Brokers In the Freight Industry Are Robbing Americans And Truck Drivers Out Of Billions Of Dollars A Year

This screenshot is an example of what happens in trucking America every single day. Fraudulent billing practices like this lead to massive freight rate increases, massive wage theft, and is one of the primary causes of the shipping crisis in America. If you think 2021 was bad, 2022 is going to be far worse.

This article will be about brokered freight. I’m don’t know the total percentage of freight that goes through brokers in America, but its high. I’ll explain what a freight broker does, how the broker system works, and how to get around it. In my opinion, until the fraud of the brokerage system is eliminated, the shipping crisis will only get worse.

If you’re a shipper — even an occasional one — read this article. I am going to save you a ton of money, and I’ll even break it down by the most common types of freight. While this article is long, if you read it you will save money.

What is a freight broker?

A freight broker is a company a shipper calls when they need freight moved, generally called “Third Party Logistics,” or 3PL, for short. They say they will get you the best rates, quickest service, take care of all your problems, just pay us, and “we will take care of everything.” They are the equivalent of a general contractor when it comes to having a house built.

There are varying levels of freight brokers. Some are massive companies that control billions of dollars’ worth of freight every day; some are smaller, niche operations. They want you to think they can do things you can’t do, that they have data they think you can’t find, and have expertise you don’t have. In most cases, this is completely false. Anyone can do all of this themselves, usually for much cheaper, and for the same amount of effort you would put into calling a broker. I can save shippers money by explaining how to get around the brokerage system, which will ensure truckers get more money, and as a result both ends of the supply chain will get better service by cutting out the unnecessary middleman.

The Scam is How Freight Brokers Work The Spot Market:

As you see by the screenshot, the broker charged a shipper $4300 to “move” a load, and the carrier (in this case, an owner operator) was paid $2325. Where did 46% of the cost of that load go? IN THE BROKER’S POCKET. Nearly half the price of that load went to someone who did literally almost nothing. Shippers and consumers: this is what you end up paying for.

I’m going to walk you through a typical scenario explaining how this works.

A shipper calls a broker to get a load of freight moved, and the broker quotes a shipper a price based not on the actual cost of moving the freight, but the maximum he thinks he can get a shipper to pay for the freight to be moved. The shipper accepts the rate and pays the broker to move the freight in the agreed time requirements. For the broker, it’s now game time.

Brokers have access to what are called “load boards.” These have been around nearly since the beginning of trucking, but now they are all online and provide brokers with tons of data, most of which shippers and the public themselves can access(anyone can buy this data)if they know how to look for it. Brokers do pay for access to these boards, but a broker usually has a pretty good idea of what they think a load will cost them. What they are really trying to do is see how much more they can bill a shipper when they set the price. While most brokers claim to charge a “set percentage” per load, this is not true in any way. Once a shipper pays a broker to move their freight, nobody will see what the shipper has paid the broker again, ever.

Let me make this very clear, again: once a shipper pays a broker to move freight, nobody in the supply chain will ever see how much the shipper paid to move the freight, nor will most brokers allow shippers to see what they themselves actually paid to move the freight. The set percentage a broker says they are charging you does not exist if you never (and you do not) get to see what the broker is paying a carrier to move the freight. The same is also true for carriers. They have no idea what the broker got for the freight. So, the “set percentage” a broker says they are charging you is quite literally a line of B.S. The only way a shipper knows what percentage of the freight cost he is actually paying is if the broker shows the shipper what they paid a carrier to move the freight, and they will not do this.

The shipper has paid a broker to move a load, the broker has put it up on a load board (or multiple load boards.) What happens now?

Its literally a reverse Ebay…

The broker charged the shipper the amount they think it will cost to move that load, plus whatever the broker thinks they can get on top of that. They put the load up on an online load board, but at the lowest rate they think they can get the freight moved for…and wait. There are literally hundreds, if not thousands of carriers and drivers watching the load boards at this point. The likelihood of someone taking the load at this lowest assumed rate, is high.

So now a carrier connects with the broker and says they want the load. Has the carrier ever worked with the broker before? In many cases, no — the broker has no idea whether the carrier will show up when they are supposed to, deliver when they are supposed to, or whether they will load the freight properly and get it delivered undamaged. The broker sends the carrier a broker “contract,” the carrier fills it out and signs it, the broker checks the carrier’s motor carrier number with the DOT to make sure the carrier is licensed and insured to do it, the contract is signed at the agreed rate, and the carrier is assigned the load. This regularly happens in as little as ten minutes, it’s literally the equivalent of picking up a day laborer off the street. Since the broker got the load taken by a carrier in its first time up on the board, they get to keep the highest possible amount out of what they billed the shipper. Its literally free money to the brokers, and the broker kept far more than the 10–15% they said they were charging the shipper. The goal for the broker is not to deliver your freight at the agreed to percentage they charged the shipper, but to charge the shipper as much as possible, and pay the driver/carrier as little as possible. The broker then keeps the difference.

