The logistics industry faces a growing menace - double brokering.
This deceptive practice involves fraudulent intermediaries, posing as genuine carriers or brokers, who subcontract jobs without the shipper's awareness or approval. The repercussions of this fraud include delayed deliveries, lost revenue, and potential legal complications.
Recent reports indicate a concerning trend: TIA has reported a staggering 200% increase in double brokering cases last year. As noted by Anne Reinke, TIA's President and CEO, in an interview with Vishnu Rajamanickam, an oversaturated market has led to "too many carriers chasing less freight," contributing to double brokering.
The stakes are high.
Double brokering is not just deceitful - it's illegal. The practice can cost your freight brokerage time and money and tarnish your reputation.
This article aims to arm you with crucial information to identify and prevent this industry menace. We'll explore the mechanics and consequences of double brokering, equipping you with the knowledge to safeguard your operations and maintain the industry's integrity.
What is a double broker?
A double broker is a fraudulent intermediary who claims to be able to arrange transportation services but instead subcontracts the job to another carrier or broker without the shipper's knowledge.
There are two common instances:
- Double broker posing as a freight broker.
- Double broker posing as a carrier.
Double Broker Posing as a Freight Broker
There are instances of double brokering when a broker, who has already agreed to transport a shipment, gives the job to another broker without the permission or knowledge of the shipper. The result is a long chain of intermediaries, each taking a cut of the profits, ultimately reducing the carrier's earnings and increasing the shipper's costs.
Double Broker Posing as a Carrier
Double brokering can also occur when a broker arranges for a "carrier" to transport a load, but that "carrier" then outsources the task to another carrier for a reduced rate. The first carrier keeps the price difference without informing the initiating broker about the change. As a result, the broker remains unaware of the second carrier's safety record, insurance coverage, and other potential legal issues until problems arise.
In some cases, the carrier that transports the cargo doesn't receive payment from the carrier involved in double brokering. If the shipper who initiated the shipment receives complaints about non-payment, it can result in a complicated dispute involving three or four parties, including the broker.
Identifying Double Brokers
Spotting and preventing double brokering is an essential skill for all stakeholders at every level of a company. By being watchful and proactive, industry participants can foster an environment of trust and fairness, safeguarding the industry's future and reinforcing its reputation for excellence.
Vetting your Carriers
To avoid double brokering, working within your established carrier network is preferable. However, sometimes new clients require carriers out of network with specific equipment. It is crucial to evaluate new carriers thoroughly.
There isn't a single tell-tale sign of a double broker, but certain key factors can help differentiate between potential double brokers and reputable carriers.
Suggested Vetting Criteria:
- Business longevity - The easy setup of carrier authority leads to new MC numbers daily. Opting for carriers with longer business histories helps minimize double-brokering risks and promotes the safe transportation of goods.
- Safety record analysis - Carriers with multiple trucks should have had at least one inspection in the last year.
- Business address verification - Cross-check their address using tools like HaulHero and TIA Watchdog to ensure it's not a non-business location like a convenience store.
- Phone number and email validation using SAFER or Carrier 411 - If there's a mismatch, contact the listed number to discuss the load due to potential identity theft concerns.
- DAT Directory Seat - Refer to the DAT directory to verify an MC's DAT seat.
Though not exhaustive, this list serves as a solid foundation. Freight brokers should consider using tools like Carrier 411, Highway, TIA Watchdog, RMIS and Freight Validate. Each brokerage should develop a specific vetting process for new carriers. We can help eliminate double brokers and foster collaboration with authentic, industrious logistics companies by remaining diligent.
Common Red Flags of a Double Broker
Navigating the logistics industry requires keen attention to potential red flags that might signify the presence of double brokers. Here are some warning signs to watch out for and the appropriate steps to take if you encounter them:
Red Flag: Call Center Background Noise
You're talking to a carrier or dispatcher about a load, and the background noise sounds like a call center. For carriers that claim only 1 or 2 trucks in their fleet, it's even more suspicious if it sounds like a call center.
What to do: Do your research. Look for inconsistencies in their authority length, number of power units registered, number of inspections, or reports on Highway, Carrier 411, or TIA Watchdog.
Red Flag: No haggling
Negotiating rates is a common practice in the logistics industry. If a carrier does not negotiate, particularly when offered a low rate, it's important to be skeptical, even during a freight recession.
What to do: Run the lane in DAT or your preferred load board to see if somebody reposted it.
Red Flag: Driver using gmail
The driver requested you send the carrier packet to a random Gmail instead of a company email. Be more suspicious when the driver is part of a larger trucking company or fleet.
What to do: Call the carrier's company to verify the driver is associated with them and that the email is correct.
Red Flag: Driver refuses to talk on the phone
Verifying the driver and carrier before a load is good form. However, if the driver refuses to talk on the phone or a dispatcher refuses to give you driver information, you might have a double broker. Texting and email ONLY are big red flags.
What to do: Call the driver's phone number and see if a voicemail is set up. Many double brokers use free texting apps like TextNow or Google Voice for their drivers' numbers. Calling those will send you straight to voicemail or won't have a voicemail created.
Preventing Double Brokering for a More Trustworthy Logistics Industry
Double brokering presents a significant challenge within the freight and logistics industry. It undermines trust between carriers and brokers and can lead to a host of issues. Double brokers add an unnecessary layer of complication, often leading to inefficiencies and disruptions that harm service providers and clients.
However, it is essential to remember that the burden of combating double brokering does not lie solely with individual businesses. Double brokering is an industry-wide issue that calls for an industry-wide response. We urge all players in the freight and logistics sector to take a stand against double brokering by investing in practical tools and resources, developing strict vetting criteria, and maintaining a culture of transparency and ethical practice. Together, we can make strides in eradicating double brokering and fostering a more trustworthy and efficient logistics industry.
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