Lightning like Steve McQueen I'm in a fast lane when the light turns green And I built tough I ain't nothing but grit Cause I made rugged blood sweat and spit yeah, like a horse I fly Then for a bumpy ride I like to play hard But I work harder and I weather the storm Because I'm built stronger.
What is up, ladies and gentlemen, we are back. We are live. It is a Freight Coach podcast, the top podcast in transportation coming to you guys every single weekday, 8:30 in Pacific, 10:30 Central to break down some industry headlines and do we have one for you here today. This is a topic that seemingly comes up every four years now. @ least that's what it's on par for. I'm a big data guy. It happened in 2020, it's now happening in 2024. And I'm preemptively betting this is going to come back in about 2028. But I digress. I'm going to save the rest of the intro. I hope you guys all had a happy Thanksgiving. You guys know what to do. Subscribe and share the show.
But we're going to jump right in to this phenomenal topic called freight broker transparency that's going on and I'm bringing an attorney on the show. Your guys favorite attorney. Although this is not legal advice at all, I want to preemptively say that as well to break down what this actually means. So Mr. Armchair Attorney, aka Matt Leffler on the show. What's up brother?
On the first day of Christmas, my true love gave to FMCSA proposed regulations on broker transparency. It's great to be here, Chris. How are you happy? Happy Monday, man.
How long did you plan that? Like how?
Just a second ago, I'm like, I gotta have a snazzy way to join in today. I was like, what can I do? I was like, oh, we can make it work. And it worked. So I'm really glad it came to me as I started talking. So thank you.
Start calling this the 25 days of freight Coach. What can we do to bring you guys a solid Christmas cheer this year? And we are going to talk about broker transparency. And you know, dude, like I said, this was a thing back in 2020 and now it's, you know, it's just banging the drums. Chris Jolly and Chris Jolly's opinion only is there are trade groups that are out there that are really driving for revenue on it and that's why it seemingly goes away during that time frame. And again, I'm not here to knock anybody's Hustle. I'm a capitalist. I love the free market. But ultimately I am a fan of knowing the law and what it is that's going on out there. But more importantly, my main concern. And I talk about this a lot, Matt.
I don't really give a what's going on in the market. Right. Like, I can't control the White House. I can't control a lot of that stuff. I need to control my expenses, I need to increase my revenue and I need to run a profitable business. That's what I need to focus on the most. And that's what I try to focus on day in and day out. Because ultimately what one person's doing in business does not put more money in my pocket. And yeah, so I just kind of want to put that out there. But you know, broker trans. What's the actual legal shit that I know you want to come in here and talk about?
Look, broker transparency has been on the books in different iterations for a really long time. We won't talk a lot about the history, but just for the folks who are watching us or who are listening to this, Broker transparency began in the old days when the motor carriers hired brokers as agents. And the broker was actually paid from a commission that was given to the motor carrier. So shipper pays motor carrier then takes a piece of that money and gives it to the broker. Is a single transaction with different things happening. Today it's totally different. Today it's. It's two transactions, maybe more. But the main transaction we're talking about is shipper to broker. And then broker has a transaction to the motor carrier. And the question is, what can the motor carrier learn about that first transaction between the shipper and the broker?
Can they learn how much was paid? Can they learn all the different fees that were put in there? And as it sits today, the answer is it depends. There is a rule sitting on our books today. It's 371.3. And that rule talks about when you as a broker must disclose records to a motor cure upon a request. A lot of stuff is around this issue and there's new proposals that will kind of modify this. But that's the fundamental question. Should the broker be required to tell the motor carrier how much they made on a specific load?
Yeah, I'm. So there's an actual really good article here, you guys. I'm going to put this out there for reference. It breaks it down very well. What Matt's talking about, some of the statutes and everything. It's a statute, right? Is that what that.
What's a federal. We wouldn't call it a statute. So this is a federal rule. So it's basically the FMCSA created a rule that has been. It's put at the Federal Register where you can actually look at same forces in effect as a statute. It's just not passed by Congress, not approved by the president. It is simply done by the federal.
