The legislative battle over trucking deregulation has become a high stakes lobbying game for the regulated carrier.
With billions of dollars in potential profits at stake for its member companies, the American Trucking Associations has waged a million-dollar public relations campaign to convince Congress and the public of the virtues of federal regulation.
The stakes for the regulated trucking companies, which generally have been protected from competition by the rules of the Interstate Commerce Commission, are best seen in the commission's latest report on earnings for the nation's 100 largest trucking firms. Sixteen of the 100 largest companies had a rate of return on equity ranging from 30 percent to a whopping 109 percent for the 12 months ending Sept. 30, 1979.
"There'd be rioting in the streets if Exxon and other oil companies were reporting profits like this," says Marcus Alex, a member of the ICC.
For the regulated portion of the industry as a whole, profits have been high on the average. The median rate of return on equity for these truckers has hovered in the 20 percent range while the median return for the Fortune 500 companies in 1978 was approximately 14 percent.
The handsome profits of the industry have been spawned by the very nature of the ICC regulations that have governed it since the mid-1930s. Because auuthority to operate interstae trucking services has been relatively difficult to come by since the start of trucking regulation in 1935, despite a rapidly expanding economy, those companies that were already in the business have been protected from the pressures of innovation and the lower prices of hungrier, more eager competitors.
An indication of how lucrative it is to be in the regulated trucking business comes from the amount of money companies are willing to spend just to get the valuable government certificates that allow them to operate; in recent years, they have sold for as much as $20 million.
The high profit levels also have been assured by the way the ICC has let motor carriers set rates. Currently, rate bureaus comprised of trucking companies operating within regions have antitrust immunity allowing them to sit down together and agree on the rates all will charge on the same routes for moving each product category.
In doing that, the rate bureaus average the costs of the carriers and set the rates a certain level above that to provide profits. The method, in effect, raises the rates for everyone in order to protect the inefficient companies that, with higher costs, might not be able to survive if they had to charge lower rates. It also gives the really efficient companies, with costs lower than average, a large profit-margin.
The Teamsters Union, with 500,000 of its members drivers for regulated trucking companies, also perceives a big stake in current regulation. In the past, economists believe, high wage demands were not resisted by companies because the costs could be passed on through higher freight rates that were generally approved by the ICC.
Moves at the ICC and in Congress to alter the regulatory structure, freeing up entry with its concomitant increased pressure on rates and profits from new competitors, could mean that higher wage settlemenets would be harder to achieve in the future.
ATA, in its million-dollar plus campaign, is trying to convince the public and Congress that significantly reduced regulation would cause chaos in the industry, that small towns and cities would lose trucking services, that companies would go bankrupt and the industry could become more concentrated, that rates would go up, not down, and would be very confusing to shippers.
Using those themes, the public relations firm of Hill and Knowlton, the largest in the nation, was hired a year ago by the ATA to put on a public relations campaign designed to gain public support for continued regulation.
"Well, let's not put it that way now," says ATA President Bennett C. Whitlock Jr. "We feel that it is an educational program. Actually, the man in the street probably doesn't even know the trucking industry is regulated and then when he finds out government regulations is involved, he's immediately going to be opposed to it simply because he's sick and tired of government red tape.
"So we felt we needed to educate the public on what we feel have been his benefits," he says.
In seeking to educate the public, the ATA and Hill and Knowlton appear to know few bounds in some of their efforts.
On Halloween, for instance, a press release quoting the director of distribution for the Heath candy company warned that children would get less candy on future Halloweens because the cost would go up if trucking is deregulated. "Halloween well may become more trick than treat if some in Washington have their way," the ATA press release declared.
Just before Christmas, another press release warned that toys for children would be more expensive next year if trucking regulations is reduced.The predictions were made by the traffic managers of eight department store chains.
Recently, the ATA in its lobbying and press release campaign has tried to capitalize on the changes that have occurred in airline passenger and cargo industries since the move toward deregulation started there.
"You go talk to some of the communities under airline deregulation," Whitlock says. "That 's the one thing that really has brought credibility to our argument on service to small towns." Although he knows transportation officials say the nation is in a period of adjustment, he says "that isn't much consolation to the guy in Brunswick or the guy in Fort Wayne or the guy in Providence who no longer has his certificated air service." He also points to higher prices since airline deregulation.
They are suggestions that make Sen. Howard W. Cannon (D-Nev.), a cosponsor of the airline deregulation measure with Edward M. Kennedy (D-Mass.) and a key player in the trucking debate, bristle. "Air fares have gone up and for a very valid reason -- because the fuel costs on the average have just about doubled over the period of a year," he responds. "No one said that prices wouldn't go up if fuel costs went up or labor costs or other costs went up. Somebody has to pay for it whether you have a regulated or an unregulated structure, the public or the users are the people who are obviously going to have to pay for it."
He also contends that the services to small communities that were dropped by large carriers are beginning to improve substantially as smaller and medium-sized airlines move in. "Commuters and others are moving in to fill the void and I think that will get consistently better as we go on," he said.
Most large corporations, perceiving the possibility of a wider variety of services and prices with less government control, are counted in the support column for trucking reform.
ATA has organized a group of shippers in favor of regulation who rely on trucking services to get their productes to market but so far consist primarily of industry suppliers of products like tires.
Although the ATA represents the bulk of the regulated carriers, some segments of the industry, including private carriers, carriers working under contract, and owner-operators want some of the widened opportunities that reduced regulation will offer them.
"Regulatory reform is the only way we're going to survive," Karl Murphey, president of the Washington State Independent Truckers Association, told a symposium on trucking issues last month. Committed to a finance company for his rig, Murphey hauls lunregulated agricultural products one way and is forced to pay a regulated carrier with an operating certificate a 25 percent commission on any business he hauls back for them. The restrictions on his operations cost him money and the nation fuel, he says. "If I'm in Pittsburgh, I have to go to New York now to get a load to go back to California," he complained.
Murphey is part of an ad hoc group trying to counter the ATA efforts by lobbying on the other side of the issue.
The group of supporters of significant reform of trucking regulation includes the National Association of Manufacturers, National Retail Federation, National Industrial Traffic League (the largest shipper group in the country), Food Marketing Institute, American Paper Institute, American Farm Bureau, National Association of Farmer Cooperatives, Sears, Roebuck & Co., PPG Industries, American Conservative Union and Common Cause.
No one underestimates the influence the trucking industry and the Teamsters Union have had in Congress over the years.
The trucking industry's campaign contributions are legendary. "Regulated trucking has a presence in every congressional district and they make it known," says Rep. Allen E. Ertel, a strong House proponent of deregulation. Citing their "history of extensive political participation, he predicted the fight for reduced regulation would be "very difficult."