Tucker Blog

Wednesday, December 5, 2007

National Classification Committee (NCC) Loses its Antitrust Immunity. What Does This Mean to You?

We have had a lot of discussions and questions relating to the Surface Transportation Board’s (STB) decision eliminating the NCC’s and its peer organizations’ antitrust immunity, to set rates and freight classification schedules. So, we thought we would include a discussion of this in our newsletter. As with anything, we invite other thoughts or opposing viewpoints.

On May 7, the STB ruled to eliminate approximately 60 years of antitrust immunity granted by the federal government to the National Classification Committee (NCC) and its peer organizations. The NCC, and other groups like Southern Motor Carriers SMC3), etc., are essentially groups of motor carriers who collectively evaluate each type of freight type for density, transportability, etc., establish a freight classification for each type, then establish a yearly rate base for each freight classification. Participating carriers, and indirectly, nonparticipating carriers, then implement those rates into their operations. The rate bureau decisions impact the entire LTL industry.

Antitrust immunity for NCC was an old-world leftover from the days of heavy regulation (1930s-1978). It was also one of the most contentious, one-sided protectionist regulations left on the books. Debates on the topic at national conventions and other venues were heated to say the least.

Tucker Company’s policy position since deregulation in 1980 has been to support efforts to deregulate pricing, and promote business by contract. Tucker Company is pleased with the STB’s decision and has supported this policy move for many years in many organizations. Tucker Company is actively involved in various trade associations. Nearly all of those associations agree that the NCC should be stripped of its antitrust immunity and that the market alone should establish pricing parameters to move freight between parties. Shipper and 3PL organizations generally see this STB decision as an enormous win for shippers.

So what effects will this have on shippers or Tucker? We agree with other close observers that the National Motor Freight Classification (NMFC) which is the NCC generated tool defining every product’s class, is probably not going away, nor does this ruling eliminate the NCC. Rather, what the ruling does say is that shippers and carriers must agree together on any future changes. While participating carriers of NCC and other bureaus obviously do not wish to lose such an important edge — that of
setting rates and classifications together under protection of law — many carriers have already taken pricing and tariff generation in-house, relying on the NCC and other rate bureaus for validation and benchmarking.

Today’s shippers and carriers have mastered the fundamentals of negotiating together. The ruling will force us to think and negotiate a little differently, but also provides the assurance that shippers and 3PLs will be negotiating freely.