If you are a freight broker, or just getting started in the trucking industry then you have undoubtedly heard of the term “double brokering.” But what does it mean? And more importantly, is it something that you need to be worried about?
In this blog post, we will answer these questions and more. We’ll also provide some tips on how to avoid double brokering in your own business. So, if you’re ready to learn more, keep reading!
What Is Double Brokering?
Double brokering is a term used to describe the practice of double-dealing between brokers – essentially, it’s when one broker (or carrier) takes a load from another broker and passes it off as their own in an attempt to sell the load.
The person who is responsible for the double brokering is basically trying to skim some of the profits of the load. This occurs largely in the trucking industry and is becoming a major concern for everyone who wants to play by the rules.
Is Double Brokering Illegal?
If your out in the field, or do a quick (uninformed) search online you may have had heard that double brokering is illegal, but is it really?
Double brokering isn’t technically illegal, there is not a FMCSA Regulation or law in place to prevent or punish the act. However, it is wildly frowned upon in the trucking industry.
The fact that it is not illegal is how countless people get away with it everyday. That doesn’t mean that you still wont get into trouble.
Double brokering may be a violation of the broker shipper agreement or the broker carrier agreement, so it’s definitely something to be concerned about.
The Difference Between Double Brokering and Co Brokering
You may have also heard of the term co brokering but you may not know the difference between double brokering and co brokering.
Co brokering is when two brokers work together to match a load with a carrier. Usually there is full disclosure and everyone in the transaction is aware of the working relationship.
This often happens when a freight broker or carrier is having a hard time finding equipment to move a load. They will call on another broker or carrier to see if they have anyone in their network who can help fill the need.
There again, everyone involved in the shipping arrangement should be aware of what is going on when attempting to co broker a load.
The easiest way to distinguish between co brokering and double brokering is to ask yourself – is any other party being hidden from one part of the shipping transaction?
What Risks Are There
As we mentioned earlier double brokering is highly frowned upon and it definitely has the potential to cause some serious problems for you and your company.
The foremost risk involved with double brokering is the legal risk. While double brokering is not illegal, it may be specifically prohibited in one of the operating agreements with a shipper or carrier.
Let’s say that a shipper hires a freight broker to move a load and their broker shipper agreement specifically prohibits the transfer of that load to another broker. If another freight broker or carrier takes that load and double brokers it, they could potentially face legal repercussions.
The same is true if a broker carrier agreement has a statement that prohibits double brokering. If the broker gives a load to a carrier and that carrier then tries to pass it off to another carrier while skimming some profits off the top, they could face legal action for violating the agreement.
Disadvantages Of Double Brokering
Let’s say that double brokering is not specifically prohibited in the broker shipper agreement or the broker carrier agreement, there are still some major disadvantages to it.
The biggest disadvantage is the risk of damaging your reputation as a freight broker. One of the most important things that we teach in freight broker training is how important your reputation is.
Many new freight brokers will attempt to double broker a load because they think that it is an easy way to score quick profits. In the long run this ends up hurting them more than anything.
Once the freight community notices that you’re double brokering loads, they will very likely quit doing business with you. Not only that, they will also begin to spread the word and it wont be long until your business is permanently tarnished.
Grow Your Freight Brokerage Carefully
Even though double brokering is not illegal, you should now understand that it can be severely damaging to your freight brokerage business.
There are no shortcuts in growing a solid business the right way. The freight community will appreciate a broker who is vigilant at spotting and deterring double brokering.
Always be on the lookout, and make sure that you have the proper agreements in place to protect yourself and your customers from double brokering.