STB IMPOSES CHANGES TO RATE/CLASSIFICATION BUREAUS
The U.S. Surface Transportation Board will require the motor carrier industry’s National Classification Committee to change its operating procedures and that carriers participating in the rate-setting bureaus to provide “truth-in-rates” notices whenever they reference bureau-set rates.
Under the law, interstate motor carriers may enter into agreements with competitors to discuss certain issues related to rate setting, and other activities approved by the STB, to avoid violation of antitrust laws.
One of these bureau agreements pertains to the “classification” process, through which commodities are grouped according to transportation characteristics. The other agreement pertains to the “class” rates that are set for various classifications.
“Although many motor carrier bureaus have operated with government approval for several years, shippers have complained that the classification procedures do not provide for enough shipper participation, and that the collectively set class rates are far above market levels,” the STB said.
In December 1998, the STB said it would impose “rigorous conditions” on continued approval of classification and rate-setting agreements. The STB has now laid out specific changes that must be made to classification procedures and setting class rates:
For classification, the STB imposed specific conditions regarding the exchange of information and the provision of advance notice designed to start the classification process to include more shipper participation.
“The most significant change that it directed is the requirement of a right to arbitration as part of the classification process,” the STB said. “The Board found that shippers currently do not participate fully in the classification process because they do not believe that they can get a fair hearing, and as a result, classification decisions may be made by the classification bureau on a less-than-complete record.”
In respect to rate-setting bureaus, the STB imposed full disclosure, or a “truth-in-rates” requirement. Before the motor carriers deregulated in 1980, the class rates set by the rate bureaus were often the rates actually charged to most shippers. As the industry adjusted to deregulation, the bureau-set rates became known as “benchmark” rates or “listed prices,” which were usually charged to “less sophisticated shippers,” the STB said.
The STB said it “found no basis for specifying a minimum discount that every shipper must be given, because such a requirement ‘would give shippers of some traffic a windfall far beyond what they could expect in competitive market dealings between knowledgeable shippers and carriers.'”
The agency concluded that to ensure the collective rate setting process does not “skew market pricing or mislead shippers,” a motor carrier must give a “truth-in-rates” notice to the potential shipper when it references a bureau-set class rate.
In its decision, the STB also considered the “loss-of-discount” provisions under which a shipper must pay the full undiscounted class rate if it does not pay its freight bill on time. “Noting that, with discounts as high as 70 percent, a loss-of-discount provision could result in penalties far beyond the collection costs incurred by the carriers, the Board required bureaus to provide, as a condition of membership, that their member carriers not use a bureau-set class rate as the basis of a loss-of-discount penalty for late payment,” the agency said.
The National Industrial Transportation League praised the STB’s decision.
“It would have been easy for the STB to gloss over the importance of dealing with these relics of old-style regulation,” said Ed Emmett, president of the NIT League. “Instead, the chairman, commissioners and staff have crafted decisions based upon a sound understanding of the realities of the marketplace. When implemented, these rulings will improve shipper/carrier relationships.”