Joint Appendix — Air Courier Conference of America v. American Postal Workers Union
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‘fi. Morne Gonos
if’ FILED
JUL 27 eH
No. 89-1416 CLERK |
Supreme Court Of The United States
October Term, 1990
AIR COURIER CONFERENCE OF AMERICA,
Petitioner,
v.
AMERICAN POSTAL WORKERS UNION,
AFL-CIO, et al.,
Respondents.
On Writ of Certiorari to the United States
Court of Appeals for the District of Columbia
JOINT APPENDIX
L. PETER FARKAS * JOHN G. ROBERTS, JR.*
SUGHRUE, MION, ZINN, Acting Solicitor General
MACPEAK & SEAS Department of Justice
2100 Pennsylvania Ave., N.W. Washington, D.C. 20530
Washington, D.C. 20037-3202 (202) 633-2217
(202) 293-7060 Counsel for Federal
Counsel for Petitioner Respondent
Air Courier Conference of America
KEITH E. SECULAR * ANTON HAJJAR*
COHEN, WEISS & SIMON O’DONNELL, SCHWARTZ
330 West 42nd Street & ANDERSON
New York, New York 10036 1300 L Street, N.W.
(212) 563-4100 Suite 200
(202) 898-1824 Washington, D.C. 20005
Counsel for Respondents (202) 898-1824
National Association of Letter Counsel for Respondent
Carriers, AFL-CIO American Postal Workers
Union, AFL-CIO
* Counsel of Record
Petition for Certiorari Filed March 8, 1990 - Certiorari Granted June 4, 1990 ©
TABLE OF CONTENTS
Relevant Docket Entries, American Postal
Workers Union, AFL-CIO v. The United States
Postal Service, United States District Court for
the District of Columbia
Relevant Docket Entries, American Postal
Workers Union, AFL-CIO v. The United States
Postal Service, United States Court of Appeals of
the District of Columbia
Excerpt from Page 40 of the 1985 Compre-
hensive Statement on Postal Operations
Federal Register Notice, October 22, 1985
Federal Register Notice, November 8, 1985
ACCA Comments, October 28, 1985
United States Postal Service Reply to
Congressman Leland and Congressman
Horton, November 20, 1985
Excerpts from the “Comments of the
International Remail Committee,”
December 12, 1985
Department of Justice Letter to General Counsel,
December 12, 1985
Comments of the United Department of Justice,
December 12, 1985
Letter to Honorable John McKean,
January 23, 1986
Letter to Honorable Albert v. Casey,
February 26, 1986
Letter to Honorable Albert v. Casey,
February 28, 1986
Letter to Honorable Albert v. Casey,
lf} ry aa ee ee ee
Letter to Honorable Alfonse D’ Amato,
gd TM sii te ane ees en 60 8 es
Federal Register Notice, Item No. 90 of the
Administrative Record, March 21,1986 .......
Letter to Honorable John McKean,
SS a ee er
Department of Justice Letter to
Charles D. Hawley, May 2,1986 ...........
Federal Register Notice, May 12,1986 .......
Federal Register Notice, Item No. 110,
Su Se ee 6:4 6 oh ee bE ees 6%
Comments of the United States Department of
Sustion, Sp U7, BGS ww wee etc e eens
AED 0. cn 5 bc eS Oe eee een
Federal Register Notice, Item No. 121,
Ce | eee er eee ee ee
Complaint for Declaratory and Injunctive Relief . . .
Pree T Ce ee Oe eee oe
Defendant’s Motion to Dismiss or in the
Alternative for Summary Judgement .........
Declaration of Charles D. Hawley, .........
Declaration of Charles D. Hawley, including
Index to Administrative Record ...........
Declaration of Kenneth D. Wilson ..........
Declaration of Jack L.Rutnmer ............
The following opinion, judgments an orders have been
omitted in printing this joint appendix because they appear on
the following pages in the appendix to the Petition for Certiorari:
Opinion of the United States Court of Appeals
for the District of Columbia Circuit,
rr , la
Order of the United States District Court for the
District of Columbia, granting intervention
UO GUS eS... 27a
Opinion of Charles R. Richey United States
District Judge for the District of Columbia,
EEE ee 28a
iv
RELEVANT DOCKET ENTRIES
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PLAINTIFF
AMERICAN POSTAL WORKERS
UNION, AFL-CIO, et al.