At this point, the broker makes sure the freight is loaded, and monitors its progress and delivery date. When the driver delivers, the broker pays the carrier in the agreed time frame (usually 90 days, but sometimes in 30), and supposedly deals with any problems along the way. But during this time, the broker actually has no control over any part of the shipping operation. They have literally contracted out the load to someone who he has specified in the broker contract is not an employee, but is a contractor, and the carrier can literally do whatever they want while they have the load, so long as they get the load delivered on time and legally (and truthfully the broker doesn’t give a damn if you get it there legally, just on time). If not, the freight is late the broker fines the hell out of the carrier and holds this money out of the carrier’s payment.

What do most brokers do in this situation? Literally give the shipper the phone number of the driver of the load. Now the shipper can communicate directly with the driver, the broker does nothing, and the shipper and the driver can communicate directly. The driver gets no extra pay for this, and the shipper, who shouldn’t be making calls to the driver in the first place, is now literally doing the job they paid the broker to do.

Load Boards: Data Banks To Be Used AGAINST Shippers AND Drivers:

I explained what a load board was in its most basic form, now I’m going to tell you what they are in their most pure form: an advertisement for brokers to lower the pay of carriers/drivers.

Anyone reading this can go into any truck stop in America and see a TV screen that shows available loads for that area. Most of these boards are run by a company called DAT Logistics, DAT stands for “Dial A Truck,” they have been around forever, and anyone can see the rates for a given load to a given area. DAT isn’t the only load board company, it’s just an example of the most widely used one I have seen.

These load board companies are advertising to drivers. But brokers have access to lots of load boards, and what these boards are doing besides posting rates to drivers is publicly posting rates to each other. It takes very little effort for brokers to watch the rates loads are being posted for and drive the rates they pay to carriers down by doing this. When one broker sees a load taken at an extremely low rate, this effectively resets the rate a broker will put his next load up for and it becomes a race to the bottom. This is quite literally what is happening right now. A broker will tell a shipper “fuel costs are outrageous, it’s going to cost a ton of money to move this freight,” then will sit around, watch load boards at posted prices (which are already at the current lowest possible rate), and do everything they can to drive prices down even further. They get all of the information they need just by watching what other brokers are getting their loads moved for. The more the brokers drive down the prices, the more money they can pocket for themselves.

Anyone can watch this in real time. When loads don’t get taken at the first given price, the rate goes up. In many cases the rate increase is 25%, and the second time a load is re-posted, loads may cost double their original posted price. Brokers are not going to pay for these loads out of their own pocket if they made a bad deal with the shipper, because even at double the original rate, they are still making money. That’s how much pay is being sucked out of the process and going to the brokers, who are nothing more than a middleman.

There are a lot of good loads out there on load boards. But there are also just as many that are absolute garbage and may leave you a couple of pennies per mile to live on. With diesel costs so high, fuel costs alone right now are over a dollar a mile. You can find loads on load boards today that no carrier or owner operator could make a living on. The brokers know that they can get at least some freight hauled this way, and that these rates will drive carriers out of business. But at no point do the brokers lose — not if they create a shortage of trucks/drivers, not if they raise rates to shippers — they will keep finding ways to drive their rates to carriers/drivers down to the floor. No matter what the stated freight rate is, the brokers will find a way to make money for themselves and keep as much of the money as possible from going to those doing the actual labor (the shippers and the drivers).

A perfect example of this happened last year on a massive scale with ‘port congestion fees.’ As containers started to back up in ports undelivered, container lines started publicly stating they were paying port congestion fees as a bonus to get drivers to haul their containers out of the ports. Sometimes these fees were $800 per container. These port congestion fees rarely, if ever, made it to the carriers/drivers who were expected to sit there for 6 hours at a time for literally no pay, waiting for a container. If the broker is the middleman, they’re going to take that fee, they have no reason or motivation to pass it on the driver, and for the most part, NONE of that money made it to drivers.

How to Fight this Massive Theft whether you are a Shipper or a Driver

Brokers will tell shippers that they have hundreds of contacts and contracts in the industry, that

they will get you the best rate, and that they will take care of everything. While this may be true in some cases, in many cases, it is not. Shippers don’t have access to load boards directly, but data such as average weekly freight rates is publicly available, and in many cases, it’s even broken out by freight lane (such as Chicago to Atlanta, L.A. to Seattle, New York to Miami, etc). Once a shipper has this data, that’s where the actual bargaining with brokers should begin. But with the right data, shippers could also negotiate contracted shipping rates without a broker.

