PRC denies USPS request to reclassify first class mail parcels

PRC denies USPS request to reclassify first class mail parcels

The US Postal Regulatory Commission (PRC) has denied a request submitted by the United States Postal Service (USPS) in November to transfer first class mail parcels (FCMP) from the “market dominant” product list to the competitive product category. Essentially, USPS had argued that FCMP should be reclassified because it faces competition in this service sector from private sector parcel carriers like UPS and FedEx – and therefore lacks “market power”.

However, in its Order No. 2686 issued yesterday (26 August), the PRC found that “the Postal Service does not provide sufficient evidence demonstrating that it lacks market power”.

The PRC added: “To transfer the product, the statute requires the Postal Service to demonstrate that it lacks market power such that it is precluded from effectively setting the price of Single-Piece, First-Class Mail Parcels substantially above costs, raising prices significantly, decreasing quality, or decreasing output, without risk of losing a significant level of business to other firms offering similar products. Therefore, the Single-Piece, First-Class Mail Parcels product may not be transferred from the market dominant category without violating the prohibitions.”

The PRC order did, however, include a joint note of dissent from the Acting Chairman Robert G. Taub and Vice Chairman Tony L. Hammond which stated: “We dissent from today’s Order. We find that it contradicts established Commission precedent, conflicts with the reality of the marketplace, and will work to the detriment of both the Postal Service and its competitors.

“To begin, according to the Order, it is unclear whether UPS and FedEx compete with the Postal Service to deliver parcels. In reply, it would be enough to observe that scarcely anyone who sends a parcel in this country is unaware that there are two major carriers besides the Postal Service ready to deliver it. The competition is obvious.

“Perhaps for this reason, the Order implies that the Commission could have been persuaded otherwise, if not for the alleged inadequacy of the Postal Service’s evidence. In fact, the Postal Service has thrice appeared before this Commission with the very same evidence, and thrice has the Commission found it sufficient. The Order does not explain why the same evidence is now found wanting.

“As a result of today’s decision, the Postal Service could lose more than $100 million in annual revenue, with future losses potentially higher. Equally important, the Postal Service’s competitors could face a market that is potentially distorted by an artificially underpriced product.”

Click here to access a full copy of the PRC Order No. 2686.

 

 

 

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