Agency itself, which, you guys know my stance is on federal agencies. But anyways, the article is from trucking info.com and it's just FMCSA proposes changes to Broker Transparency regulations. It was released on November 19. I've read that one. I've read a couple other ones. But I think that one specifically does do a very solid breakdown because it, you know, Oida and Noah Noa or whatever is they put their piece out there and then the TIA puts their piece out there as well and you know, gives. It. Gives a good breakdown with it. Because, you know, ultimately I think that, you know, from my stance on this, like, obviously I love my trucking partners making money, right? Because as a freight broker, as I've said often, like I don't have a business without them and I want them to make money on it.
But you know, and I see a lot of these little selective clips on social media about how this One broker made 50% and yada, which we all know there's those underlying things, just like there's those times out there where trucking companies make a lot of money on certain runs that are going on out there. Right. Because that's the free market. Nobody ever complains in those moments. But ultimately, let's remove the fringes of this and let's talk about the bare bones overall transactions in this industry, which dat and they're cited inside of this article, put information out there that, you know, industry average is about 15%. Right. And that's the number I want to talk about is industry average, not the outliers where somebody made a lot of money one or a driver made a bunch of money one, either.
I want to talk about the industry average because in my career, and again, I've only brokered three truckloads in my entire life. So I want to be abundantly clear. That's my data set. But in my data set, my numbers fall almost fucking lockstep and key in line with that out there. So again, go. Go for it.
Yeah, the way to think about this, I think the outlier piece is really important. So what has happened in the industry and as people have watched this issue unfold, is that there is this belief among certain groups that the brokers are making money hand over fist that they are making way more profit than the motor carriers are. And that is not a good thing. And so the idea is, well, if the broker had to disclose how much money they made, maybe me, the motor carrier, I can negotiate for more. Now, I don't think that makes a of sense because if you're a motor carrier, you're really based around like, what is your operational cost, how do you cover those costs and how do you make a decent profit. But what has happened?
This is really the fundamental question these Noah and Oida were like, look, we believe our members are getting taken advantage of and we think that this rule that's on the books today should be modified. Now here's some examples how the rule works today. So let's take apart the waiver piece for a second because that's really important. We'll have to really dig into that one. But under the Rule 371.3, if you're a motor carrier, you can request to get access to the documents of the broker transaction, but there's no requirement of the format. So a broker could say, yeah, you can come and see them at my corporate office on Thursday. And if you're in Seattle, unfortunately we're in Ohio, so you can't make it in time. So they were required to be. There's no way whether paper electronic.
Most brokers would say, it's paper, come and visit me. And that was one barrier. So this proposed rule would convert this to being electronic format. It's electronically available. Now. Oida and Noah both asked to have this happen automatically. So you have a load moved within two days, you are sending those documents automatically. The proposed rule has not said that. The proposed rule says once you make the request as a motor carrier, then you have we. The broker has two days to comply. But that's that electronic document format, that's one of the really substantial changes in the proposed rule. But the real issue, and I think that's why it's not as big of a deal as many people believe, is this idea of waiver. So if you're a broker and you're working with a motor carrier, you have your broker carrier agreement.
And this is not legal advice. Don't take legal advice from a podcast. If you think you need a lawyer, you probably do, and it's not me. But if you're a broker and you don't have a waiver in your contract right now. You need to get one. You need to call your lawyer and say how do I make sure that I have a waiver of 371.3? Because the contractual waiver is used by 90% or more of all freight brokers. And what it basically stands for, the proposition is if you ask for the documents, you don't get them because you've already waived them. That is the fundamental fight Oida and Noah had as they tried to get this rule on the books. And the waiver remains. There is no carve out that says you can't waive those rights. And we can talk more about that.
But that's the, really the meat and the potatoes of all this is can you waive that right? And the answer from the FMCSA is absolutely, yeah, it's.
And that's ultimately what I think this hinges on is they're not going to remove like there's going to be, I would almost put it at a 0% chance that they're going to ever be able to force somebody to remove that waiver from a carrier like a set of contract. I think that's almost at 0%.
