FTC Staff Comment Before the California Public Utilities Commission Concerning California S.B. 727 to Deregulate Trucking

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££D£RA1. TRA1>£ COMMtSS10S
.uhiDStoa,DC 20510 .-
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JilJ'U.ft£Au OF ECONOMICS
hbruary 16. J988
-Mr. Vi(::t()r·Weisser
£xecutive :DiTeetor
Public Utilities Commission of
the Stat1: -of California
SOS Van Ness Avenue
'San Francisco, CA-94102
Dear Mr. Weisser:
The 	staff 	()ftheFederal 'Trade 	Commission 	submits 	the 'following
comments! in response 10 your agency's request {or ~omments on 	the issue
of regulation of the State of California's for·hire trucking industry. 	The
attached 	analysis 	of 	California 	Senate 	Bill 	7:7 	by 	'Commission 	'Staff,
previously sent to Senator Rebecca Morgan, discusses a 	Dumber of benefits
of 	trucking 	deregulation. 	Based 	on 	the 	available 	evidence 	on 	trucking
deregulation at 	both the federal and state levels. weconetuded that iTJhe
evidence 	is 	clear 	and 	convincing: 	deregulation 	lowers 	trucking 	rates.
California's own 	experience indicates that significant consumer benefits. in
the form of lower shipping prices. can be expected from the deregulation of
contract 	motor 	freight 	carrier 	rates." 	We 	supplement "tnat 	analysis 	with
comments focusing on an additional issue raised in the· Notice -of En Bane
Hearing on which we have expertise-the effector deregulation upon service
10 the public in general and to small communities in particular.
IThese 	comments 	represent 	the 	views 	of 	the 	Bureaus 	of 	Economics.
Competition, and Consumer Protection of the Federal Trade Commission, and
do 	not 	necessarily 	r~present the 	views 	of 	the 	Commission 	iuetfor 	any
individual Commissioner. 	The Commission has, however. voted to authorize
the staff to submit these comments to you.

Y"	0,".., 	,.,. 	.
The 	Federal 	Trade 	Commission 	has 	a 	kgal 	mandate 	to 	preserve
competition 	and 	protect 	consumers 	from 	deceptive 	and 	unfair 	business
practices. 2 	As part of 	this mandate, the Commission staff has .stud~dthe
deregulation 	of 	trucking 	anc 	has 	advocated 	increased 	reliance 	on 	market
forces 	at 	both 	the 	federal' 	and 	state 	level.· 	Based 	upon 	our 	extensive
experience in studying trucking ~e:8uiationand deregu1ation .as well as our
expedence 	with 	competition 	policy 	issues 	in 	general, 	we 	believe 	that
consumers have benefited from trucking deregulation 3t the federal level "and
in 	those 	nates where 	it 	has 	been 	tried. 	In particular, previous effons 	to
deregulate 	the 	trucking 	industry 	in 	California 	have 	benefited 	California
consumers and made the STate's industries more competitive.5
2 	See 15 U.S.c. f § 41 el seq.
S 	See ,comments 	-of 	the 	staff 	of 	the 	Federal Trade 	Commission 	on
Pricing 	Practices 	of 	Motor 	Common 	Carriers 	of 	Property 	since 	the 	Motor
Carrier Act of 1980, Ex Parte No. MC-166, before the Interstate Commerce
Commission (January 19, 1983); 	Supplementary comments of the Bureaus of
.competition, Consumer Protection and Economics, Federal Trade Commission
on 	the 	Exemption 	of 	Motor 	Contract 	Carriers 	from 	Tariff 	Filing
ReQuirements, 	Ex 	Parte 	No. 	MC-165, 	before 	the 	Interstate 	Commerce
Commission 	(1983); 	D. 	Breen, 	Bureau 	of 	Economics 	of 	the 	Federal 	Trade
Commission. 	RegulaLOry Reform and Ihe Trucking 	Illdustry: 	An 	Evalualion of
the MOlor Carrier Act of 1980, submitted to Motor Carrier Ratemaking Study
Commission (March 1982).
.. 	See 	comments 	of 	the 	Federal 	Trade 	Commission 	staff 	to 	the
Legislative 	Audit 	Council 	of 	the 	State 	of 	South 	Carolina 	on 	possible
restrictive 	or 	anticompetitive 	practices 	in 	South 	Carolina's 	Public Service
Commission 	statutes 	(September 	29, 	1987); 	Statement 	of 	the 	Staff 	of 	the
Federal Trade Commission on Economic Deregulation of Trucking to House
and 	Senate Transportation Committees, Washington State Legislature (March
7. 1985).
5 	See previous FTC submission concerning California Senate Bill 7:7 to
Senator Rebecca Morgan, December 31, 1987.
.,..