DEFENDANT
UNITED STATES
POSTAL SERVICE
CIVIL ACTION NO. 87-3199
DATE NO.
11/25/87 —-1)
PROCEDURES
Filed complaint for declaratory and
injunctive relief.
12/18/87 2)
rogatories.
12/18/87 3)
Filed plaintiffs’ first set of inter-
Filed plaintiffs’ first request for
production of documents.
01/15/88 4)
File defendant’ s motion for a
protective order, memorandum of
points and authorities in support
thereof, and proposed order.
01/21/88 5)
Notice of Judge Richey setting a
conference, order announcing Rule
26 through Rule 37 motions not
favored, and Judge Richey’s trial
certification sheet.
01/25/88 6)
complaint.
01/29/88 7)
Filed defendant ’ s answer to the
Air Courier Conference of America’s
(ACCA) motion to intervene,
memorandum of points and
authorities in support thereof
and proposed order.
02/05/88
02/11/88
02/11/88
02/18/88
02/18/88
02/19/88
02/26/88
02/29/88
03/10/88
03/10/88
03/25/88
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
Vv
Plaintiffs’ cross-motion to compel
discovery, opposition to defendant’s
motion for a protective order and
memorandum in support of cross-
motion to compel discovery, and
proposed order.
Filed order granting defendant’s
motion for a protective order.
Filed order granting plaintiffs ’
motion for an extension of time.
Filed defendant ’ s motion for enlarge-
ment of time and memorandum of
points and authorities in support
thereof, and proposed order.
Order granting defendant’s motion
for enlargement of time.
Filed defendant’s response to
ACCA’s motion to intervene.
Order granting ACCA’ s motion
to intervene.
Order setting briefing schedule for
case disposition on cross-motions
for summary judgment.
Filed plaintiff ’ s first set of
interrogatories to ACCA.
Filed plaintiff ’s first request to
ACCA for production of documents.
Filed defendant’ s motion to dismiss
or in the alternative for summary
judgment, defen-dant’s statement of
material facts as to which there is no
genuine issue, memorandum of
points and authorities in support of
motion to dismiss, declaration of
03/25/88
04/12/88
04/12/88
04/12/88
04/22/88
04/24/88
04/25/88
04/28/88
05/04/88
05/16/88
05/16/88
19)
20)
21)
22)
23)
24)
25)
26)
27)
28)
29)
vi
Charles D. Hawley and proposed
order.
Filed defendant’s first notice of filing,
declaration of Charles D. Hawley
and index to administrative record.
ACCA’s objections to plaintiff’s first
set of interrogatories.
ACCA’s memorandum of points and
authorities in support of defendant’s
motion to dismiss or in the alterna-
tive for summary judgment.
ACCA’s Notice of address change.
Filed order setting hearing on motion
for summary judgment or to dismiss.
Filed plaintiffs’ motion for summary
judgment, statement of material facts
as to which there is no genuine issue
and memorandum in support of
plaintiffs’ motion fo: summary
judgment and in opposition to
defendant’s motion for summary
judgment.
Filed plaintiffs’ notice of filing
of exhibits.
Filed plaintiffs’ notice of filing of
proposed order.
Filed order resetting hearing on
motion for summary judgment and
to dismiss.
ACCA’s motion for an extension
of time.
ACCA’s motion corrected certificate
of service.
05/16/88
05/20/88
05/20/88
05/26/88
05/27/88
05/31/88
06/03/88
06/08/88
06/08/88
06/13/88
30)
31)
32)
33)
34)
35)
36)
37)
38)
39)
Vii
Defendant’s motion for an enlarge-
ment of time and to reschedule date
of oral argument.
Filed order granting ACCA’s motion
for enlargement of time.
Filed order granting defendant’s
motion for an enlargement of time
and to reschedule date of oral
argument.
Filed defendant’s motion for an
enlargement of time and memoran-
dum of points and authorities in
support thereof.
Filed defendant’s motion for an
enlargement of time and memoran-
dum of points and authorities in
support thereof.
Filed defendant’s opposition to
plaintiffs’ cross-motion for summary
judgment and reply to opposition to
defendant’s motion for summary
judgment.
Filed order granting defendant’s
motion for an enlargement of time
and to extend time to file reply.
ACCA’s motion for an enlargement
of time.
ACCA’s memorandum in opposition
to plaintiffs’ motion for summary
judgment and in reply to plaintiffs’
opposition to defendant’s motion for
summary judgment.
Filed order granting ACCA’s motion
for enlargement of time.
06/16/88
06/16/88
06/16/88
06/24/88
06/29/88
07/01/88
07/11/88
10/17/88
12/20/88
40)
41)
42)
43)
44)
45)
46)
47)
48)
viii
Filed plaintiffs’ reply memorandum
to defendant’s opposition to
plaintiffs’ cross-motion for summary
judgmeat with Rutner declaration.
Filed plaintiffs’ motion for an
enlargement of time and memoran-
dum of points and authorities in
support thereof.
Filed plaintiffs’ motion to strike
declarations, memorandum in
support thereof and proposed order.
Filed defendant’s motion for enlarge-
ment of time and memorandum of
points and authorities in support
thereof.
Filed order granting plaintiffs’ motion
for an enlargement of time.
Filed order granting defendant’s
motion for an enlargement of time.
Filed defendant’s opposition to
plaintiffs’ motion to strike
declarations.
Filed order entering judgment for
the defendant.
Opinion of Charles R. Richey.
ix
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
APPELLANTS
AMERICAN POSTAL WORKERS UNITED STATES
UNION, AFL-CIO, et al.
APPELLEE
POSTAL SERVICE
07/17/89
07/26/89
08/17/89
08/30/89
09/07/89
09/19/89
09/19/89
09/19/89
10/13/89
12/8/89
12/8/89
60)
61)
APPEAL NO. 88-5436
PROCEEDINGS
Notice of Appeal
Appellants’ (American Postal
Workers Union, AFL-CIO, and
National Association of Letter
Carriers, AFL-CIO) docketing
Statement and initial submissions
Appellants’ Brief
Certified Original Record on
Appeal - 2 vol.; 1 vol. of transcript
Appellee’s Brief
Appellants’ Reply Brief
Joint Appendix
Appellee’ s Brief
Appellants’ Brief
Appellants’ Reply Brief
Argued before Chief Judge Wald;
Circuit Judges Mikva and
Ruth B. Ginsburg
Opinion for the Court filed by
Circuit Judge Mikva
Opinion concuring filing by
Circuit Judge Ruth B. Ginsburg
12/8/89
12/8/89
02/06/90
03/13/90
03/23/90
62)
63)
64)
65)
66)
Judgment by this Court that the
Judgment of the District Court
appealed herein is remanded in
accordance with the opinion of
the Court filed herein this date
Mandate Order
Receive entry of appearance from
L. Peter Farkas on behalf of Air
Courier Conference of America
Notice of filing of petition for
writ of certiorari
Mandate issued
1
The Postal Service recognizes its first priority is to compete
on the basis of good service at reasonable price. Yet it also
believes that the activities of certain “remailing” companies
violate the Private Express Statutes. These companies bypass
the Postal Service and ship foreign destination letter mail col-
lected from U.S. customers to a foreign point, where the postage
of that country is applied and the letter mail then put in the
foreign mailstream. The amount of mail lost to the Postal
Service, while not quantified, is believed to be very significant.
The Postal Service has asked the Justice Department to take
action in these cases.
*EXCERPT FROM PAGE 40, OF THE 1985 COMPREHEN-
SIVE STATEMENT ON POSTAL OPERATIONS.
POSTAL SERVICE
39 CFR Parts 310 and 320
Restrictions on Private Carriage of Letters; Proposed
Clarification and Modification of Definition and of
Regulations on Extremely Urgent Letters; Change of
Phone Number
AGENCY: Postal Service
ACTION: Correction of Proposed Rule.
SUMMARY: On October 10, 1985, the Posta! Service publish-
ed in the Federal Register (SO 62) a proposed modification and.
clarification of the regulations on the Private Express Statues.
On October 15, 1985, the telephone numbers at Postal Service
Headquarters were changed. This document provides the new
number for telephone contact concerning the above proposed
rule.
DATE: Comraents must be received on or before November
12, 1985.
ADDRESS: Written comments should be addressed to the
General Counsel, Law Department, United States Postal Ser-
vice, Washington, D.C. 20260-1113. Copies of all written
comments will be available for inspection and photocopying
between 9:00 a.m. and 4:00 p.m., Monday through Friday, in
Room 5128, 955 L’Enfant Plaza, SW., Washington, D.C.
FOR FURTHER INFORMATION CONTACT: Charles D.
Hawley (202) 268-2970.
W. Allen Sanders,
Associate General Counsel, Office of General Law and Ad-
ministration.
[FR Doc. 82-25065 Filed 10-20-85; 8:45 am]
39 CFR Parts 310 and 320
Restrictions on Private Carriage of Letters; Proposed
Clarification and Modification of Definition and of
Regulations on Extremely Urgent Letters; Extension of
Comment Period.
AGENCY: Postal Service.
ACTON: Proposed Rule; Extension of comment period.
SUMMARY: On October 10, 1985, the Postal Service publish-
ed in the Federal Register (SO FR 41462) a proposed modifica-
tion and clarification of the regulations on the Private Express
Statutes, which was corrected in a minor respect on October 22,
1985 (FR 42729).
Several parties have requested that the comment period,
originally thirty days, be extended. Because of the substantial
public interest in the proposal and the likelihood that a modest
extension of the comment period will permit greater public
participation in this rulemaking process, the Postal Service is
extending the comment period by an additional thirty days. The
extended comment period will expire on December 12, 1985.
DATE: Comments must be received on or before December 12, 1985.
ADDRESS: Written comments should be addressed to the
General Counsel, Law Department, United States Postal Ser-
vice, Washington, D.C. 20260-1113. Copies of all written
comments will be available for inspection and photocopying
between 9:00 a.m. and 4:00 p.m., Monday through Friday, in
Room 5128, 955 L’Enfant Plaza, S.W., Washington, D.C.
FOR FURTHER INFORMATION CONTACT: Charles D.
Hawley (202) 268-2970.
Fred Eggleston, :
Assistant General Counsel Legislative Division.
[FR Doc. 85-26742 Filed 11-7-85; 8:45 am]
4
ACCA
Air Courier Conference of America
RE: 39 CRR Parts 310 &
October 28, 1985
General Counsel, Law Department
United States Postal Service
Washington, D.C. 20260-1113
Dear Sir,
The Air Courier Conference of America (ACCA) is the trade
association for the air courier and express industry. Its members
are 142 companies who provide domestic and international
courier and express services.
ACCA wants to express its opposition to the proposed rulemak-
ing. It is ACCA’s position that there should be no postal
monopoly and all services provided by the Post Office should
be subject only to free and open competition in the market place.
The proposed rulemaking purports to attack one group of com-
panies who can provide a less expensive alternative to the post
office mailing overseas. ACCA believes that this savings to
U.S. companies should not be eliminated but should be com-
mended. This is free enterprise at its best. The more efficient
and less costly alternative should be encouraged.
Sincerely yours,
Larry P. Rodberg
President
5
United States Postal Service
475 L’Enfant Plaza, SW
Washington, DC 20260
November 20, 1985
Mickey Leland, Chairman
Frank Horton, Ranking Minority Member
U.S. House of Representatives
Committee on Post Office and Civil Service
Subcommittee on Postal Operations and Services
209 Cannon House Office Building
Washington, D.C. 20515
Dear Messrs. Leland and Horton:
Mr. Carlin has asked me to respond to your letter of
October 28 expressing interest in the Postal Service’s proposed
amendment to the regulations implementing the Private Express
Statutes and requesting a thirty-day extension of the comment
period. As I advised your staff, the comment period for this
proposal was extended for thirty days by a notice published in
the Federal Register on November 8.
You have asked a number of questions about the proposed
amendments, which we are happy to answer:
1) Why does the USPS consider the proposed changes in this
regulation necessary?
It is needed to prevent the misuse of an administrative
suspension of the Statutes, adopted to permit the private carriage
of extremely urgent letters, to carry abroad large numbers of
letters that are not extremely urgent for delivery as ordinary mail
by foreign postal systems. As discussed in greater detail in the
published notice, the amendments will make it clear that this
6
practice, known as “international remailing,” is not permitted by
that suspension.
2) What action does the USPS intend to take against these
remailers if the proposed changes in this regulation become a
reality?
The Postal Service expects to act as it does now toward
firms that do not comply with the Statutes. We would invite the
firms’ attention to the Statutes’ requirements and request com-
pliance. Our experience has been that most reputable firms will
not knowingly violate Federal law. If, however, a carrier, for
example, were to persist in its violations, we would expect to
renew our request to the Department of Justice to authorize suit
to enjoin continuing violations.