Let me, let me. Actually I'll even build up that further. So there is a quote in the proposed rule that speaks specifically about that waiver. I'm going to read that verbatim because I think it is incredibly important. And it says. Let me find this piece. In their petitions, both OIDA and the SBTC sought an explicit ban on waivers of the requirements of 371.3, paragraph C. However, as a general principle, parties are permitted to waive any right unless Congress by statute specifically makes a right non wavable. The agency, which is fmcsa, has not identified any statutory provision in which Congress expressly borrowed waivers in this context. And therefore the agency has not included the requested language in the revised regulation. That is the most important piece of this entire rulemaking process. They sought the waiver and the FMCSA said we don't have that power.
The only way we have that power is if Congress makes a law and then passes it through the President and then we then are bound by it. So they have already said they are not going to have the waiver being banned explicitly. So this change that we're talking about may not ultimately matter at all, provided the broker are continuing to use these contractual waivers.
Yeah, no, I, I agree. And I think that's kind of like what stops the entire argument right there on both sides of it. But, you know, I think ultimately, like, there's enough data that is out there right now that almost proves dat's data that they put out there in that report. I don't remember what article that was from, but you know, about the industry averages being.
You could look at their financials. You can see what they make.
Every. I was just going to say that every single publicly traded company inside of Transportation has all of their financials listed out there. You can do the quick math and shows, I mean, C.H. Robinson was at, I think 14%, Hunt was around 14%. They're all kind of right around in that. And I think ultimately, you know, my, I get, you know, when I'm out there building my business, you know, because I'm out there just like everybody else, I don't want anybody to go out of business. I want everybody to flourish financially. And I want drivers to make a shitload of money. I want brokers. I want everybody to make money, right? Because ultimately that's the system that I operate in. I'm a capitalist at heart, but I believe in responsible capitalism. I want everybody to win when we're out there in the market.
And I think like, you know, and I'm not just saying this because I'm a broker, any of my driver friends or whoever listens to this, you want to think I'm a piece of shit broker, that's fine. You fucking think whatever you want about me. But you ultimately, this does not make you run a more profitable business, all right? Because that's where what if you want to put all this effort into fighting the purple dragon of how brokers are making all of this money. And again, brokers do not do themselves any favors, all right? They do. Not at all. I am the most anti freight broker that there probably is out there because we're our own worst fucking enemy in most instances, okay? But with that being said, what somebody else makes on a transaction does not make you more money.
That's right.
Absolutely does not make you a more profitable business. It does not get you better financing terms out there. It does not get you better terms out there for anything inside of your business. It does not all of a sudden make you make more money, all right? It doesn't. You need to always start at you and look at yourself in the mirror. And you know, I think a big push behind this is, dude, there was a big. I don't know if many people remember this, but back in 2020 and 2021, there were so many fucking courses on Become an opener operator and become a millionaire. That was out. It was fucking nauseating. And I think everybody thought this business.
Would be profitable forever. And it's cyclical. It's always been cyclical. It will never not be cyclical.
But so many people got in at the wrong time, right? Like, it's just like right now in car sales are at historic lows because interest rates are at a very, at a high. Home sales, same thing. Interest rates on 30 year fixed mortgages, all they're at a very elevated rate. So people don't do it. But unfortunately a bunch of people got in when interest rates were high, when equipment prices were high and everything. And you, and you got caught up in I think some hoopl Internet hoopla on how you were just going to make a million dollars a year, every year for the rest of your life.
But you know, again, instead of doing all of this, if you want to know what a broker makes on a load, the best, most effective way is to cut freight brokers out of your business as an owner, operator and as a fleet and get direct freight. All right? The drivers that I see out there, that's their response to a lot of this. They have the most. And those are coming from guys who have driven for 20, 30 years. They're like, I don't deal with brokers. I have my own customers. They never have to deal with this stuff because they took the time and they built out their business model without needing anybody else.
Well, I mean the thing that I look at is that we are trying to find someone to blame for our own inadequacies. Like we see this pattern where the only reason we're struggling is because this person or this group is taking advantage of you. And that when you build up these ideas of this is the villain of the story. Someone has an idea how they're going to manipulate you. To your point, if you're a motor carrier, you have to know your operational cost. Now there is a to be said about the barriers to enter this business being too low. I fundamentally believe it is too easy to be a broker. It is too easy to be a motor carrier. But beyond that, simply having this disclosure does not solve the ultimate problem, which is you have to know your operational costs.
