Regulation, Deregulation, and Reregulation in the Surface Transportation Industry

Transportation deregulation has produced enormous benefits for consumers and shippers. Airfares and trucking rates are decreased a lot; the nation’s railroads are offering new services. A few years ago, passenger and freight transportation were among the most heavily regulated industries in the United States.

Now federal regulation has been totally eliminated for air freight, and air passenger controls are being phased out. Furthermore, in 1980 Congress passed the Motor Carrier Act and the Staggers Rail Act, which significantly reduced Interstate Commerce Commission control over truckers and railroads. This wave of deregulation stems from a growing recognition that government controls of transportation have not fostered the public interest. Regulatory agencies tend to protect the interests of the industries they regulate and regulatory agencies reduce competition at the expense of the public.

There is the question that the current deregulated environment is appropriate or whether a return to some additional oversight is necessary. The reregulation appears to be primarily in the area of safety and size regulation for the motor carrier sector. The side effect is that that when traffic is competitive with the railroads, the motor carrier rates act as a constraint on rail rates.

Moreover, as a result of deregulation allowing rail mergers with less regulatory oversight, the industry has shrunk to four primary railroads carriers. The industry should consider the possibility of supporting reregulation as a means of increasing profitability, but many shippers argue that the reduction in the number of potential carriers has led to abuses of market power when there is only one dominant carrier.

Sources:

http://onlinepubs.trb.org/onlinepubs/millennium/00097.pdf

http://www.cato.org/pubs/pas/pa012.html

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