14 Journal of Regulatory Compliance Vol. I
warned that deregulation would result in carriers “drop[ping] rates to variable
costs in order to attract freight from competitors,” which would lead to chaos
in the industry. 34 These claims sound quite severe in their import, yet basic
economic principles teach that a market with strong competition and low
barriers to entry will see profits decrease, largely due to reduction in prices
towards “variable costs.” Opponents of deregulation were, in many respects,
making precisely the same claim as proponents; the primary difference was
whether competition was seen as a net positive (by proponents) or a net
negative (by opponents.)
In the end, both sides were at least partially right, in that the passage of the
MCA 1980 led to the industry entering a chaotic period, characterized by
high entry and exit35 but also specialization. 36 The market share held by the
eight largest trucking companies increased from 20% in 1979 to 37% by
1987.37 As disturbing as these results were to those in the industry, there is
nothing to suggest anything other than normal market processes, albeit more
chaotic due to the long period where market forces were prohibited from
operating. 38 More to the point, while the MCA 1980 took a step towards a
free market, it was not complete deregulation, in that the government
maintained significant oversight and control over the trucking industry. That
willingness to interfere in the trucking market continues today.
2. Current Crisis and its Causes
In 2005, it was estimated that there was a shortage of 20,000 truck
drivers. 39 The shortage is expected to worsen in coming years, with one
34. Paul Stephen Dempsey, Running on Empty: Trucking Deregulation and Economic
Theory. 43 ADMIN. L. REV. 253, 260 (1991) (“Unlimited entry and rate deregulation has
created excessive capacity, declining productivity, destructive competition, discriminatory
pricing, inadequate returns on investment, a deterioration in safety, a decline in wages, an
erosion in labor management relations, an enhanced number of bankruptcies, mergers and
acquisitions, and, in the long term, unprecedented concentration.”).
35. Between 1979 (the year de facto regulation began) and 1986, more than 54% of the
Less Than Truckload companies went out of business, costing 120,000 employees their jobs.
J. HARKINS, STATE OF THE LTL TRUCKING INDUSTRY (1987). Of course, the U.S. experienced
a severe recession during the same time period, so it is unclear how much of the failure rate
for trucking businesses can be attributed to the new, deregulated market.
36. The industry bifurcated, carriers began to specialize in truckload (TL), bulk shippers,
or less-than-truckload (LTL) operations, also known as parcel carriers. Paramig, supra note
37. Dempsey, supra note 17, at 273.
38. One piece of evidence supporting this interpretation is that trucking output more than
doubled in the thirty years after deregulation, making trucking the dominant mode of freight
transportation. Paramig, supra note 28. Trucking companies could expand into new markets
or service sectors, and that competition would have incentivized carriers to transport more
freight productively and at a lower cost.
39. BOB COSTELLO & ROD SUAREZ, TRUCK DRIVER SHORTAGE ANALYSIS 2015 (2015). Of