[Federal Register Volume 61, Number 151 (Monday, August 5, 1996)]
[Notices]
[Pages 40671-40675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19754]
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POSTAL RATE COMMISSION
[Order No. 1128; Docket No. C96-1]
Complaint of Coalition Against Unfair USPS Competition; Order
Denying Motion of United States Postal Service To Dismiss Proceeding
and Notice of Formal Proceedings
July 30, 1996.
The Commission has before it a Complaint against the United States
Postal Service pursuant to 39 U.S.C. Sec. 3662 which concerns a ``Pack
& Send'' service, hitherto unknown to and never reviewed by the
Commission, and the rates or fees which the Service is charging for
providing that service. Complainant, a coalition consisting of
organizations and individuals doing business in the Commercial Mail
Receiving Agency (``CMRA'') industry, alleges that the Postal Service
is charging rates which do not conform to the policies of the Postal
Reorganization Act, inasmuch as it is rendering a postal service
without first having requested a recommended decision on the service
and its rates from the Commission. The Postal Service concedes that it
is offering the service on a trial basis at a limited number of
facilities, but denies that its ``Pack & Send'' service is within the
Commission's jurisdiction under Sec. 3662 because it is not ``postal''
in character. On that ground, it moves to dismiss the complaint.
The factual assertions of Complainant and the Postal Service
conflict on some, but not all, points. Furthermore, the information
offered to support the conflicting factual claims is incomplete, and
does not justify a conclusion at this time either that Pack & Send is,
or is not, postal in character. However, some of the information
already presented would tend to support an inference that Pack & Send
is a postal service, and the Commission believes that further inquiry
into this matter would be appropriate. Because the Commission reaches
the preliminary conclusion that the Complaint may be justified,
depending on the ultimate state of the facts concerning the Pack & Send
service offering, the Postal Service's motion to dismiss shall be
denied. Formal proceedings to develop an evidentiary record will be
conducted in this docket.
Substance of the Complaint. In its Complaint filed May 23, 1996,
the Coalition Against Unfair USPS Competition identifies its membership
as organizations engaged in the franchising of stores in the CMRA
industry, together with individual franchisees who independently own
[[Page 40672]]
and operate CMRA stores nationwide. According to the Complaint,
``[e]ach of the individual stores offer pack and send services as part
of the overall retail value-added services provided in these stores.''
Complaint at 2. Consequently, the Complaint alleges, by offering the
Pack & Send service the Postal Service ``is in effect going into direct
competition with the CMRA industry * * *'' Ibid.
The Complaint is accompanied by several attachments intended to
document particulars of the Pack & Send service, its competitive
purpose, and the terms under which it is being offered. Complaint,
Attachments 2-3, 5. Also included is an affidavit reporting the
experience of an individual customer who purchased Pack & Send service
in a Postal Service retail store in Anchorage, Alaska. Id., Attachment
4.
Complainant alleges that the Postal Service is providing the Pack &
Send service as a postal service, but without having submitted a
request to the Commission as required by the Reorganization Act.
According to Complainant, the status of Pack & Send as a postal service
is established by the fact it is being ``bundled'' with acceptance for
mailing by postal clerks; by a description in the 1995 Annual Report of
the Postmaster General that casts the service as part of a mailing
transaction; and by the Service's failure to include the Pack & Send
service with other non-postal services specified in connection with its
request in Docket No. MC96-2. Id. at 4-5. The Coalition identifies 11
areas where the Postal Service is offering the Pack & Send service, and
assert on the basis of anecdotal evidence ``that the implementation of
this service is burgeoning.'' Id. at 5. Citing a Postal Service
publication which discloses an average packing charge of $3.24, the
Complaint also claims that, ``the Postal Service is not pricing this
service based on any attribution of costs * * * pricing is based on
`what our competitors charge.'' Id. at 3, quoting Attachment 2.
