US Republicans have “heightened concerns” over USPS package business
An influential committee within the US Congress is investigating the US Postal Service over its competitive parcels business. The Oversight and Government Reform Committee in the House of Representatives has written to Postmaster General Megan Brennan demanding she respond to concerns about the possibility that the federal agency has been using its monopoly mail products to support its activities in the competitive parcels industry.
While regulators have said in recent months that USPS is in compliance, House Republicans said success seen in the Postal Service package business have heightened their concerns about how compliance is measured and controlled.
Under US postal law, the Postal Service has to ensure that any services it runs in competition with the private sector are profitable, to the extent that it is not seen to be gaining a competitive advantage in the industry because it also has a monopoly on services like First Class Mail.
USPS has to bring in enough revenue from its competitive products to cover all their costs, as well as a portion of overall USPS overheads — institutional costs — to show that the services are not cross-subsidised.
At the end of March 2015, regulators at the Postal Regulatory Commission concluded that in 2014 USPS did comply with these requirements for all services except two international money transfer services.
USPS brought in $15.3bn in revenue from its competitive products list in the 12 months up to the end of September 2014, with costs for running those services put at $11.2bn.
Concerns
However, the Republican-led Oversight Committee said this week that it was concerned because competitive products now generate 22.5% of all USPS revenue, “more than double the percentage in 2008”, because traditional mail volumes have declined dramatically while e-commerce has been propelling parcel volume growth.
The Committee, which is led by a Party that believes in small government and reducing federal interference in private markets, said recent USPS package growth had provided a “much-needed financial bright spot” for the federal agency.
But Chairman Jason Chaffetz said that growth in competitive products’ revenue in recent years meant regulatory controls on cross-subsidisation had become more important than when the current controls were brought into law in 2006.
“Opportunities for unlawful cross-subsidisation exist in a number of areas,” Chaffetz wrote to Brennan. “In fact, some of the Postal Service’s actions and public statements have heightened the Committee’s concerns about cross-subsidisation.”
The Committee chairman pointed to a statement within the USPS strategy for reducing the size of its mail processing network, which suggested that cutting operating costs would free up investment to boost the package business.
Chaffetz has given USPS a little under two weeks to provide his committee with information competitive products revenue, assets, performance and related matters from 2008 to 2014.
The Committee wants to know plans on how costs will be attributed to the major vehicle fleet renewal being planned by the Postal Service.
And, it wants detailed explanations on how the Postal Service calculates its costs for competitive services, and why “cost attribution, as a percentage of total costs, has declined” since the last major postal act was passed by Congress in 2006.
