Nexus: Chapman's Journal of Law and Public Policy

Many residents of California do not know that their state is home to the world’s second largest port, in terms of tonnage handled, just behind Singapore. Even some that know that trivia do not know what that means to the economy of the state. It means money, big money. California and California companies in the logistics business get a piece of 50% of the imports for all of the United States.

There is no surprise that many have seen opportunities for rent seeking in connection with the port. The latest move has been a Baptist and Bootleggers move, or unholy alliance between environmentalists who want to clean up the air in and around the harbor area, and the Teamsters, who have officers who want to up their salaries by adding dues paying members.

It may not be obvious how both can accomplish their ends. The game was played as follows: The Teamsters tried to organize the 16,000 owner-operator truckers in the harbor. Their effort failed because of the anti-trust implications: 16,000 separate businesses cannot fix prices (no one has ever accused the Teamsters as being the smartest organization in the world, but some have accused them of being the greediest). Calling for backup, the Teamsters then formed the unholy alliance with the environmental lobby. The environmentalists pointed out how California was about to lose a lot of federal funding because of non-compliance with the clean air act. The Teamsters pointed out that the 16,000 owner-operators did not make enough money to buy new, lower emission 2007 or 2010 trucks. (This was slightly ironic, as when trucking was de-regulated in the early 80s, the Hispanic politicians of the state were calling for the opportunity for these same individuals to throw off their employment yoke and become their own businesses) If the harbor wanted their federal money, they needed to turn the owner-operators in employees of large trucking companies, who were “rich” and could afford the new, lower emission trucks.

They found the perfect man in government to work with, former Teamster organizer, and Los Angeles mayor Antonio Villaraigosa. He just happened to have appointed all five of the Los Angeles Harbor Commissioners, and they decided that the Commission could regulate both type of trucks and employment status of the drivers because they were the landlord. (The Los Angeles and Long Beach Harbor commissions own almost all of the land in the two harbor areas. Borax might own the only remaining private berth.) The Port of Long Beach was lock step with the Port of Los Angeles on all issues.

The American Trucking Association instigated litigation in Federal District Court, arguing that the regulation was a violation of the commerce clause, as all cargo passing through the ports was interstate commerce. So far, the Court has struck down all of the employment provisions of the regulation, and the Teamsters have lost big in their rent seeking bid. The Port of Long Beach has broken ranks with Los Angeles, and has dropped all the employment provisions.

All that is left is to see who is going to foot the bill. The shippers are trying to force the cost back on the truckers. The truckers are having trouble absorbing the cost, because their margins, in their commoditized market, are already in the low single digits. In the end, to clean up the air in California, it seems likely that the cost to ship through Long Beach and Los Angeles will increase. Everyone who buys goods imported through the ports will foot the bill, which is a market efficient outcome. So far, so good, but the final chapter has yet to be written.