The Coalition observes that the Domestic Mail Classification
Schedule contains no classification provision for Pack & Send, and that
no reference can be found for an approved rate for the service.
Complainant also states it has no knowledge that the service has ever
been submitted for a rate or classification decision by the Commission.
The only rationale that would support these omissions as lawful under
the Reorganization Act, Complainant states, would be a conclusion that
Pack & Send is not a postal service. Citing court decisions which dealt
with distinguishing ``postal'' from ``non-postal'' services, the
Coalition argues that this conclusion would not be justified for the
Pack & Send service because the terms under which it is offered prove
``that Pack & Send is a service so closely related to the delivery of
mail that it clearly is a postal service.'' Id. at 8.
In response to its Complaint, the Coalition requests that the
Commission provide relief in the following forms: (1) issuance of an
opinion that the Postal Service is offering Pack & Send in violation of
the Reorganization Act; (2) initiation of a proceeding pursuant to
sections 3622 and 3623 leading to a recommended decision on the Pack &
Send service to the Governors; (3) transmission of the opinion in item
1 to the Governors, together with a request that the Postal Service be
directed to suspend its offering of Pack & Send until it has submitted
the service to the Commission for a recommended decision; and (4) any
other appropriate relief consistent with the requests in the first
three items.
Postal Service Answer. The Postal Service responded to the
Complaint in an Answer filed on June 24, 1996. The Service denies that
it is offering Pack & Send service on a nationwide basis, but states
that it ``has begun to offer packaging on an experimental basis at a
few selected retail outlets.'' Answer at 2. The Service also denies
that Pack & Send is a ``bundled'' service that necessarily entails
mailing. It asserts that ``Pack & Send'' refers only to the packaging
of items by the Service, and that: ``Customers of the packaging service
need not send their packaged items through the Postal Service in order
to have them packaged.'' Id. at 9.
The Postal Service denies that, by offering a packaging service, it
has ``launched itself into competition with the CMRA industry[.]''
Instead, the Service claims, ``any existing competition between the
Postal Service and the CMRA industry was created by the CMRA
industry.'' Id. at 3. The Service also denies that there is any
foundation for Complainant's characterization of Pack & Send as not
being priced on the basis of attributed costs. Id. at 9. The Postal
Service does admit that the packaging service has not been the subject
of a rate or classification proceeding pursuant to 39 U.S.C. Secs. 3622
or 3623 respectively, and that the Domestic Mail Classification
Schedule does not include a separate classification for packaging. Id.
at 2, 5 and 7.
In response to sections 84 (b) and (c) of the rules of practice,
the Postal Service takes the position that the Complaint is not
properly before the Commission. The Service claims that the subject of
the Complaint is no more than a ``limited parcel packaging trial,''
(id. at 8), and asserts that it ``is not a postal service, within
previous interpretations of the term.'' Id. at 9. Because, in the
Service's view, the Commission lacks jurisdiction to review the
Complaint, the Postal Service also claims that a hearing is unnecessary
and the relief requested is inappropriate. Therefore, the Service
asserts, the Commission should dismiss the Complaint.
Postal Service Motion to Dismiss and Memorandum. Three days after
filing its Answer, the Postal Service submitted a motion to dismiss the
proceeding with prejudice ``on the grounds that the subject matter of
this proceeding does not fall within the scope of 39 U.S.C.
Sec. 3662.'' Motion of the United States Postal Service to Dismiss
Proceeding, June 27, 1996, at 1. The Service also filed a memorandum in
support of its motion, accompanied by an annotated copy of the
Complaint and a Declaration of a Postal Service manager. Memorandum in
Support of Motion of the United States Postal Service to Dismiss
Proceeding, June 27, 1996.
