Antitrust Issues In The Motor Transportation Industry

• Pages: 1-39

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CHAPTER I

ANTITRUST ISSUES IN THE MOTOR

TRANSPORTATION INDUSTRY

After a long history of regulation, motor carriers today are largely

free of federal regulation. The Surface Transportation Board (STB)

provides some regulation for certain types of carriers. Certain mergers

and joint conduct among motor carriers are subject to STB approval, but

once approved enjoy antitrust immunity. This chapter provides a

comprehensive discussion of the historical and present regulatory and

legal landscape facing motor carriers.

The chapter is structured in four parts. Part A offers an overview of

the history of federal motor carrier regulation from early regulation under

the Interstate Commerce Commission (ICC) and National Industrial

Recovery Act (NIRA) to the abolishment of the ICC and creation of the

STB. Part B addresses mergers and acquisitions in the motor carrier

industry. Part C analyzes other antitrust issues facing motor carriers. Part

D discusses exemptions and immunities in the motor transportation

industry.

A. Federal Motor Carrier Regulation

Historically, federal regulation of the motor transportation industry

has been extensive. This introductory section deals with facets of that

regulation relevant to the antitrust and merger control laws and

enforcement, which are discussed in detail in the latter parts of this

chapter.

1.

Early Regulation: The ICC and the NIRA

The history of federal regulation of the transportation industry dates

back to 1887 when Congress passed the Act to Regulate Commerce,

creating the ICC.1 The ICC was the first federal administrative agency to

impose comprehensive economic regulation on any industry, in this case

the railroad industry. As the Supreme Court explained.

1. Paul Stephen Dempsey, Transportation: A Legal History, 30 TRANSP.

L.J. 235, 265 (2003).

2 Transportation Antitrust Handbook

The principal objects of the Interstate Commerce Act were to secure

just and reasonable charges for transportation, to prohibit unjust

discriminations in the rendition of like services under similar

circumstances and conditions, to prevent undue or unreasonable

preferences to persons, corporations, or localities, to inhibit greater

compensation for a shorter than for a longer distance over the same

line, and to abolish combinations for the pooling of freights.2

The Act to Regulate Commerce was thus designed to fight collusion

between railroad companies and their largest customers.3

The Transportation Act of 1920 provided the ICC with the power to

set minimum rates, to regulate entry and exit from markets, to regulate

intercorporate relationships and the issuance of securities, and to plan

consolidation of rail companies.4 When Congress passed the

Transportation Act of 1920, commercial trucking was in its nascent

stages and thus not addressed by the act.5 Congress felt no need to

regulate such a small industry; indeed, in the 1920s, trucks were seen as

an adjunct to rail lines and not as a separate industry.6

Market conditions during the Great Depression and an expanding

network of roads prompted Congress’ first attempt to regulate the motor

transportation industry. During the Depression, there were little to no

barriers to entry in motor transportation. Because new entrants were also

poor at calculating their own costs, they often set their rates below cost

leading to their (and many of their competitors’) rapid demise.7

Unregulated trucking was also competing with the heavily regulated

rail lines.8 The Great Depression created tension within the ICC to set

trucking rates so that rail lines could make a profit while at the same time

keeping prices low enough to be acceptable to customers.9

2. Interstate Commerce Comm’n v. Baltimore & Ohio R.R. Co., 145 U.S.

263, 276 (1892).

3. Id.

4. Dempsey, supra note 1, at 272-73.

5. Leslie W. Jacobs, Regulated Motor Carriers and the An titrust Laws, 58

CORNELL L. REV. 90, 90 (1972).

6. William E. Thoms, Rollin’ On . . . To a Free Market Motor Carrier

Regulation 1935-1980, 13 TRANSP. L.J. 43, 44 (1983). At the time, most

trucks were used by rail companies to move cargo short distances from

rail yards to final destinations.

7. Dempsey, supra note 1, at 281.

8. Jacobs, supra note 5, at 92.

9. Id.

Antitrust Issues in the Motor Transportation Industry 3

Congress first attempted to regulate the motor carrier market with the

NIRA in 1933 but with little effect.10 The NIRA was ruled an

unconstitutional delegation of power before it had a chance to affect the

market in any substantive way.11 Describing the NIRA, the U.S. Supreme

Court noted:

Section 3 of the Recovery Act is without precedent. It supplies no

standards for any trade, industry or activity. It does not undertake to

prescribe rules of conduct to be applied to particular states of fact

determined by appropriate administrative procedure. Instead of

prescribing rules of conduct, it authorizes the making of codes to

prescribe them.12

The Court also ruled that Congress exceeded its authority in regulating

intrastate commerce.13

2.

The Motor Carrier Act of 1935

Congress reacted to the problems created by the growing motor

transportation industry by passing the Motor Carrier Act of 1935 (the

1935 MCA).14 The 1935 MCA added bus and trucking companies to the

ICC’s jurisdiction.15

The 1935 MCA was “a conscious decision to eliminate open and

natural competition. The Federal Coordinator of Transportation’s reports

outline the three principle bases for this approach: protection of the

railroads, stabilization and consolidation of the trucking industry, and

support of organized labor through the elimination of owner-operators.”16

With this new authority, the ICC interceded in markets and set

minimum rates, minimum qualifications for drivers, safety standards, and

criteria for market entry. This created a controlled market for

transportation companies that was meant to allow some competition

while also permitting a return on investment.17

10. Ch. 90, 48 Stat. 195 (ruled unconstitutional in A.L.A. Schechter Poultry

Corp. v. United States, 295 U.S. 495 (1935)).

11. A.L.A. Schechter Poultry, 295 U.S. at 519.

12. Id. at 541.

13. Id. at 550.

14. Pub. L. No 74-255, 49 Stat. 543 (1935).

15. Id.

16. Jacobs, supra note 5, at 94 (footnote omitted).

17. Dempsey, supra note 1, at 287-88.