U.S. DOJ allows collective
ratemaking for regional LTL group
The Department of Justice will not challenge a proposal by a consortium of seven regional less-than-truckload (LTL) carriers in
the United States and Canada to allow any member of the group
to bid on contracts and offer rates on behalf of the other carriers
for business that originates in multiple regions of the country.
The Justice opinion, which came in the form of a business
review letter issued in September, expands the operational
scope of the consortium, known as the “Reliance Network,” to
include collective ratemaking. The DOJ action paves the way
for the group to introduce a nationwide LTL tariff by mid-
2010, according to Phil Pierce, executive vice president of
Averitt Express Inc., one of the network’s members.
The group sought the DOJ opinion to ensure that any future
collective ratemaking initiatives would not run afoul of federal antitrust laws, Pierce said.
In January 2008, the U.S. Surface Transportation Board
approved a proposal by the carriers to pool their operating territories into a network covering the continental United States.
Under the arrangement, the network coordinates operations
and handles sales and marketing for shipments transiting at
least two of the truckers’ respective service regions. The network is not involved if a shipment originates and ends within
a single carrier’s service territory.
In their proposal to DOJ, the carriers said that collectively,
they account for less than 20 percent of LTL business in
regional markets and much less than 20 percent of the nationwide LTL market. The carriers also said that each faces significant competition in its respective market.
Besides Averitt, the network includes DATS Trucking Inc.,
Lakeville Motor Express Inc., Land Air Express of New England,
Pitt-Ohio Express, Canadian Freightways, and Epic Express.
rate sharks circling YRC
As YRC Worldwide Inc. struggles with ongoing financial problems, its rivals are playing pricing hardball in
a bid to undercut YRC’s market leadership (the carrier has a 15-percent share of the fragmented LTL market) and grab its business. The effectiveness of these
efforts has fueled concerns about YRC’s survival.
The latest challenger is FedEx Freight, according to
analysts at JPMorgan Chase attending the American
Trucking Associations’ annual conference in Las Vegas.
In a research note, analyst Thomas R. Wadewitz said
FedEx Freight seems to have made a “push to gain
market share” against YRC and other carriers over the
past month. “The effort to attract tonnage through
price cuts appears to be relatively broad and aggressive,” Wadewitz wrote, adding that the program is
“likely to contribute to further pressure on LTL market
pricing and also to result in further pressure” on YRC.
An executive at the ATA conference agreed that
FedEx Freight and others “are trying to drive a stake
in YRC” but noted that the real challenge for carriers
that win business through discounts will be getting
customers to accept rate hikes later. “It doesn’t take
much effort to cut rates, but it does require skill and
genius to raise them,” said the executive, who asked
not to be identified.
There is precedent for FedEx’s aggressive actions.
During the 1990-91 recession, it underpriced rival
Airborne Express on air-freight business in what was
seen at the time as an attempt to drive Airborne out
of business. While the FedEx actions wounded
Airborne, the air carrier hung on for another 11
years before being acquired by DHL in 2002.
—M.S.
ground breakers
; ProLogis has signed four new lease agreements for a total
of 326,000 square feet of distribution space at its facilities in
Columbus, Ohio. The transactions include a lease with mattress manufacturer Spring Air for 116,000 square feet of
space, a lease with Almo Corp. for 97,000 square feet of
space, an agreement with TCG Continuum for 75,000 square
feet of space, and a lease with an unnamed U.S. consumer
goods retailer for 38,000 square feet of space.
; Automotive parts supplier LKQ Corp. has announced that
it will open a parts distribution center in Plainfield, Ind. LKQ’s
plans call for leasing and refurbishing an existing 106,000-
square-foot building.
; Stirling Capital Investments has
secured a lease for 231,185 square feet of
space from Plastipak Packaging Inc. at
the Southern California Logistics Centre, a
2,500-acre commercial and industrial complex in Victorville,
Calif. Plastipak Packaging will manufacture and distribute
plastic bottles at the new facility.
; Worldwide Logistics, a furniture transportation and warehousing company, has relocated its California operations
from a facility in Ontario to a 250,000-square-foot distribution center in Riverside. Worldwide has nine distribution centers in the United States and one in China.
