Less Than Truckload (LTL)…a Brief History.

The US government started regulating the trucking industry in 1935 under the guidance of the Interstate Commerce Commission (ICC). The Motor Carrier Act of 1935 required new truckers to seek a “certificate of public convenience and necessity” from the ICC. The act required motor carriers to file their tariffs with the ICC 30 days before they became effective. The tariffs were then available to be viewed by any interested party. The tariff could then be subject to a challenge by another carrier or railroad which could lead to a suspension of the tariff until an investigation could be carried out.

In 1948, despite a veto from President Truman, the Congress allowed carriers to fix prices and allow them to be exempt from any antitrust legislation. For the next 30 years competition was virtually extinguished as the ICC denied applications from new carriers. The industry began to change in the early 1970’s when first the Nixon, then the Ford and Carter administrations implemented a number of acts to reduce price fixing and collective vendor pricing. The final part of the deregulation was the Motor Carrier Act of 1980. The effect of the new law resulted in intense price competition and lower profit margins, with thousands of new low-cost, non-union carriers entering the market. Between 1977 and 1982, the average LTL rate fell by up to 20%. The trucking industry changed after deregulation. The number of carriers doubled between 1980 and 1990, with over 40,000 carriers in the US. Union membership fell sharply between 1980 and 1985, dropping from 60% to 28%.

Current Conditions

Changes in the law did open the industry up to competition but now the number of carriers is significantly lower than the years after deregulation. The LTL market is estimated at approximately $30 Billion, but currently there is overcapacity, which has could be as high as 15%. This, combined with the slowing economy, will inevitably lead to more carriers seeking Chapter 11 protection leading to job losses in the union and non-union sectors.

Reference: click here.