FOR YOUR INFORMATION............................ NOVEMBER 6, 1992
REDUCING REGULATORY OBSTACLES TO ENTRY INTO
INTRASTATE TRUCKING MARKET WOULD BENEFIT
CONSUMERS AND COMPETITION IN MICHIGAN, FTC STAFF TESTIFIES
Relaxing restrictions on new motor carriers seeking to enter
the trucking industry in Michigan would benefit consumers and
competition by increasing choices, improving service, and reduc-
ing prices for the transportation of goods, according to Federal
Trade Commission staff testimony delivered by Phillip Broyles,
Director of the FTC's Cleveland Regional Office, at a hearing
before the Michigan Public Service Commission (MPSC) yesterday.
The MPSC is considering amendments to its rules regulating
intrastate trucking.
In general, Broyles said, the arguments for economic regula-
tion of the motor carrier industry appear largely unfounded, and
the consequences of rate and entry regulation have been undesir-
able. Deregulation of trucking has not led to the adverse impact
on competition or consumers that many critics of deregulation had
predicted. In fact, according to the testimony, deregulation has
fostered lower shipping rates and improved service, benefits that
in many instances are passed on to consumers in lower final-
goods' prices.
The MPSC proposes to change several aspects of the applica-
tion process for operating authority and the resulting certifi-
cates and permits for Michigan truckers. Originally, the MPSC
suggested that applicants be required to request relatively
general operating authorities, specifying a few generic commodity
classifications and broad territories. The MPSC now fears that,
because applications for broad authority could stimulate many
competitors' protests, its original proposal might actually delay
or deter procompetitive entry.
- more -
(Michigan intrastate trucking--11/06/92)
Therefore, the MPSC's current proposal would require that
applications and authorities be relatively specific, including
descriptions of the commodities to be carried and of the complete
geographic area to be served. It also proposes to retain and to
bolster measures to prevent firms from using the state's protest
procedures in ways that would harm competition.
According to the FTC staff testimony, studies of the motor
carrier industry at both the federal and state levels have shown
that consumers benefit most when operating authorities are broad,
rather than narrowly restricted, and when anticompetitive pro-
tests against applications from prospective entrants are cur-
tailed. Experience suggests that the MPSC should give serious
consideration to the broad-authorities approach it proposed
originally, coupled with curtailing inappropriate protests, the
staff testimony states.
"We believe that consumers and shippers benefit most when
entry restrictions are minimal...and thus we believe that the
approach in the MPSC's original proposal would benefit consumers
and shippers substantially," Broyles said. While believing the
MPSC's original proposal to be superior, the FTC staff did not
recommend against the current proposal, because "[r]elative to
the status quo, it would increase the prospects for procompetiti-
ve entry. Further, it is possible that, in Michigan's particular
statutory and regulatory setting, a combination of specific
authorities and limited protests may result in greater carrier
flexibility and more competitive entry than the alternative of
general authorities facing constant protests. Whether that
proves to be true will depend in part on whether the measures to
curb anticompetitive protest activity accomplish that goal."
These comments are the views of the staff of the Cleveland
Regional Office and the Bureau of Economics of the FTC, and are
not necessarily those of the Commission or any individual Commis-
sioner.
- more -
(Michigan intrastate trucking--11/06/92)
Copies of the comments are available from the FTC's Public
Reference Branch, Room 130, 6th Street and Pennsylvania Avenue,
N.W., Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
# # #
MEDIA CONTACT: Howard Shapiro, Office of Public Affairs
202-326-2176
STAFF CONTACT: Phillip L. Broyles, Cleveland Regional
Office, 668 Euclid Avenue, Suite 520-A
Cleveland, Ohio 44114
216-522-4207
or
Timothy P. Daniel, Bureau of Economics
202-326-3520
(michtrk)