You're not going to make all this money every single year or every single load. Brokers lose money on some loads and they win on some loads and they on average make the 14%. What I would say, Chris, I think to keep a note of what happens Next. So this rule goes out, people are going to comment. And there's comments now. Over 750 comments. I've seen brokers have said on different social media platforms, if they get requests under this regulation, they blacklist the motor carrier. They simply say, I'm not going to work with this person because they're too difficult. And if you think that broker transparency is going to save your business, you are going to be in for a rough ride. It will not do that. It may ultimately hurt you if you don't understand what you're signing and what you're agreeing to.
And ultimately, you have to know your operational cost. That is the only way to control how much profit or loss you experience as an independent business.
Now, I'm right. I'm right there with you, man. And that's why I say, like, that's why I had initially said, before we even really started getting into this, about how, like, I don't pay attention to the market, I don't pay attention to people chime in on social media or I don't care who's in the White House. Yes, I think there are certain people that can make way better policies to make our life a lot easier. But I ultimately, though, I, as a business owner, am solely responsible for the growth of my business, for the growth of my revenue, for all of that stuff. And I think that the. The second you stop blaming outside forces for the failure of your business, because that's ultimately it, right? It is the failure of you as an operator on why your business is not profitable, okay?
And it's a tough pill to swallow, all right? It really is. But ultimately it's on you, right? Like, just like me as a business owner, it's on me. If I want my revenue to grow, it's not anybody else's problem. If I want more advertisers for this show, guess what? I have to go out there and earn it. I have to separate myself from the competition. I have to do a lot of out there to do it. But ultimately, the buck stops with me. All right? And that's a very tough because, like, here's another thing, too. Ultimately, just because you make more revenue, does that mean you all of a sudden have financial literacy? I think that's the biggest fucking problem in all of this is financial literacy. And that stems back to, like, high school and shit, right?
How many people don't even know how to balance a fucking checkbook? You know, it's just little. It's shit like that. I mean, I go through and I've talked about this numerous times on my show. I go through my P and L. P and L stands for profit and loss for those of you who don't know. P And l every 90 days. And I look at every fucking dollar that goes outside of my companies and I see what can I eliminate? Actually using this, is that the most effective way? I mean, I, Dude, I get fired up about this because I just want. And again, I just want more people to take accountability for their actions inside of their business, all right? Because as a broker, guess what? I don't just call the shipper and they just give me access to freight, all right?
There are people out there that spend thousands of dollars, years of prospecting to get in the door of the shipper, all right? That is the fundamental reality of being a freight broker. We spend money to get in there, to get business. All right? Now and again, I'm not justifying shitty actions and shitty behaviors by people. But to sit there and say that like we're the only ones who have money on the line, that is, that it's a false statement. And again, how somebody else operates their business, what else? What somebody else makes in a transaction does not make you profitable. It doesn't. It's as simple as that.
Well, I want to kind of fast forward what does the future look like with this? And let's assume the waiver you don't have in the broker carrier agreement. So you're just running your own business with no waiver in this. Are you ready to comply? I mean, this is the reality. Is it. Whether the, whether you like a rule or not doesn't matter. The rule becomes the rule and you have to comply with it. So if it gets enforced as written, brokers will have two days to produce records after someone requests them. And if they don't, there could be, we don't know for sure. There could be fees or penalties for not producing these records. So this aspect of the compliance we're going to have to see.
If you are a broker and you are passionate about this issue and you ought to be passionate about it, there is a place you can go and comment. Right now, the vast majority of comments from what I have read are motor carriers who say, oh, I think it's unfair that brokers do this again, the fundamental mental shift has to be this. For motor carriers, the broker is not your agent. The broker works for the shipper. The shipper is their customer. You, you motor carrier, your customer is the broker. That is your customer. You may think that the broker is an intermediary and an interloper and they shouldn't be here, but they are your customer. And if you don't go into this eyes wide open, you can burn a lot of bridges really rapidly.
