Opinion: Safety Initiatives and Joint Ventures
Motor carriers now have a green light to experiment in two important areas of federal regulation: highway safety and joint ventures.
Thanks to TEA-21 and new Department of Transportation rules, it’s no longer as difficult to obtain an exemption from the Federal Motor Carrier Safety Regulations. Previously, a carrier would have to ask DOT to go out on a limb and pledge that absolutely “no diminution of safety” would result. Now, it’s enough to present a plan that would “likely” achieve a level of safety “equivalent to” compliance with the regulation. An exemption application needs to describe the expected safety benefits, propose a strong substitute set of safety management controls and offer supporting data and expert opinion. A stellar safety record and the endorsement of a respected insurer are also helpful.
That’s not to say getting an exemption has become easy or risk-free. For example, a state court could throw a monkey wrench in an exempted operation by finding the carrier liable in a highway accident case for “negligently” choosing to obtain the exemption. The new federal law, however, expressly overrides any conflicting or inconsistent state law or regulation. Also, DOT’s formal approval — involving a science-based finding that the exemption would likely achieve a level of safety equivalent to what was achievable under the regulation — would be persuasive evidence against a liability judgment.
Offsetting any possible risks are the potentially large compliance savings — and safety improvements to the public — that innovative exemptions could bring. Congress and DOT have issued an intriguing invitation to experiment. The industry’s safest and savviest members might want to think about taking them up on it.
Another federal agency, the Surface Transportation Board, just made it easier for motor carriers to form joint ventures without violating the antitrust laws. An occasional side-benefit could be relief from certain other federal, state and local laws.
Federal law has long forbidden motor carriers to engage in joint ventures called pooling arrangements without Interstate Commerce Commission, and now STB, approval. Such approvals have often been granted to national networks of van lines and agents and to arrangements between large less-than-truckload carriers and rural pickup-and-delivery firms.
In traditional pooling arrangements, the carriers each surrender to the joint venture certain shipper business they previously competed for. Ordinarily, most such “agreements not to compete” would trigger antitrust concern. But if the STB approves an arrangement as “in the interest of better service to the public or of economy in operation” and not likely to “unduly restrain competition,” the participants receive automatic antitrust immunity.
In its Groendyke Transport decision in June, the STB gave an unusually broad reading to “pooling.” Nine bulk chemical haulers proposed to reduce empty backhauls by creating a clearinghouse to match members’ empty trucks with available loads. Each member, however, would deal separately with shippers as to rates, contracts and services, and there would be no joint solicitation of freight and no joint billing or collection of freight charges. In addition, while each carrier would open its tank-cleaning facilities to the others, there would be no common ownership or operation of the facilities.
In short, the usual agreement not to compete was absent — yet the STB treated the joint venture as “pooling.” The decision suggests that almost any collaboration among three or more carriers amounts to “pooling” if each occasionally hauls in its own trucks freight that has been contracted for by one of the others.
The good news is that a wider range of motor carrier joint ventures will now be eligible for immunity from expensive antitrust litigation. As a bonus, some of these joint ventures could benefit from a little-used statutory provision that exempts pooling participants not only from the antitrust laws but “from all other law, including state and municipal law, as necessary to let that person carry out the arrangement.” A predecessor-provision was interpreted by the Supreme Court to override the federal Railway Labor Act, allowing railroads to disregard union contract terms that interfered with the carrying out of an ICC-approved rail merger.
On the same theory, STB approval of certain motor carrier pooling arrangements could nullify restrictive federal or state laws that block fulfillment of the arrangement’s efficiency-creating purpose. It’s unlikely the courts would permit carriers to sidestep clean-air, safety, employment-discrimination or other rules just because they form a pooling agreement. But suppose a group of carriers, working with equipment manufacturers, obtained STB approval for a pooling arrangement to jointly develop and serve shippers with technologically-advanced trucks that would significantly reduce shipping costs and increase safety — but that would exceed federal and state size-and-weight limits. Wouldn’t it be fair to say that in this situation an exemption from the limits was “necessary to . . . carry out the arrangement?”
Even if broad exemptions prove rarely obtainable, the recent STB pooling decision makes antitrust immunity routinely available to a broad array of motor carrier alliances — and invites enterprising carriers, large and small, to think expansively about profitable new forms of joint activities.
