Barring the competition

Oct. 1, 1998
Trucking was deregulated, but technology may offer new barriers to competition.Deregulation was supposed to free trucking from anti-competitive barriers and bring the for-hire portion of the industry back to "natural" free market conditions. The competition unleashed by loosening the regulatory collar certainly has driven the industry to unparalleled levels of productivity and cost-effectiveness,

Trucking was deregulated, but technology may offer new barriers to competition.

Deregulation was supposed to free trucking from anti-competitive barriers and bring the for-hire portion of the industry back to "natural" free market conditions. The competition unleashed by loosening the regulatory collar certainly has driven the industry to unparalleled levels of productivity and cost-effectiveness, but you're making a big mistake if you think that it also meant an end to those anti-competitive barriers.

Even in the freest marketplace, the pressure to compete will inevitably foster attempts to gain an edge over everyone else, an edge that can't easily be duplicated because it's protected by legal or financial defenses. In trucking, it looks like the edge is coming from information technology.

The most obvious protective barrier is financial. Immediately after deregulation, many predicted that trucking would soon be divided into "whales and sharks." The whales, or big fleets, would push everyone out of the most profitable markets, while the small-fleet sharks would move quickly to gobble up the scraps.

What actually happened is that some of the sharks secured access to capital that allowed them to grow rapidly by investing a large portion of that money in advanced technology systems. Shippers have become accustomed to the services afforded by those technology investments, which is effectively shutting out competition that can't afford to make similar investments.

The second protective barrier to competition is coming from a more expected quarter - patent law. As we've shifted from an industrial economy to one based on knowledge industries, the concept of protected patent ownership has been expanded from physical systems to also include "intellectual" inventions. The giant software industry is based on this concept of intellectual property rights, which has made it possible to patent mathematical formulas and even certain numbers.

A software developer that gets a patent on a broad concept is now in the position to legally prevent competitors from developing or using a very wide range of important business tools. For example, there is a mutual funds company that patented a formula for apportioning stock values among its various funds. It has used patent law to force competitors to stop using similar calculations, which, say the competitors, puts them at an unfair disadvantage.

Before you dismiss this as too remote to have any effect on trucking, think about how much of your business these days relies on just this kind of intellectual capital. Just a few months ago, one of the country's largest truckload carriers sold its intellectual property rights to a paperless log system. That system will probably end up as product offered for sale to any fleet that wants it. But it's not inconceivable that if it hadn't been sold, the fleet could have claimed rights to the concept of paperless logs transmitted overwireless communications systems - and attempted to keep competitors from implementing similar systems.

If that still seems somewhat peripheral to your business, consider this. Some fleets have invested in developing rate-quote software programs for Internet-based systems. Patents have already been applied for, and approval could well open the question of who actually owns the concept of on-line rate quotation. If you're legally blocked from quoting rates over the Internet, that certainly presents a new and significant competitive barrier in what is supposed to be the age of the free marketplace.

About the Author

Jim Mele

Nationally recognized journalist, author and editor, Jim Mele joined Fleet Owner in 1986 with over a dozen years’ experience covering transportation as a newspaper reporter and magazine staff writer. Fleet Owner Magazine has won over 45 national editorial awards since his appointment as editor-in-chief in 1999.

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