Now the thing I'll also mention, this is the part I get really excited about. I, I want to talk about Chevron just for a moment.
Let's do it.
So earlier this year we saw Chevron, this very important administrative law case, get overturned. Then we have this case called Loperbright. There is an argument to be made that the fmcsa, what they have been statutorily authorized to do is safety. Now we can debate whether or not they're good at that aspect. I will say when 20% or more of all commercial vehicles are unsafe at any speed, there might be an issue with their ability to enforce the existing regulations. But if this gets challenged, the entire broker, carrier like transparency movement, that code that sits there now is 371.3 could all be thrown out. That I think is the end game for some of these organizations on the behalf of the brokerage industry who look and say this Rule made sense 20 years ago, it made sense 30 years ago, it makes no sense today.
And I am of that camp. I think the transparency aspect makes absolutely no sense. If, if you think it makes sense. I just, I struggle to understand it, but the data doesn't support that. Brokers are making a ton of money and the law, I think is tenuous as its foundation of whether or not it will be upheld as the courts navigate these things over the weeks and months and years to come.
Yeah, no, I mean, I wholeheartedly agree, man. I'm right there with you. I think that, you know, ultimately it's like as we're going out there and trying to pick and choose our battles because owning a business, starting a business, becoming profitable in business is hard enough, as is any ounce of your time that you focus on what somebody else is doing to stop you from succeeding is opening up the door for somebody out there who is, has accepted the fact that it is on nobody else but them to make their business work. And you know, it, dude, it's a tough pill to swallow. It really is, man. Like nobody, like, and it's, you know, I'm of the camp where it's like carriers and customers are 1A and 1B of importance to me. Right.
As a broker, even though, yes, I technically pay the carrier, I view them as a customer of ours as well because ultimately I don't have a business without them. But you know, from my perspective though, I. And man, it's like again, I know brokers are. We're our own worst fucking enemy out there. Because for everybody situation that you see out there's 50 of them that justify a carrier wanting to think this way, right? So it's like I can truly sympathize with some of these complaints that are out there, right? Because it's like a lot of these guys, a lot of these drivers are like, man, I just want to run my business. Like that's it. I just want to make a fair wage, I want to provide for my family and that's that. But you know, again, you take it for anything.
You can take anything that I say and completely disregard this because I am a freight broker and I accept that, right? You can say whatever you want about me, but if I was making 50% margin on every single load, I did, all right, If I was doing that, I would not have time to do a podcast, I would not have time to do anything because I would be going after literally everything I possibly could to completely stack as much money as possible. That is what a capitalist society and free market would do. And you could as well as a truck driver. But ultimately you got to look at it like this, is your business capable to do more? All right. And you know, for me inside, could I move? And again, I'm not associated or affiliated with Kraft Heinz.
I don't want to get, you know, but like could I move Kraft Heinz's freight right now? Yes, 1,000%, probably better and more effective than their entire current network because I have that much self belief in my capabilities. But could my business execute upon those requirements that they have every single day? You might need to take 500 loads a month or whatever it is. And in its current structure, no, my business can't move 500 loads a day or whatever that looks like. Right? Because we're a small business and we're a startup. And ultimately if you have one truck, all right, the requirements that most shippers have at four brokers to come in and move their freight is because we can do 15, 20 loads in a day. So it might not move the needle for that business to onboard a one truck operation.
I'm not say it's impossible or anything like that. But again, that's where the value of a real freight broker can come in is because we can help manage that. We're not out there gouging our carrier partners. We're taking care of them, we're paying them the truck order not used. We're paying them the layovers, we're paying them a fair market rate and everything else. But ultimately the buck stops with me as a business owner. It's on me to go out there and find more business to grow that and stop looking at hypotheticals about why I'm not making money in business.
I think the fundamental, I think you're exactly right. I think the fundamental mind shift we have to have is that broker and carrier are not an adversarial relationship. Adversarial relationships. When you go to court, for example, and opposing counsel is against you, this is an adversarial thing. Like I only win if you lose. And that is not the way to approach what is a partnership. I was a maintenance guy for many years. I worked on really amazing equipment for OD and Siva and Pitt Ohio and others. And I have these part suppliers and I can't do my job if I don't have the right parts. But it's a collaboration. The part supplier is not my enemy. And I think to your point, what shippers want is to control their costs and get some level of consistency.
