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.
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(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.
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(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.
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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)