Landstar System has cut more than 35,000 motor carriers from its approved network over the past four years, shrinking the pool of capacity available to haul its brokered freight by roughly 35%.
Matt Miller, Landstar's vice president and chief safety and operations officer, disclosed the reduction during the Jacksonville, Florida-based company's second-quarter earnings call on July 28. "Over more than 20 years in brokerage, we've always looked for ways to enhance our carrier vetting with people, process, technology, and information," Miller said. "Over the past four years, we've gone from over 100,000 approved carriers in the second quarter of 2022 to just over 64,000 at the end of the second quarter or a 35% reduction." Landstar officials said the aim was to tighten the company's focus on safety, security and service.
Carrier pool down a third in four years
According to FreightWaves, the reduction represents more than 35,000 carriers removed from Landstar's approved network since mid-2022. Commercial Carrier Journal first highlighted the size of the reduction. Overdrive, a sister publication of CCJ, reported that Landstar's effort initially focused on combating cargo theft and freight fraud, with the company deploying enhanced vetting technology, identity checks and stricter compliance measures.
Landstar's approved carrier pool stood at approximately 64,600 at the end of the second quarter, down another 7% year over year after declining 19% in the first quarter, according to previous FreightWaves reporting. The company, which trades on Nasdaq as LSTR, is an asset-light transportation logistics company operating through a network of independent freight agents and third-party capacity providers.
| Metric | Q2 2022 | End of Q2 | Change |
|---|---|---|---|
| Approved carriers | over 100,000 | ~64,600 | -35% |
| YoY change (latest Q2) | — | -7% | — |
| YoY change (previous Q1) | — | -19% | — |
Supreme Court ruling raises stakes for carrier vetting
Landstar's multiyear carrier purge takes on additional significance following the U.S. Supreme Court's May ruling in Montgomery v. Caribe Transport II, which widened the potential liability exposure facing freight brokers over the selection of motor carriers, according to FreightWaves. The ruling has heightened concerns across the brokerage industry about how companies select and monitor carriers, potentially increasing the importance of documented vetting procedures.
"We believe greater Federal clarity around carrier vetting and selection standards would help support a more predictable operations, insurance, and claims environment for truck brokers, carriers, and shippers," said Landstar CEO Frank Lonegro.
Landstar CFO Jim Todd said the decision means broker liability cases that previously may have been dismissed on federal preemption grounds could now have to be litigated. "I think there's certainly going to be some element of plaintiffs being more emboldened to pursue these cases," Todd said during the Q2 earnings call, according to FreightWaves.
Financial fallout and insurance renewal
Landstar reported approximately $10.5 million in unfavorable adjustments to prior-year claims during the second quarter, with three of the five claims responsible for nearly all of that adjustment involving truck brokerage operations. Nevertheless, the company reported a relatively favorable insurance renewal after the Montgomery decision: its auto liability coverage was effectively flat at its June 1 renewal, while broker liability costs increased about 3%, according to Miller.
What the smaller network means for shippers and agents
Landstar's approved carrier pool of roughly 64,600 at the end of the second quarter leaves a materially smaller base of vetted capacity for shippers and independent agents to draw from, according to FreightWaves. The company has said its scale, safety record, technology and insurance programs could become competitive advantages following Montgomery. Landstar recently signed an $18 million Midwest freight broker as an independent agent, and Lonegro said inquiries from prospective agents have accelerated since the Supreme Court decision was released in mid-May.
Watch list
- Miller indicated Landstar has no plans to ease scrutiny of carriers. "As new technologies and information become available, we're going to continue to do just that, exactly what we've been doing," he said. "We're always looking for opportunities to drive safety, security, and service."
- Lonegro's call for federal clarity on carrier vetting and selection standards could shape future regulation, according to FreightWaves.
- Todd's expectation of emboldened plaintiffs suggests broker litigation trends bear watching after Montgomery.
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