Transparency would be bad for carriers: DAT’s Ken Adamo

Home Weather Transparency would be bad for carriers: DAT’s Ken Adamo
Transparency would be bad for carriers: DAT’s Ken Adamo


When DAT Chief of Analytics Ken Adamo told a roundtable meeting of big shippers about the issue of broker transparency, or the Federal Motor Carrier Safety Administration’s recently announced plans to strengthen a longstanding rule giving carriers and shippers more power to see the buy and sell prices in freight transactions, “no one knew this was simmering, but once they found out, they were all instantly pissed off,” he said. 

An ongoing Overdrive survey currently holds that 79% of carriers who have so far responded think FMCSA’s broker transparency proposal stands a good chance of boosting rates, but macro analysts like Adamo and Avery Vise, vice president of trucking for FTR Transportation Intelligence, disagree. (You can take that quick survey here.) 

It might make sense to an owner-operator that knowing what a shipper paid a broker for a load he/she hauled, and having access to that information 48 hours after requesting it, as FMCSA currently proposes, would help in load negotiations. Another Overdrive poll earlier this year, before the details of FMCSA’s proposal were known, found 55% thought greater transparency generally would do just that. Following the November release of FMCSA’s proposal, the current survey currently shows an even greater share (66%) feel their load negotiations will benefit in some way. 

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Attachments Idea Book Cover

That use case for broker transparency documentation holds water, but Adamo offered a bevy of arguments and statistics that suggest it might not be all it’s cracked up to be. Keep in mind, though, the same early-year survey found truckers distrust rate averages like those published by DAT, yet hear Adamo out. He has 15 years of pricing experience in deregulated markets and makes some detailed arguments to illustrate his points. 

[RelatedDAT does broker transparency? Seeing what the shipper paid]

Can carriers really impact rates through broker transparency? 

“First of all, both carriers and brokers are price takers,” said Adamo. What he means is that no carrier or broker can really generate a price independent of the larger market. (Go ahead and post your truck on DAT for $3,000 for Atlanta to Chicago, or around $4-plus/mile, but don’t expect any big bites in the current market.)

Made To Be Heard

He has a series of four questions he asks to determine if someone is a price taker or not — yes answers to the questions indicate they are. Let’s go down the list. 

Is the service you’re offering commoditized? is the first one. A commodity, for the purposes of this exercise, represents a fungible good. Think of a megawatt of electricity — it doesn’t matter where it comes from, a megawatt is a megawatt. Trucking, of course, isn’t “perfectly commoditized,” said Adamo. Specialty hauling and open deck work represent a less-commoditized part, but something like moving a dry van for Amazon has been shown to work pretty much like a commodity. 

Are the barriers to entry low? In trucking, that’s certainly the case, in Adamo’s view. While getting a CDL, insurance and a truck certainly isn’t a cakewalk requiring next-to-no investment, the abundance of carrier capacity, he feels, demonstrates the bar for entry definitely isn’t too high for about 300,000 entities. For brokers, put up your bond and get insurance — some investment required, of course, but there are tens of thousands of authorized brokers registered with authority, too. Next question.

Is the market fragmented? In trucking, big-time. As Adamo put it, “90% of carriers are small carriers and out of some 20,000 brokers, not one controls more than 10% of the market.” 

Finally, do trucking service providers have access to “perfect information?” Adamo says this so-called perfect information access — or ready availability of current, accurate information on prices, costs and values — is definitely the worst-fitting criteria of the four. Yet with DAT and Truckstop, Greenscreens (for shippers and brokers) and other services out there giving average pricing data to carriers and others, brokers and trucker alike at least “have enough data to make informed decisions,” he said. 

Overall, 3.5 or so out of 4. Trucking in a sense, then, represents a commodity in Adamo’s view. Whether you buy all that or not, here’s another question Adamo put forward: Can a carrier impact demand or name their own price? Plenty owner-ops and small fleets try to name a price all the time, with varied success depending on both the market at the time and their level of service to whatever customer they’re dealing with. Yet in Adamo’s view, on the macro level, and especially for carriers working with many different brokers in the spot markets, the answer here to both parts of the question is something akin to not really.