The Postal Service's memorandum consists of factual statements
which describe the parcel packaging service and legal arguments which
rely on those statements. The statements of fact are based on the
attached Declaration of Hugh McGonigle, who states he is the Manager of
Alternate Retail Services. On the basis of the McGonigle Declaration,
the Postal Service states that parcel packaging service is currently
available on a limited, trial basis at approximately 230 post offices
in various areas throughout the United States; that it was initiated to
provide a convenience to customers; and that the purpose of the limited
testing has been measurement of customer interest and assessment of the
service in operation. Memorandum at 1-2.
The Postal Service Memorandum also draws from the McGonigle
Declaration to describe the transaction whereby an interested customer
can procure packaging service from a window clerk at a facility which
offers Pack & Send. According to the Service's description, at one
point in the transaction the customer is free to ``choose whether he or
she wants to send the package through the Postal Service, to pay for
and accept only the packaging, or to retrieve the item and terminate
the transaction entirely.'' Id. at 2. The Service represents that the
experience reported in the affidavit appended to the Complaint
(Attachment 4)--in which Ms. Chou reports being told by a
[[Page 40673]]
window clerk that she could not purchase Postal Service packaging
unless the item to be wrapped was also mailed through the Service--``is
contrary to the Postal Service's intent in offering packaging[,]'' and
that there is ``no reason to consider this occurrence anything other
than an isolated incident.'' Id. at 3. However, the Service also notes
that, ``system-wide operational instructions have not been finalized
and distributed [for Pack & Send].'' Ibid. In light of the assertions
in the Coalition's Complaint, and in order to ensure consistency in
conducting the Pack & Send trial, the Service states that it has issued
a directive to remind postal personnel that customers may purchase only
packaging, if desired. Ibid. That directive is attached to the
McGonigle Declaration.
Based on its representations of fact, the Postal Service presents
several arguments against Complainant's assertion that Pack & Send is a
``postal'' service. First, the Service cites the decision in Docket No.
R76-1, in which the Commission found the Postal Service's offering of
``postal related products'' such as padded shipping bags, postal scales
and packing material, to be ``too attenuated'' in their relation to the
carriage of mail to place them within the Commission's jurisdiction.
Id. at 4, quoting PRC Op. R76-1, Vol. 2, App. F at 20-21. The Service
argues that packing service properly belongs in the same non-postal
category as these shipping products, and that its relationship to
collection, transmission and delivery of mail is insufficiently close
to deem it a postal service. Memorandum at 5.
The Postal Service also argues that Complainant's assertions fail
to justify any departure from this conclusion. The Service cites the
McGonigle Declaration to rebut Complainant's claim that packaging
service is necessarily bundled with mailing. Ibid. It also denies that
Attachment 2 to the Complaint, which Complainant terms an advertising
circular but the Service characterizes as a ``motivational tool
directed to postal personnel,'' (id. at 6), amounts to a statement of
Postal Service policy, or supports any inference that the Service
recognizes Pack & Send as a postal service. Id. at 6-7. The Service
also denies that its Compliance Statement filed with its Request in
Docket No. MC96-2 supports such an inference, as parcel packaging ``was
not widely available on a permanent basis[]'' when that filing was
made. Id. at 7. Finally, the Postal Service disputes that Attachment 5
and anecdotal evidence cited in the Complaint establish that Pack &
Send is available on a nationwide basis. Id. at 8-9.
The Postal Service's Memorandum concludes with arguments that the
judicial authorities cited by Complainant do not support the conclusion
that Pack & Send is a postal service. The Service asserts that parcel
packaging clearly does not fall within the ATCMU court's standard of
``very closely related to the delivery of mail'' 1 or the NAGCP
court's standard of ``clearly involv[ing] an aspect in the posting,
handling and delivery of mail matter.'' 2 To the contrary, the
Service argues that packaging is more similar to the sale of packing
and wrapping materials, which the Commission found not to constitute
postal service in the decision in Docket No. R76-1. The Service notes
that packaging service is not limited exclusively to the mailing
function; that close (if not identical) substitutes are available from
other sources such as Complainant's membership; and that Pack & Send is
not tied to postal services in any manner that would change its non-
postal character. Id. at 9-11.
