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State Trucking Regulations Raise Prices Significantly, FTC Staff Study Finds...

Agency: Federal Trade Commission Date: 28 November 1995

A Federal Trade Commission staff study has concluded that regulation of the trucking industry at the state level tended to raise trucking rates significantly. Using rates filed in the spring of 1987, the study concludes that strict regulation of trucking rates had the largest effect on the rates for larger freight loads. And state restrictions on the entry of new trucking firms had the largest effect on the less-than-truckload sector, according to the study.

The study, "Disentangling Regulatory Policy: The Effects of State Regulations on Trucking Rates," was authored by Timothy P. Daniel, an economist and an assistant director for antitrust in the FTC's Bureau of Economics, and Andrew N. Kleit, a former FTC economist. Noting that state regulation of the trucking industry varied widely in 1987, the study examines both the independent and combined effects of three different types of state regulation -- regulation of rates, restrictions on truckers seeking to enter a market, and state-provided antitrust immunity for rate-setting and other decisions made by trucking rate bureaus. The study does not examine other factors that might be relevant to states in determining how best to regulate intrastate trucking.

According to the study, trucking rates for less-than- truckload shipments (under 10,000 pounds) tended to be significantly higher in states that imposed any one of the three types of regulation. Entry restrictions had the largest effect, raising rates by as much as 20 percent. For truckload shipments (loads larger than 10,000 pounds), strict rate regulation raised rates as much as 32 percent. The study found no significant relationship between rates and either of the other two types of regulation for the truckload sector, however.

Combining the various types of regulation also led to higher rates in both the less-than-truckoad and truckload sectors in most cases, the study concludes, noting the rates rose most significantly when entry restrictions were combined with either strict rate regulation or state-level antitrust immunity. Accordingly, the study authors conclude that rates likely would decline significantly if states with multiple forms of economic regulation started by loosening entry restrictions.

Another finding "casts doubt on the proposition that common carrier rate bureaus should be provided antitrust immunity to permit them to coordinate their rates and schedules" because resulting cost savings will be passed on to consumers. "To the contrary, the finding suggests that antitrust immunity facilitates rate increases, not cost reductions, among motor carriers," the authors state.

This study represents the views of its authors and not necessarily those of the Commission or any individual Commissioner.

Copies of the study are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov