Online shoppers love a great deal and “free shipping.” Here in Texas, we know a few things about shipping. Texas leads the nation in shipping, moving more than $3.1 trillion worth of goods each year, according to TxDOT. But the cost of moving goods from the warehouse to the consumer is far from $0.

This “free shipping” perk makes it hard for Texans to see the factors driving the rising cost of goods and services. An example of one of these hidden drivers of ever-increasing costs is a unanimous decision by the Supreme Court of the United States (SCOTUS) earlier this month. The ramifications for the 9-0 decision in Montgomery v. Caribe Transport II, LLC have yet to be seen, but they will soon start showing up in grocery stores, gas stations, pharmacies, and, yes, that online shopping cart.

SCOTUS Severs Federal Protection for Freight Brokers

The Supreme Court found that freight brokers—the middlemen who help connect producers with transportation companies to ship goods—are not protected from liability lawsuits under a 1994 Federal Aviation Administration law. Up until now, everyone thought they were. That federal protection kept these brokers out of lawsuits stemming from accidents involving the transportation companies. Consequently, the freight brokers did not insure for this risk. Now, they find themselves subject to state transportation safety laws and state-court judgments for crashes they did not cause.

What This Means in Texas

Several factors point to economic distress in the coming years as Texas brokers shift their operating protocols to meet new liability standards. If a trucking company is sued for an accident, the broker is now likely to be sued as well. Here is how that will likely impact Texas shoppers and businesses.

• Texas-sized Industry: In 2022, the state’s shipping companies moved 3.4 billion tons of goods valued at about $3.1 trillion (the highest in the nation).
• 10,000+ Texas Businesses: That’s how many freight brokerages operate in Texas (the largest in the nation due to the border, ports, and diverse industries), and most of them are small-to-mid-sized businesses.
• Insurance Gap: Because of the federal protection, most of these companies don’t have liability insurance. The industry is already strained by lawsuit costs, and now 10,000 businesses will need to buy into the market, on top of the transportation companies they work with to connect consumers. That means higher costs for those services, which will get passed along as the market adjusts.
• Billboard Lawyers: About a third of all nuclear verdicts ($10 million+) in Texas come from auto accident cases with a high propensity for targeting transport companies. In 2023, Texas handed out six of the Top 10 largest verdicts totaling more than $200 million.
• Pay Up or Close Up: These smaller freight brokerage companies will either absorb the added costs or be forced to close due to high insurance premiums, which are pricing them out of the market. That means job losses, less competition in the industry, and higher costs to deliver the same service. FreightWaves CEO Craig Fuller estimated that the “extinction event” could affect as many as 50% of freight brokers nationwide.
• It Touches Every Industry: Energy, Construction, Agriculture, Health Care, Retail, Entertainment. If it isn’t grown or manufactured entirely in-house, there’s a cost to making, serving, and selling everything that comes through the door.

What This Means for Texas Shoppers

Shipping has never been free; it’s baked into the cost of common items. Whether you pick them up at a store or off your front porch, the price of those items goes up as shipping costs rise. 

Prior to this SCOTUS ruling, it was estimated that added lawsuit costs would increase food prices by 15% over the next decade. The “hidden tort tax” costs each Texas family more than $4,400 per year due to higher costs for goods, services, and living expenses. Those costs continue to increase year after year as lawsuit abuse gets worse.

Based on the U.S. Chamber’s data pointing to food price increases over the next decade, the annual cost to Texas families could increase by $150-$300 following the SCOTUS ruling. 

And so, “free shipping” isn’t truly free. And the cost of shipping everything is about to go up.