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\1\ Associated Third Class Mail Users v. United States Postal
Service, 405 F. Supp. 1109, 1115 (D.D.C. 1975), aff'd, National
Association of Greeting Card Publishers v. U.S. Postal Service, 569
F.2d 570 (D.C. Cir. 1976), vacated on other grounds, United States
Postal Service v. Associated Third Class Mail Users, 434 U.S. 884
(1977).
\2\ National Association of Greeting Card Publishers v. U.S.
Postal Service, 569 F.2d 570, 596 (D.C. Cir. 1976).
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Response of Complainant. The Coalition responded to the Postal
Service's Motion to Dismiss in an Opposition filed on July 8, 1996. It
challenges the Service's arguments that the Pack & Send service is non-
postal, particularly the analogy to the sale of packing materials.
Complainant argues that the more persuasive and relevant analogy is to
the sale of postal money orders, which was found to be a regulated
postal service by the court in the ATCMU case on the ground that the
vast majority of money orders sold at post offices are actually sent by
mail. Even if a postal customer is allowed to procure Pack & Send
service without mailing the package, Complainant asserts, ``it is
extremely unlikely that a postal customer will use another shipping
service when that service is not available at the postal facility.''
Opposition at 4.
Complainant also challenges the Postal Service's interpretations of
the information attached to the Complaint, and argues that the totality
of Postal Service material available on the Pack & Send service
indicates a goal of providing a service that is integrated with
mailing. As support for this position, the Coalition cites the ``box
it, pack it, and send it'' characterization in the Annual Report of the
Postmaster General; the similar description in the advertising circular
at Attachment 5 to the Complaint; the $2-off coupon which reads ``Let
Us Box, Pack and Ship Your Gifts''; and the reference to ``truly one-
stop shopping for [customers'] mailing needs'' in the June 1995 issue
of USPS Update also included in the Attachment. Opposition at 5-6.
Additionally, Complainant suggests that the Postal Service's declared
policy in favor of selling Pack & Send service separately, stated in
the McGonigle Declaration and attached Memorandum of June 24, may have
been crafted to avoid the Commission's jurisdiction, and in any event
``is subject to change on a moment's notice. * * *'' Id. at
4-5.
Complainant also argues against the Postal Service's denial that it
is offering Pack & Send service nationwide, and claims the Service is
relying on an erroneous legal premise. The Coalition notes that the
Complaint does not allege that the service is available nationwide, and
that declarant McGonigle admits that Pack & Send is available in
various areas throughout the United States. In any event, Complainant
argues, whether or not the service is nationwide is essentially
irrelevant because applicable law requires a rate request to the
Commission even for temporary, limited or experimental postal services.
Id. at 6-7.
Finally, Complainant suggests that additional factual questions
about Pack & Send are raised by the Postal Service's specific denial
that packaging service is performed by postal clerks. The Coalition
states that its allegation that postal clerks perform the Pack & Send
service was intended as no more than a routine factual recitation, and
that the Service's denial without further elaboration leaves questions
about who will perform the service unresolved. Complainant argues that
these outstanding factual issues provide another reason for denying the
Postal Service's motion.
Disposition of the Motion to Dismiss. As both the Coalition and the
Postal Service have recognized, the pivotal issue posed by the
Complaint at this juncture is whether the Pack & Send service is
``postal'' or ``non-postal'' in character. If the service is deemed
``postal'' in nature, Complainant's challenge of the rates or fees
charged is appropriate for consideration under the terms of 39 U.S.C.