They don't want to have a massive network of vendors. They use consolidation, they use some asset based motor carriers and they use some brokerages and the broker brings on a network of providers. They bring on their service network, their providers of motor carriers. And this is the fundamental kind of back and forth that happens. Shippers don't necessarily, I think, don't even care about broker transparency. All they care about is did I pay you? And did it get to the place it was supposed to go on time, undamaged and safely? If it did, then we're great. So anybody who's trying to make you hate someone else in this industry, they are probably not someone you should trust because they have a very specific goal. And whatever that goal is, we don't really know.
But if their goal is to make you hate the people you have to work with, then they're probably not people that are very good advocates for the industry. And you have to your point earlier, understand your operational cost. This is the really sad part of our industry. There are motor carriers moving stuff at beneath their operational cost. How long can they do that? Who knows. But it's very clear that there are people who are not maintaining their equipment, who are very carrying the very minimum for insurance and they suppress the overall amount of money motor carriers can make. There will be a mass exodus. It'll continue to happen for another few months. And if you can survive, you can White knuckle this long enough, you will get to the place where you make good money again.
But the good money does not come when brokers have to provide all of their transaction data of a particular load. That does not make you more money. Maybe it makes you a more sophisticated, you know, seller of your own stuff. But there are so many tools, whether it's green screens or data truck stop, that can help you understand how to price what you do. But ultimately, if you're looking for government to save your business, you are in the wrong line of work, because the government is not here to save your business.
The last thing anybody wants is the government sticking their hands in our pockets any more than they already are. They're already fucking shoulder deep inside of all of our pockets on everything right now. We don't need any more of that. Ultimately, that's out there. But again, to, you know, to kind of recap, I get your frustration out there as a business owner, right? When you. When you sit there and you think all is lost, everybody's taken advantage of you, nobody's paying you fairly, you got bills to pay, you got a family to feed. I get it, all right? I completely understand your frustrations and those fears on. Are you going to stay in business? Because I have those fears, right? I do. I'm a small business, all right?
I'm trying everything I possibly can to eke out my share of the American dream, all right? I truly am. So I get your frustrations. But I think most people, and I throw myself in this because I had to do this. I have severely limited my social media time because 99% of it's bullshit. 99% of it is bullshit. And it was a lot of the information that I. That I consumed out there is. I had to get in the right headspace because it's not as bad as you think, all right? There aren't that many people out there that are against you and against your success, but you got to stop doing that, and you got to start thinking, what can you do differently to improve your current circumstances? Because again, it's not on me if you got, you know, shitty loan terms and everything else.
It's nobody else. It's on you, all right? I've gotten myself in plenty of those predicaments over my. My short journey in entrepreneurship on shit. Those terms sucked. That term sucked. And I had to fight really fucking hard to get out of some of those situations that if I didn't, I don't know if I'd be here today. All right? But Ultimately, it was nobody else's fault but mine. I'm the one who signed on the dotted line, and it's only going to be on me. This business is going to succeed because of the efforts that I and my future team put in to make this business succeed. And it's a tough pill to swallow. And I get it. And I understand your frustrations, but. But the government is not our fucking friend in this situation.
But we got to wrap up today because I got to make some more sales calls. But, Matt, go.
Let me just end with this. Whether you fall one side of this issue or another side or somewhere in between, you have the opportunity to participate in this democracy. The comment period is open, I believe, until January 21st of 2025. I'll make sure to share with Chris the link. He can promote that as well. But if you have an opinion, you get to make it. Our government is influenced by the things that you say and the things that you do. If you just want to complain on the Internet, that's fine, but that doesn't move the needle. You want to move the needle. You need to show that you are committed to what this industry is going to look like in the future. This is your moment. Take it. It's your democracy. It's about time you acted like it.
I can't stop that. You guys know what to do. You guys got value. I know you got value. I can't wait to see the comments that come through later on. But anyways, that's going to be it. I appreciate you guys. I love you guys and we'll be talking to you soon. Dude, let's go, man.