For example, if a broker quotes a shipper $7 a mile for a load on a given lane, and the shipper already knows that the going rate for the lane is $4.50 a mile(because they looked up the average freight rates for last week), this is where rate negotiation should begin. The shipper should not lower the rate to the truck by one PENNY, as the brokers were throwing that rate up on the load board for as low as they can get in the first place, all you are doing is squeezing the broker, and keeping more of the money you should have in the first place. If they refuse, learn how to book loads yourself, and you will massively drop your shipping costs.

In all contract negotiations, shippers should demand brokers show them receipts for the loads they pay for. In many cases, brokers will refuse to do this. Shippers should not work with these brokers and find a broker who will be transparent. If brokers aren’t forthcoming, shippers should do what the person in the screenshot did, and just ask the driver what they got paid. If the driver is an actual employee, they won’t be able to tell you, but if they are a leased-on owner-operator, percentage driver (even employee), or owner operator, they will be able to tell you. While most brokers contractually prohibit drivers from discussing their pay for a job, when shippers do tell drivers what they paid for a load, you could easily tell by the driver’s reaction if you got ripped off or not, and in many cases, the driver will be so pissed off, he will actually tell you what he got paid. The difference in these prices will likely be huge, and from then on, you know where to bargain your rates.

Shippers should look into direct contract pricing. This is easier said than done, but for the money saved and the improved service received, it is 100% worth the time spent. Once a shipper sets a contract rate, they will likely end up with many carriers trying to get a load contract out of them, these rates will likely be much cheaper than anything done through a broker(and more predictable), and these companies will even dedicate trucks to your account. The only time you will need a broker (if ever) will be for extra loads that you didn’t bargain for in your account. Without a broker, service should be better, pricing will be far more stable, and a shipper will directly be in contact with the company actually hauling the freight. All the tracking information a broker monitored for you will now be done by your contract company. This has already happened in the industry, since a lot of companies that used to use spot market trucking have signed dedicated contracts because the spot market was so unpredictable and expensive. You do not need a broker to sign a direct contract with a trucking company, no matter what the broker tells you.

Freight-type breakdown, and where to look for current rates:

Dry Van: this is usually the cheapest freight to move. Weekly average nationwide rates are posted every single week. Use the publicly available data provided by load board companies to find the spot market rate and bargain off that. Direct contracts will save you a ton of money, and you’ve cut out the middleman.

Reefer: Same as above, though rates are higher than dry van. Some reefer rates differ by growing season, and availability rates depend on who is paying the best depending on what is being harvested.

Flatbed: Highest general rates of all, different lanes than the other two. Some of these rates will be drastically higher than others, as a lot of flatbed freight goes inbound to a location with nothing to pick up, so you will have to add money to the inbound price to get these trucks to an area where they have freight to pick up. Again, contract rates will save you a ton and get you better service.

Containers: This is one where data (good data) does exist if you know where to look for it, and like a load board, these container/drayage companies are advertising to each other as much as they are to customers. Use this data against them.

Where should you look? Don’t call and ask them what they are charging to move a container for you, since the container industry is a model industry on how to rob their drivers blind (see my other articles). Find the rates they are advertising to pay drivers and bargain from there.

It really is this easy. When container companies advertise for drivers to hire, they will usually post up certain rates from their yard/port to cities they go to regularly, for example, Newark, NJ, to Carlisle, PA, or Chicago to St. Louis. These are the rates they pay their drivers, and as shippers have found out, it has NOTHING to do with delivered costs of a container. In any given area you can find multiple companies advertising driver pay rates and they almost all match. There may be a $50 difference here and there either way, but in any given area, container companies are flat rating their drivers to go to each city, and you can find these rates at nearly every major city that has a container port, domestic or international.

This is not how freight is priced in any way for shippers, containers are not priced like a USPS flat rate box. A shipper will not get to move a hundred containers from NYC to Harrisburg for the same price without a contract rate. In fact, unless it’s a contract rate, the likelihood of two containers in the same lane going for the same price is virtually ZERO. High priority containers don’t go for the same price as low priority containers, and as a shipper, you will not get 40,000-pound container moved for the same price you will get 5,000 pound container moved, but this is how they are paying their drivers, according to their own advertisements, so as a shipper, call them directly and bargain using that information. (And if you really want to have fun, tell the drivers what you paid to get the container, and watch their reactions).

LTL Freight: A little harder than the rest, but the discounts and rewards will be greater than the rest.