That is, carriers can’t really create shipping “demand,” according to Adamo, without doing something that would have nothing to do with trucking — they are not shippers, in other words. As far as “name your price” goes, Adamo feels it’s never literally true that a carrier’s rate is 100% determined by the carrier. In cases where it’s mostly true or meaningful for a carrier, as he went on to say, that’s probably “for a small percentage of the best carriers, probably doing something specialized.”    

[Related: How to beat brokers at their own game and win direct freight]

So, as a price taker, most carriers never really have that much leverage in setting prices, according to Adamo. “If you don’t take” the load at the price sought by another party, “someone else will,” he said. “The next point is, even if they weren’t price takers, there’s so much variability and lack of consistency” in terms of spot rate fluctuations, shipper buy rates, and small carriers doing business with dozens of brokers in a given year “that your ability to affect your next negotiation” with data revealed by broker transparency “may not happen for months and most likely will never happen.” 

Adamo recently released a small study that found in a sample of about eight million records, from approximately 325,000 carriers and 400 brokers, “about 46% of all carriers hauled just one load per broker, 64% completed 2 or fewer, and over 80% completed 5 or less. If you go back to a tight capacity year like 2021, the single-use rate reaches 55%.”

What does that mean? “About half the carrier population operating in the spot market will only move one load per broker in a given year,” he said. Good luck cornering the same broker with a similar load from the same shipper in a timeframe that makes sense. 

The spot market “is so variable that what happened on” one load “has almost no statistical bearing on what will happen on the next,” he contended. 

What shippers are telling DAT about broker transparency

If he’s right and what to do with broker transparency data represents a puzzle for carriers, shippers in Adamo’s view feel like they’re in a tough spot here.  

“Shippers do not want this information getting out,” he said. “This is very strictly confidential information” from the shipper’s point of view. He noted many big shippers currently hesitate to deal with smaller brokers for fear the small business won’t be able to keep their information safe. Add to this the burden of transmitting the data and a whole new web of problems opens up. 

“No one is going to email this,” he said. “If a broker asked us, ‘how do I comply with this regulation?’ We would advise them not to email it. If one of my employees emailed” data that sensitive, “I would terminate them instantly.”

Instead, expect a “secure web portal” approach, he felt. The freight tech world will have to invent some form of safely communicating this data, and brokers may then begin vetting carriers on their ability to safely store and receive the data.

Such an approach to transparency, combined with what FTR’s Avery Vise noted he expected — a greater use of confidentiality agreements around rates revealed through transparency — would preclude carriers’ ability to name and shame brokers exposed for collecting outsize margins, but also ought to assuage shipper fears over their strictly confidential pricing data. 

[Related: Big Rips, Fat Lips: Biggest broker margins, fails reported in March]

Finally, how does Mr. Adamo see FMCSA’s proposal, if adopted, impacting rates? “This is bad for carriers,” he said. If the broker transparency proposal is adopted, “I believe that it will have minimal deflationary effects or no effect on rates.”

His rate analysis leaves aside the question of carrier rights371.3 has been on the books for more than four decades, and while carriers comply with written regulations, brokers have waivered and otherwise obstructed their way out of allowing carriers and shippers to review transaction records, including those buy-and-sell prices. That is, rates. 

To that point, Adamo said that he’d advise DAT broker clients that, “while the regulation is on the books you should comply with it,” but that DAT will comment on the Federal Register against the proposed rulemaking. “This is bad for shippers, brokers, and carriers” alike, he contended. “It’s bad for shippers because they consider this data to be some of their most highly confidential and competitive in terms of how you’re managing your overall procurement budget and spend.”

For brokers, it’s an “administrative headache,” he said, a big one in his view. For carriers, the transparency push represents “a lot of wasted motion,” and energy better spent elsewhere. 

[Related: POLL: Your view of FMCSA’s broker transparency proposal?]

Yet he also said he believes in transparency of a different kind, citing his company’s DAT IQ product and the data it delivers to carrier and broker customers, 35,000 of whom use it daily, he said. Ultimately, he encouraged carriers to do their own research and study up and comment on the Federal Register to make their voice heard. FMCSA will accept public comments on the proposed rule through Jan. 21, 2025.



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