraid of their own shadows. SBTC suspects the US Attorney and DOJ Antitrust Division are about to turn on the interrogation lamp.

So, when you read Voltmann's excuse why brokers cannot be transparent and how transparency would cause the sky to fall, take it with a grain of salt. Rate information is only intended to be known by the players in a transaction and confidentiality clauses like the one TIA drew up in its own model contract protect the shippers' costs from prying competitor eyes. That leaves us with only one other reason why Mr. Voltmann, TIA, and #TIAmembers don't want transparency. The SBTC contends that reason is... if you know the big brokers' actual margins, they won't match up to the alleged 16% average Voltmann wants you to believe.

SBTC is still waiting for an explanation on the load that appears at the top of this article that appears to show a broker commission of not anything near 16%, but more like 57%.

@3PLAssociation can respond via public Tweet to @theSBTC for all to see, Bob.

So bring on transparency. And enforce the law against the violations that have been happening. After all, we need transparency to "FIGHT FRAUD." Just who is engaged in that fraud, I will leave for you and DOJ to figure out.

To watch my May 22nd rebuttal to TIA, click here.

To read my May 24th article "Independent Truckers: Maybe it's time to cut out the Big Broker middleman, get your own broker license, and broker loads to yourself." click here.