Acme CEO Jeff Goldfogel Reflects on the 1980s-Era Decision to Deregulate the Freight Transportation Industry
Part 1 – Deregulation Decisions That Shaped the Modern 3PL Industry
I’ve been in this industry for decades, and I vividly remember the days before deregulation. Back in the ’60s and ’70s, when a driver picked up freight from our docks, they’d meticulously hand-stack the product or, at the very least, carefully count and verify the pallets, ensuring a proper exchange of comparable quality. Chain of custody meant something. As Eric Carmen would say, “those days are gone.” It’s crucial to understand the context of this era, especially considering our company’s roots. Acme Distribution, a family-owned logistics pioneer, was founded in 1945. To better appreciate our journey and evolution, explore our comprehensive Acme Distribution historical timeline which highlights our commitment to service and adaptability since our inception.
The Era of Regulation: A Controlled Market
The reality is, nothing stays the same, even if it seems to be working. LTL (less-than-truckload) freight had been regulated since the 1940s, aiming to provide reliable public service, much like regulated airfares. The guiding principle was “public convenience.”
- Controlled Entry and Rates: Regulatory commissions determined the optimal number of carriers for specific routes and set rates to guarantee their profitability.
- Service Obligations: Carriers granted these “plums” of authority were obligated to serve both profitable and less desirable locations within their assigned areas.
- Limited Competition: Rate protection meant carriers couldn’t cherry-pick freight or provide substandard service.
This system, while functional and ensuring reliable service, was far from a free market. It was a controlled and subsidized environment where service was the primary differentiator between carriers.
The Impact on Shippers
Shippers, primarily manufacturers, bore the brunt of regulated freight rates. They lacked buying power and often relied on regional warehouses to minimize transportation costs. Major manufacturers strategically located their products near their largest customers’ distribution centers.
The Dawn of Deregulation: A New Landscape Emerges
Whether politically motivated or driven by public demand, the decision to deregulate freight was implemented in the early 1980s. This impacted carriers, shippers, consignees, and the entire 3PL industry.
- The Feeding Frenzy: Deregulation unleashed a wave of new and existing carriers, drastically undercutting established rates.
- Short-Term Gains for Shippers: Shippers initially enjoyed significant cost savings.
- Challenges for Established Carriers: Carriers accustomed to controlled pricing and guaranteed volumes faced a sudden, competitive onslaught.
A Seismic Shift Begins
The initial wave of deregulation brought about a rapid and dramatic transformation of the freight industry. Shippers rejoiced at the newfound cost savings, while established carriers scrambled to adapt to the fierce competition. However, this was just the beginning of a much larger story. The full impact of deregulation was far more complex and far-reaching than anyone could have initially predicted.
In Part 2, we’ll delve into the unforeseen consequences of this monumental shift, including the pension fund crisis that rocked the trucking industry and the crucial role deregulation played in shaping the modern 3PL landscape. We’ll explore how companies like Acme Distribution, now one of the top 3PL companies in Denver, navigated these turbulent times and ultimately thrived, becoming integral players in the evolving world of logistics. Stay tuned to discover how the seeds of change sown in the 1980s continue to influence the industry today.
Part 2 – Unintended Consequences: The Pension Crisis Born from Freight Deregulation
The Post-Deregulation Frenzy: A Market Unleashed
Whether the initial push for freight deregulation in the early 1980s stemmed from political motives or genuine public demand remains a historical footnote. What’s undeniable is the profound and immediate impact this decision had across the board. Suddenly, carriers, shippers, consignees, and all of us in the 3PL industry found ourselves in a dramatically altered landscape, affecting both interstate and intrastate freight movements.
Almost overnight, the trucking industry experienced a feeding frenzy. New and existing carriers flooded previously restricted lanes, often slashing rates by as much as 75% compared to the levels dictated by regulatory commissions.
For the shipper footing the bill, this initial period felt like a financial windfall – and for a while, it genuinely was. However, for the established carriers who had operated for decades under the umbrella of controlled pricing and guaranteed volumes, this sudden shift was the beginning of a long nightmare. Many of these mainstay companies had significant regional footprints and were largely unionized, providing their employees with good wages and comprehensive benefits packages, including defined contribution pension programs spread across numerous funds nationwide.
The rulebook had been thrown out the window. Anyone with a truck and the will could now haul freight from point A to point B at virtually any price they could negotiate. Unsurprisingly, these new entrants gravitated towards the most lucrative lanes, often neglecting less desirable routes. This upheaval mirrored the deregulation of the airline industry. Remember when you could snag a flight from LA to NY for a mere $49, while a trip from Chicago to Columbus might set you back $350? Eventually, market forces would correct some of these imbalances, and they did.
The Unforeseen Crisis: Pension Funds Under Pressure
However, the bureaucrats who championed deregulation failed to anticipate a significant and insidious problem brewing within the depths of the pension funds. This issue took time to surface, but its eventual impact was substantial. Many of the larger, long-established trucking companies had workforces filled with drivers boasting decades of loyal service. A significant portion of these drivers had accumulated the years needed to retire with full benefits – a well-deserved outcome for them, but a looming threat for pension funds that were, in many cases, chronically underfunded.
It didn’t take long for these legacy carriers to realize that without their protected tariffs and regulated rates, they were ill-equipped to survive in the new competitive arena. They faced three unenviable options: 1) Sell out – but who would want to acquire an expensive operation whose protected rates had vanished? The operating authorities these carriers once held were valuable assets until the day deregulation became reality. 2) Continue operating and try to match the new “market” rates to retain tonnage they had previously handled at higher prices with well-paid union drivers – a recipe for financial disaster. 3) Close down operations entirely. Say goodbye, sell the trucks, and perhaps retire on a boat in Florida.
For most of these larger carriers, option three was the only one that made any real financial sense. The impending wave of closures was no secret, and within days or weeks, the same bureaucrats began to grasp the enormity of the financial crisis they had inadvertently created. This mass exodus threatened to trigger a run on the bank – or, in this case, the pension funds, most of which were significantly underfunded. Thus, the initial promise of a free market solution took a sharp and unexpected turn, revealing the deep and interconnected consequences of such sweeping changes.
The story doesn’t end here. Join us for Part 3, where we’ll explore the government’s surprising intervention in this free-market experiment and how the resulting chaos paved the way for the rise of nimble and adaptive logistics partners, including Acme Distribution.