Sec. 3662. On the other hand, if the service is found to be ``non-
postal,'' then the rates or fees charged
[[Page 40674]]
are outside the purview of Sec. 3662, and the appropriate disposition
of the complaint is dismissal.3
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\3\ The Coalition correctly notes that the geographic extent of
the locations in which Pack & Send service has been offered is
essentially irrelevant to this determination. The provision of Pack
& Send service on a ``nationwide or substantially nationwide basis''
[39 U.S.C. Sec. 3661(b)] could be a ground of jurisdictional dispute
in a proceeding to consider a proposed change in the nature of
postal services pursuant to Sec. 3661, but the Commission has no
such Postal Service proposal before it.
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Determining whether the Pack & Send service is ``postal'' or ``non-
postal'' in character requires the application of legal standards to
the available facts. While it has been stated in a variety of ways, the
primary standard 4 that has been applied in analyzing different
services is:
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\4\ One alternative basis for finding a service to be ``non-
postal'' applies where the service relates exclusively to
performance of an activity, independent of the carriage of mail,
which the Postal Service is required or authorized to perform. Such
activities include the sale of migratory bird hunting stamps and
philatelic transactions. See PRC Op. R76-1, Vol. 2, App. F at 1-2;
Docket No. C95-1 (Complaint of David B. Popkin), Order Dismissing
Complaint (Order No. 1075), September 11, 1995, at 3-5. The Postal
Service has not claimed that the Pack & Send service is ``non-
postal'' by virtue of its relationship to any such activity.
* * * the relationship of the service to the carriage of mail. Those
which can fairly be said to be ancillary to the collection,
transmission, or delivery of mail are postal services within the
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meaning of Sec. 3622.
PRC Op. R76-1, Vol. 2, Appendix F at 3. Application of this standard
looks not only at the intrinsic features and terms of the service, but
also considers the extent to which use of the service culminates in use
of the mails.5
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\5\ This latter consideration was the basis on which the sale of
money orders was found to be a postal service in the ATCMU case,
supra. The Postal Service notes that the Commission ``has
questioned'' the validity of this jurisdictional analysis with
respect to money orders in the R76-1 decision. Postal Service
Memorandum at 10, n. 6. The Commission did express doubt regarding
the jurisdictionality of money orders in the R76-1 decision, and
opined that a standard more strict than that applied by the District
Court in ATCMU would be appropriate. PRC Op. R76-1, Vol. 2, App. F
at 12. Nevertheless, the Court of Appeals subsequently relied on the
same rationale employed by the District Court in finding the
provision or money orders to be postal in nature. NAGCP, supra, 569
F.2d 596.
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The facts presented thus far regarding the Pack & Send service are
fragmentary and to some extent controverted. However, even when viewed
in a light favorable to the Postal Service, the available facts do not
warrant a summary determination at this time that the service is non-
postal in character.
First, regardless of whatever relation Pack & Send may have to
other activities that are recognized as postal, the packaging service
itself is a form of mail preparation activity that is familiar in the
postal marketplace. It is a type of work that can be performed by the
shipper, the carrier, or a third party intermediary such as one of the
Coalition's members. Thus, the Postal Service's provision of the Pack &
Send service could be viewed as a form of worksharing in reverse--
compensation of the Postal Service for a mail preparation activity that
would otherwise be performed by the sender of the parcel or a third
party.
Second, it appears that the Postal Service has structured the
transaction in which the Pack & Send service is provided in a manner
which closely associates payment for the service with payment for
packing materials and payment of postage. Postal Service Memorandum at
2; Declaration of Hugh McGonigle at 1-2. The use of an Integrated
Retail Terminal (IRT) to calculate and sum the respective charges for
packing materials, the Pack & Send packaging service, and applicable
postage is neither unreasonable nor sinister. However, this arrangement
does raise the question of the extent to which purchase of the Pack &
Send service, and payment of the applicable rate or fee, is
disaggregated from payment of postage. Even after reading Mr.
