Trucking in Michigan: Cartel or Market?

Ever since the 1930s, Michigan has suffered with a state government-sponsored cartel in the trucking business. The state effectively sets the rates that trucking companies may charge for anything shipped within Michigan's boundaries.

This state-mandated price-fixing is an anachronism that "protects" trucking firms from the winds of competition at the same time it exacts a hefty price from the rest of us. That price is reckoned in terms of higher costs for goods shipped within the state, more accidents, and even more pollution.

At least now there is reason for hope: a growing number of Michigan legislators, supported by the Engler administration, want to put an end to this madness and deregulate Michigan trucking.

As things stand now, if you want to go into the trucking business in Michigan, you must first obtain a certificate from the Public Service Commission. This is not like getting a driver's license. You must prove to the PSC that there is a "need" for your services, and existing trucking firms which perceive a threat from the prospect of competition from upstarts like you can protest your application. They usually call upon attorneys who specialize in these matters, resulting in long and costly delays which deter many potential competitors from even trying.

In the unlikely event you get admitted to the "club" of firms with a license to truck, you'll quickly discover how a state-sponsored cartel works. You will be restricted as to what goods you may haul, to what places and at what prices. Discounting below the fixed rate is illegal, and your so-called "competitors" will use the power of government to see that you don't get away with it.

In other words, there's no need in Michigan trucking for an Al Capone. State regulators in pin-stripe suits will gladly--and legally--bust the knee-caps of anybody who really wants to compete.

Bruce McFee, Vice President of Saylor-Beall Co., an air compressor manufacturer in St. Johns, speaks from experience when he explains how this cartel jacks up shipping costs: "A typical shipment averaging 75 miles within Michigan costs about 20 percent more than a shipment that covers 200 miles and crosses a state line." (Michigan can't regulate trucking between states; the free market is in charge of that).

That means that when firms like Saylor-Beall go to buy raw materials and components, Michigan suppliers are at a disadvantage compared to out-of-state firms. When selling finished goods within the state, firms like Saylor Beall are at a disadvantage compared to out-of-state competitors.

Thanks to regulations that require carriers to obtain a hard-to-get certificate before they can make "backhauls," millions of miles are driven by empty trucks each year in Michigan. Spartan Stores, for instance, is headquartered in Grand Rapids and uses its fleet of trucks to deliver groceries to affiliated stores throughout the state. But those trucks come back empty each day because Spartan doesn't have the regulators' blessing to haul goods back to Grand Rapids from any city in Michigan.

It doesn't take a rocket scientist to understand that allowing backhauls would not only cut costs, but by reducing the total miles driven it would lessen wear and tear on Michigan roads and cut pollution from diesel exhaust too.

The defenders of regulation argue speciously that a free market would lead to more accidents because lower rates would prompt some carriers to cut corners on safety. The U. S. Department of Transportation, however, has found "no evidence linking safety performance with the presence or absence of economic regulation." In neighboring Wisconsin, which deregulated trucking in 1982, the accident rate actually fell nearly ten percent between 1984 and 1989.

Michigan stands to benefit from a repeal of its archaic and anti-competitive trucking monopoly. The self-serving rhetoric of special interests shouldn't be permitted to delay deregulation a day longer.