Deregulation of the Trucking Sector: Specialization, Concentration, Entry, and Financial Distress

Abstract

Deregulation of the U.S. motor carrier industry began with changes in administrative practice of the Interstate Commerce Commission (ICC) in September 1978; the process was ratified and codified in the Motor Carrier Act of 1980. Prior to 1980, the ICC controlled the industry through issuing certificates that permitted a motor carrier to carry a type of freight from a specific origin to a named destination. Deregulation narrowed the requirements for receiving a certificate and generally liberalized the rules that restricted certificate holders. It narrowed the authority of rate bureaus (carrier cartels empowered to discuss rates and to recommend actions to the ICC). It also eliminated many restrictions on truckers without certificates to solicit and carry freight as part of their operations [30]. What is called trucking deregulation applies only to interstate shipment of freight. Since most truck traffic is short-distance, the failure of all but a handful of states to follow the federal lead and similarly deregulate trucking rules has left the important intra-state industry with many more restrictions than the deregulated interstate industry. (Blair, Kaserman and McClave [6] and Fuller, Makus and Lamkin [17] describe two states that have deregulated their trucking industries.) Academic economists have praised trucking deregulation with unrestrained enthusiasm (e.g., Bailey [3]). According to Winston, Corsi, Grimm and Evans [42], deregulation reduced shippers' trucking expenses by more than $12 billion annually. Similarly, Moore [28] finds that deregulation led to reductions in trucking rates or costs in the magnitude of 12-25%, with no diminution of service quality. Other evaluations have been equally glowing, characterizing the effects of trucking regulation as the predictable consequence of imposing price controls on a competitive industry [43; 44]. The negative voices on trucking deregulation are heard almost exclusively among affected carriers, labor, or those involved in the legal or administrative practice of regulation [13; 14]. In this paper, I will argue that the enthusiasm of academic economists for trucking deregulation is probably justified, but it is right for the wrong reason. The net benefits of trucking deregulation are vastly overstated by most analyses because they implicitly treat the losses im-