McGonigle's description of the transaction, it is far from clear how a
customer is separately charged for packing materials and the Pack &
Send service.6
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\6\ In his description of how the parcel packaging service
works, Mr. McGonigle states that a customer submits an item to a
window clerk, who weighs the item on an IRT. The clerk determines
the appropriate box size, the fragility of the item to be packaged,
and ``the price and weight of the selected box.'' Declaration at 1.
At this point, apparently, the charge for packing materials has been
established. The clerk then adds the weight of the packaging to the
weight of the item, enters that total on the IRT, and enters the
class of service selected by the customer and the destination ZIP
Code to calculate the total postage that would apply to the piece.
Then, according to Mr. McGonigle, ``[t]he clerk enters the box price
into the IRT, which generates the total price for packaging and
mailing the piece.'' Id. at 2. (Emphasis added.) On the basis of
this description, it is impossible to identify a separate charge for
the packaging service. Additionally, the photocopies of Postal
Service receipts appended to Ms. Chou's affidavit (Complaint,
Attachment 4) shed no light on this question; no separate charges
for packing materials or the Pack & Send service appear on the
receipts.
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Finally, even if one assumes that the policy directive (attached to
the McGonigle Declaration) to provide Pack & Send service without also
requiring mailing is observed scrupulously throughout the Postal
Service, that fact alone would not necessarily establish the non-postal
status of the service. It is possible, as Complainant argues, that the
vast majority of customers who purchase the Pack & Send service go on
to pay postage and deposit the parcel in the mail. The extent to which
this is the case may bear importantly on the postal or non-postal
character of the service, as the courts found in the ATCMU and NAGCP
decisions.
In light of the incomplete state of the facts available concerning
the Pack & Send service, the Commission is not prepared to declare at
this time that it is, or is not, postal in character. For this reason,
the Postal Service's motion to dismiss the proceeding shall be denied.
Furthermore, because some of the information already presented would
tend to support an inference that Pack & Send is a postal service,
there is reason to believe that the Coalition's Complaint may be
justified. Inasmuch as the Pack & Send service and its rates or fees
have not been the subject of a Postal Service request and scrutiny in a
public proceeding before the Commission, the rates or fees charged may
prove not to conform to the policies of the Reorganization Act if the
Pack & Send service is shown to be postal in nature.
Proceedings to Consider Complaint. Given the nature of this
controversy, there appears to be little likelihood that the matter
could be settled or resolved under informal procedures. Because, in the
Commission's view, resolution of this Complaint would be assisted by
the production of additional facts concerning the Pack & Send service
and development of a public record, the Commission has determined under
Sec. 86 of the rules of practice that a formal proceeding pursuant to
39 U.S.C. Sec. 3624, with an opportunity for hearing, should be held in
this docket. This will enable Complainant and other interested parties
to develop information through discovery and to make evidentiary
presentations, as well as allow the Postal Service to present its
response.
In order to develop a procedural schedule for this docket,
Complainant is directed to provide a statement, due 10 days from
issuance of this order, estimating the amount of time it will require
to develop and file a case-in-chief. The Commission will thereafter
issue a procedural schedule and special rules of practice, if any.
It is ordered:
(1) The Motion of the United States Postal Service to Dismiss
Proceeding, filed June 27, 1996, is denied.
(2) Proceedings in conformity with 39 U.S.C. Sec. 3624 shall be
held in this matter.
(4) The Commission will sit en banc in this proceeding.
(5) Notices of intervention shall be filed no later than August 26,
1996.
[[Page 40675]]
(6) W. Gail Willette, Director of the Commission's Office of the
Consumer Advocate, is designated to represent the general public in
this proceeding.
(7) Complainant shall provide a statement, due August 12, 1996,
estimating the amount of time it will require to develop and file a
direct case in this proceeding.
(8) The Secretary shall cause this Notice and Order to be published
in the Federal Register.
By the Commission.
Cyril J. Pittack,
Acting Secretary.
[FR Doc. 96-19754 Filed 8-02-96; 8:45 am]
BILLING CODE 7710-FW-P
