Double Brokerage: The Menace that Plagues Our Industry
We are sure you have heard of the Double Brokerage. It’s the practice where a third-party logistics (3PL) provider brokers a shipment to another 3PL without disclosing it to the shipper or the carrier.
Despite sounding harmless, double brokerage is a headache for businesses as it creates a lack of transparency. The shipper doesn’t know who is transporting their goods, leading to delays and lost revenue for everyone involved. Additionally, the intermediary 3PL is incentivized to find the cheapest carrier, leading to lower-quality service and unhappy customers. To make matters worse, double brokerage can result in legal complications.
In some jurisdictions, it is considered illegal and can lead to penalties and fines. In Q4 2022 and Q1 2023, Truckstop reported a 400% increase in double-brokering complaints.
The good news is that those involved in double brokerage will be held accountable. For instance, Tijuana resident Alexis Castillo Padilla ran a double-broker scheme using a stolen carrier identity from Spring Valley. He posed as a shipper and passed loads to other carriers who were unaware of the scheme. Padilla collected payments and left the actual carriers unpaid. The majority of the operation was run from Tijuana, Mexico. After being extradited to the US from Italy, Padilla pleaded guilty in federal court in October 2022 to charges related to defrauding brokers and interstate carriers in the trucking industry. He confessed to the charges and paid restitution to his victims, estimated at a minimum of $239,904.
The US legal system is taking action against double brokerage and holding culprits like Alexis accountable for the harm they’ve caused to the industry. However, this process is slow, so we as freight brokers must be cautious and vigilant to avoid falling into these traps. By exercising caution and intelligence, we can safeguard ourselves and our customers.