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1. S£R\'IC£ HAS NOT SUFTI:R£D AS THE RI:SCLT OF DER£Gt:LATION
Studies 	of 	the 	effector 	deregulation 	do 	not 	find 	a 	systematic
deterioration 	in service 	to imallcommunilies. 	A series of su!"\'cy.s carried
.out by the t:.5. "Department ,of Transportation fcorn 1-980 to 1985 consistently
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found 	that the vast majority of {hippus in. rural :lre3S reportcd~itherno
. J:hangeoTanimprovementin the Quality .of their service since 	the Motor
Carrier 	Act 	of 	·1980 	partially 	deregulated 	interstate 	trucking.! 	These
findings are co.nsistent with those of a 1982 Interstate Commerce Commission
study, 	which 	found 	that 	shippers 	in 	small 	communities 	now 	enjoy 	lower
prices. less damage to shipments, and often more service options than before
deregula tion; the study concluded:
These results can lead to only one conclusion. 	The Motor
Carrier Act of 1980 has not harmed shippers in small and
isolated communities. 	In fact, evidence suggests that small
communities have actually benefited from this legislation. 1
This 	conclusion 	is 	confirmed 	by 	studies 	of 	deregulation 	at 	the 	state
level. 	Beilock and Freeman performed a number of surveys of shippers in
Florida, which 	deregulated 	intrastate trucking in 	1980, and 	Arizona, \J,'hich
deregu1:lted 	in 	198~. 	They 	found 	that abandonmcnts 	of service 	were 	rare
while 	offers 	of 	new 	service 	were 	common 	for 	the firms 	in 	their 	samples.
One 	year 	after 	deregulation 	in 	Florida, 	S9 	percent 	of 	small 	shippers
6t;.S. Department of Tnnsportation, Third Follow-Up Slud.l' 0/ Shipper-
Receiver 	Mode 	Choice 	in 	Selecled 	Rural 	Communities. 	J9S2-J. 	1986; 	U.S.
Department 	of 	Transportation, 	Fount: 	Follow-L'p 	Study 	0/ 	Shipper-Recei!'er
Mode Choice in Selected Rural Communities. 1984-5, 1986.
7Interstatc Commerce Commission, Small Communil)' Seni~ Stud.v. 198:.
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preferred 	deregulation 	to 	regulation, 	",..hile :9 	percent 	had 	no 	prefere~ce.8
Of shippers in small communities, 65 percent preferred deregul3tion. with 30
percent 	expressing 	no preference. 9 	These 	findIngs 	\1ere 	confirmed 	in 	late:
iurveys. 	Beilo.:k 	and 	Freeman 	conclude, 	~H anything, 	small 	rural shippers
appear 	to 	bemor~ 	bullish 	about 	deregulation 	than 	their 	larger, 	urban
counterparts.-} 0
In 	summary, 	there 	is 	no 	reason 	10 	believe 	that 	d~regulation 	of
intrastate trucking in California would lead to any general deterioration of
service 	to 	small 	communities. 	To 	the 	contrary, 	evidence 	indicates 	that
deregulation 	would 	bring shippers in small communities lower 	prices, better
~~':'~ervice and a WIder choice of options.
II. CONCLUSION
The 	evidence 	is 	clear 	that 	trUCking 	deregulation 	has 	been 	of 	great
benefit to consumers wherever 	it 	has been 	tried. 	Consumers benefit from
lower rates with no decline in service. 	We commend the past efforts of the
California Public Utilities Commission in this area, as well as your continued
8R. Beilock and J. Freeman, "Motor Carrier Deregulation in Florida,~ 14
Growth and Change 31-41, 1983.
lOR. 	Beilock 	and 	J. 	Freeman, 	~Deregulated MOlor 	Carrier 	Service 	to
Small Communities," Transportation Journal, Summer, 	1984. 	See also. Beilock
and 	Freeman, 	The 	Impact 	oj Motor 	Carrier 	Deregulation on 	Freight 	Rates in
Ari=ona and Florida. 	Final Report, V.S. Department of Transportation, April
30, 	1985; 	S. 	Bolton, 	R. 	Conn 	and 	J. 	Smith, 	Jr., 	"Florida 	Motor 	Carri~r
Deregulation: 	The 	Immediate 	Effect 	of 	Sudden 	Deregulation 	from 	the
Perspective 	of 	Shippers/Receivers 	in 	Small 	Communities." 	in 	Conference 0/1
Regulatory 	Reform 	in 	Sur Jace 	Transportation. 	Preprinz 	Papers. 	l~.S.
Department of Transportation, March, 1983.

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interest 	In 	this subject. 	We appreciate 	thIS OPP0::;.lnit., 	to 	make 	our views
known. and we offer ocr assistance in :he future.
Sincerely,
/J..-'J / 	' r.y--.David T. Scheffman
Director
Bureau of Economics
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