Antitrust and price competition in the trucking industry

• Author: Denis A. Breen
• Date: 01 March 1983
• DOI: 10.1177/0003603X8302800108
• Published date: 01 March 1983
• Subject Matter: Article

The Antitrust Bulletin/Spring 1983

Antitrust and price competition

in the trucking industry

BY DENIS A. BREEN*

I.

Introduction

201

Regulatory reform is producing fundamental changes in the

structure and conduct

of

interstate trucking. Among these

changes have been an influx of new trucking firms, and expan-

sion by existing carriers into additional marketing territories.

Motor carriers now have greater freedom to restructure their

route networks as they seek to streamline operations and improve

service offerings. They are competing for the first time on the

basis

of

price as well as service, giving shippers an increased

variety

of

price/service options from which to choose. Increased

competition has squeezed profit margins, causing windfall losses

for certificate owners, and combined with the effects

of

reces-

sion, has forced some firms out

of

business. Increased competi-

tion has also forced trucking management to seek concessions

from labor in an effort to increase productivity and reduce unit

costs. These changes have been most noticeable for interstate

general-freight carriers, which constitute the largest sector

of

trucking, and historically were the most heavily impacted by

• Senior Economist, Federal Trade Commission.

AUTHOR'S

NOTE: The views expressed in this article are those

of

the

author. They do not necessarily represent the position

of

the commis-

sioners or

staff

of

the Federal Trade Commission.

,c')

1983 by Federal Legal Publications. Inc.

202 The antitrust bulletin

regulation. Most economists would applaud these changes as

promoting competition and efficiency, although recognizing that

some groups have been made worse

off

in the process.

Accompanying the industry's transition to a less regulated

environment has been reduced emphasis on price setting through

trucking rate bureaus, which have enjoyed alimited antitrust

exemption,

and

an increased reliance on independent ratemaking

by individual carriers. This fundamental shift in the method

of

pricing motor carrier service raises two antitrust issues, and it is

on these two issues that this article will focus. First, how will

antitrust liability change with respect to collective ratemaking

activities in the less regulated environment? What implications

does this have for antitrust compliance? Second, is there a need

for antitrust oversight

of

individual-carrier pricing practices, in

the less regulated environment, to prevent predation

and

rate

discrimination? Does the Interstate Commerce Commission, in

particular, need to serve as a surrogate antitrust enforcer with

respect to the pricing practices

of

individual carriers?

Section II

of

the article examines the collective ratemaking

issue. Section III describes the discounting practices

of

individual

carriers in the post-Motor Carrier Act period, reviews allegations

of

anticompetitive behavior,

and

discusses rate discounting as an

antitrust issue. Predation, monopolistic price discrimination, and

the exercise

of

monopsony power are closely examined in Sec-

tions

IV,

V,

and

VI, respectively, as possible rationales for dis-

counting practices in trucking. An alternative, procompetitive

interpretation

of

motor carrier rate discounting is considered in

Section VII. Conclusions are presented in Section VIII.

II. Curtailment

of

collective ratemaking

Rate bureau practices and procedures

Following passage

of

the original Motor Carrier Act (1935),

independent ratemaking by interstate motor carriers gave way to