This Week's Spotlight in Transportation: "Dispatch Services"

With all the hoopla surrounding the three broker transparency-related petitions over the past week, including an FMCSA Property Broker Listening Session last week, there is a secondary issue that has come up (again) that seems to have fallen by the wayside: "Dispatch Services" (aka illegal brokers).

Much like I rang the bell once again this Spring to the chagrin of TIA and their big 3PL members about 49 CFR 371.3c and "transparency," I first started talking about the illegality of "dispatchers" in August of 2013 just as FMCSA was revoking the operating authority of nearly 10,000 then duly-licensed small business brokers and freight forwarders over the TIA imposed $75,000 intermediary bond. This was just a cleaning of the FMCSA database, TIA purported, despite the fact that all of those entities, including owner-operators who had broker licenses on the side to cut out the 3PL middlemen, had been maintaining and paying the premium for their $10,000 bond. I issued this opinion on LinkedIn on this topic as the then-President of the AIPBA.

Then, I published this article on LinkedIn in December of 2014 again explaining why dispatchers that work for more than one carrier are unlawful brokerages.

I then took the dispatcher issue before the entire industry in this OP-ED in Transport Topics in 2015.

In 2015, first here... and then here I asked then-Lord Voltmann over at TIA twice to echo our call since unlicensed dispatchers unfairly and illegally competed with his licensed broker members. His response? Crickets...

Also in 2015, I took the case to FMCSA in this article asking them to crack down on these unlicensed brokers. Three years later, after fending off a collusive political hit job, I came back to this issue with a petition to FMCSA in 2018 (we make the case to FMCSA again here) for rulemaking to clarify the definition of property broker to make it clear that dispatch services are illegal brokers when they work for more than one carrier. No need, said FMCSA's then Acting-Administrator Jim Mullen finally in January of this year, the current definition makes it abundantly clear that dispatchers that service more than one carrier, do fall under the existing definition of property broker and need a license and bond.

We also have reincarnated an old AIPBA exemption application asking FMCSA to make small brokers exempt from the $75,000 broker bond enacted due to TIA lobbying. TIA did not really seek to "fight fraud" as they purported (don't miss my article on the real solution to fighting fraud here) but sought to fight transparency and competition. We made this application for exemption to highlight the disparity between those small brokers who are doing the right thing and absorbing the costs of being licensed and bonded and those rogue entities that have gone illegal. Either all brokers need to be bonded and enforced against, or no small broker should have to be bonded. See this article which elaborates on that transportation intermediary bond exemption application. Further, this article asks if you have figured out what we are REALLY trying to do with this exemption application: namely, level the playing field.

And then, the TIA came up with a brilliant idea... Right after SBTC --and then 2 weeks later OOIDA --had petitioned FMCSA to strengthen the existing broker transparency rule 49 CFR 371.3c... and just as the USDOJ commenced an investigation through the US Attorney in New Jersey into big brokers who were price-gouging to exploit the global COVID-19 pandemic and possibly price-fixing... at the request of the SBTC and at the behest of the President of the United States after a three week-long trucker protest in May outside the White House: let's distract everyone by talking about dispatch services and remind FMCSA they are illegal brokers. Brilliant move, TIA... brilliant! Why didn't I think of pointing out how dispatchers are illegal brokers? Oh, that's right... I did. Numerous times over the past seven years.

So now, dispatchers are back in the spotlight. I recently granted a three part interview to Auto Transport Intel on this subject during which, I stated the problem with dispatchers is this... The FMCSA has ignored this issue for its entire 20-year existence. And they ignored the rapid growth of Dispatchers once FMCSA revoked 9800 intermediary licenses in December 2013 and made it more difficult to become a legitimately-licensed broker by drastically raising the bond. This is like leaving a weed in your garden and letting it grow 20 years. By that point, the weed that could have been easily hand plucked back then is now a fully grown tree not-so-easy to remove. Chainsaw, anyone?

To poke fun at this issue of how dispatchers go around saying they are not brokers, we point to this Twix commercial which jests that a ghost is not a spirit, a mortician is not an undertaker, and a janitor is not a custodian. This should be of particular interest to all of you attorneys-at-law reading this who are not lawyers.

So welcome to the discussion, TIA. And while we know you are trying to divert attention away from transparency (we pointed out in the Spring how TIA was being disingenuous here), we note that the dispatcher model that both TIA and SBTC agrees requires a broker license actually contradicts the TIA's argument to repeal the broker transparency rule. That is, if we conclude the dispatcher model is one where the carrier pays a third party intermediary arranging for transportation a commission, and we induce FMCSA to make them get broker licenses, there goes your argument about how brokers collect the money from shippers and pay carriers as opposed to carriers paying brokers a commission. It is not necessary for SBTC to run circles around you people at TIA, when you do such a great job at running circles around yourselves. And as you argue brokers are shippers and target unlicensed brokers that have no bond all in one breath, it would appear that as late as you are to the game, you are now actually hurting your own argument by inserting dispatchers into the discourse at this juncture.

Regardless, SBTC has taken you to task in our latest October 30th comment and we welcome the discussions that will now follow on the illegality of dispatchers. If you are an illegal broker calling yourself a dispatcher, now might be a really good time to get your broker license and bond. With the private right of action in MAP 21 and the law against evading regulation and operating without a license and bond, with the tides turning, you might be headed for serious legal trouble and civil penalties if FMCSA suddenly starts to understand the ICC precedent in this area, enforce the law, and cut down that 20 year old weed that should have never grown into a tree in the regulatory garden in the first place.