First, if you are a shipper that uses LTL regularly, and don’t have a direct account with the LTL companies you are using, you are paying unnecessary money to a broker. LTL companies will regularly discount their posted rates 50% or more, just by opening an account with them. If you are a regular shipper, discounts of 80% off the posted rate are not uncommon, and you can get this with a few phone calls, sometimes as little as even just one phone call, and likely, a salesman dedicated to your account. Where I work, we interline with multiple LTL companies. Some print rates on their bill, some don’t, but the ones that do have the stated percentage discount, the ‘public’ rate, and the end discounted rate on them. 60–80% discounts on the public rate are common. When a broker tells you they are getting discounts that you can’t get as a shipper, they are lying to you, as these rates are easily obtained by direct shippers every single day. The LTL company will also teach you how to fill out bills of lading (BOL) just like a broker would, and if you don’t know how to do it or don’t understand something, the driver can teach you. As someone who does LTL regularly, I have taught hundreds of shippers how to fil out BOLs, for no charge. I have to. I can’t legally have freight on the truck without a BOL, I can have my license pulled and go to jail for that.

Large, publicly held LTL companies (and some private ones) advertise their weight per hundred, quarterly, in earnings results. They are all doing the same thing and publicly stating they are taking the higher paying freight and letting the lower paying freight sit, so you are more at the mercy of these carriers than others, but a broker doesn’t have any more input on a charge than you do.

If you are a rare LTL shipper, let’s say you want to send something to a residential delivery with a liftgate, do anything you can to avoid this. I do a TON of home deliveries. These charges are outrageous, there are massive residential delivery and liftgate fees. Send these deliveries to a commercial address, I don’t care if it’s an empty parking lot or a grocery store parking lot and meet the driver (you had better be there on time, LTL drivers won’t wait for you to get there). Commercial addresses are what LTL is designed to deliver to, and in many cases, it may be cheaper to pay someone you vaguely know with a commercial address to unload something for you than it is to have it sent to a residential address. Its nearly cost prohibitive for an individual or small shipper to send a pallet to someone’s home, but these are easy ways to get around this.

Fuel surcharges/detention time:

If you are a shipper getting charged fuel surcharges on spot market freight, chances are all of this money is going directly into the broker’s pocket. Loads posted on a load board go for a flat rate nearly 100% of the time, they do not go for a flat rate plus a fuel surcharge(contract rates normally do).

Detention time is the same thing. You can look at any number of articles (including mine) and see that drivers generally are not paid for their waiting time, but this does not mean a shipper isn’t being charged for this load/unload time. A lot of broker contracts to drivers literally say in the contract that a truck will sit for “X” hours (usually two, sometimes up to four) for literally no pay dollars, and then they will be paid a pittance, like $35 or $40 an hour after they have waited the hours specified in the contract for free. If you are a shipper/receiver and these charges exist on your bill, challenge them, and demand to see what they paid the driver (check with the driver as well). In many cases, you are being billed for something the broker is paying nothing for. Again, this money goes straight in the broker’s pocket. Container brokers are especially notorious for this.

All of the things shippers pay brokers to do can be done by the company itself, or an individual. The brokered freight industry is a massive theft of wages from shippers and drivers, and it leads to massive price increases for everyone, and these costs are ultimately passed on to the end consumers, retail and wholesale customers.

Shippers, however, have the power to end this, as do drivers. There are decent, honest brokers in the freight industry, these are the brokers drivers, carriers, and shippers should use, but unfortunately, the only way to find out who is good and who isn’t is by experience. Everybody but the broker benefits from direct contracts in the freight industry. The shipper pays less, the carriers get more, and it smooths out massive price fluctuations. It also prevents massive overpricing of freight. Remember the goal of brokered freight isn’t to deliver anything, it is for the broker to charge the shipper as much as possible and deliver for as little as possible.

Know what you are paying for. I cannot stress this enough: once you pay a broker to move your freight, nobody else sees this bill. A carrier doesn’t get to say to the broker “what did you get to move this freight,” the broker is just throwing your freight at the wall (in this case, load boards) for the lowest price he thinks he can get it moved for to see if that price sticks, and the broker then keeps every buck he can.

How many of you would pay $5000 for something, knowing the actual price of that good was $800? This is how the brokered freight market is designed to operate. We could take out the brokers fees, drop shipping costs dramatically, and pay everyone in the supply chain, except brokers, far more money. I have said before and will say it again, until the people doing the actual work get paid more, you will have a shipping crisis. In this case, we just need to redirect the existing money out of the broker’s pockets and into carriers/drivers pockets, and we could probably charge shippers far LESS in the process.

In the end, TRANSPARENCY is the only thing that will end the shipping crisis. People doing the actual work, not brokers throwing things up on a load board to be bid down to near zero, should be the ones getting the money. Right now, there is no incentive for anything to change, but we are all paying the added costs of a middleman in the supply chain taking a huge cut. It’s been this way forever, but until we see the brokerage system as the problem that it is, there will be no solution.