3) How much volume is involved in this remailing business,
both in terms of pieces of mail and dollars?
The Postal Service has no reliable estimates of either the
number of letters or the dollars in revenue that are diverted from
the United States Mails by remailing activities. It is common
knowledge, however, that a number of shippers and carriers
engage in this practice, and we infer from this and other infor-
mation that the volumes and revenues involved are significant.
4) How would the public benefit from the implementation of
the proposed changes in the regulations?
The proposed amendments will reduce the diversion of
international letters from the mails. This will benefit the public
in a rather direct way by increasing postal revenues and con-
tributing to the Postal Service’s efforts to achieve its statutory
goal of breaking even financially. They will also maintain the
integrity of the Statutes and the implementing regulations by
ensuring that a suspension adopted for one purpose is not
unfairly used for another purpose.
5) Is the USPS planning any further attempts to reclaim business
lost to private couriers?
7
The Postal Service wishes, of course, to provide the best
possible service for all of :ts customers. We are currently testing
anew PRESORT INTERNATIONAL program to provide more
direct service for our bulk airmail customers to countries over-
seas, with resulting savings in delivery time. We are also
adjusting the rates of our International Surface Air Lift Service
and implementing increased service to Latin America. These
actions are separate from and independent of our proposed
amendments to the Private Express regulations. Nonetheless
they illustrate our commitment to serve the needs of our cus-
tomers in all of the services we provide.
Sincerely,
William T. Johnstone
8
Docket
Before the
UNITED STATES POSTAL SERVICE
39 CFR Parts 310 and 320:
Restrictions on Private Carriage of Letters;
Proposed Clarification and Modification of Definition
and of Regulations on Extremely Urgent Letters
— 50 FR 41462 (Oct. 10, 1985)
COMMENTS OF THE INTERNATIONAL
REMAIL COMMITTEE
12 DECEMBER 1985
[Excerpts]
Contrary to the Postal Service’s expectations, the proposal
to eliminate the remailer competition will not significantly
enhance net postal revenues. More likely results include the
driving of U.S. jobs and printing activities overseas and a loss
of revenues now received from inbound international remail. In
some cases, U.S. companies will wind up using other, more
cumbersome, less efficient remail procedures which are clearly
beyond the reach of the monopoly — rather than using still less
efficient postal services. Even if the entire $60 million per year
international remail business (estimated gross) were handled by
the Postal Service, it may be estimated that the net increase in
annual postal revenues would be no more than three million
dollars, about one fortieth of one percent (0.025%) of total
postal revenues, and probably much less. This is obviously an
exceedingly small benefit for the costs and injustices imposed.
9
As international commerce became more and more infor-
mation oriented, in the late 1970’s and early 1980’s, customers
began to demand the advantages of international remail for
other, more time-sensitive bulk mailings, such as newsletters,
brochures, statements o account, order forms, etc. Perhaps, a
key commercial event was the 39 percent increase in interna-
tional air mail rates in 1981. In any case, it became clear that
by combining prompt air freight service to a carefully chosen
foreign postal distribution point with the international air mail
postal system, it was possible to extend the remail idea to include
air freight/air mail service that was faster, cheaper, and more
reliable than the Postal Service’s international air mail.
The New Postal Policy Council is a group of about twenty
of the largest U.S. banks, securities firms, and public utilities,
led by American Express and Citibank. Theses major institu-
tions (and hence, major mailers) unanimously adopted a resolu-
tion strongly supporting private international remail. The
Council noted that the proposed rule
could severely impede international trade. [It is]
ill conceived, untimely, and unjustified....
American business currently relies on these
private carriers whose service has proved to be far
superior to that of the United States Postal Ser-
vice. The effect of the proposed rule would be
devastating to American businesses engaged in
international trade; it would hamper effects to
improve our balance of payments; and it is not
likely to increase U.S. postal revenues in the long
run. In short, it benefits no one. [Resolution of
November 15, 1985 (emphasis added). }
10
The International Remail Committee also retained an inde-
pendent polling firm, Hickman-Maslin, to poll users of remail
on the role of remail within their businesses. The survey pool
consisted of about 300 remail users, the entire customer base of
most of the members of the Committee and, we believe, most
of the customers of the industry as a whole (in the short time
period in which the poll was planned and executed a few
members were unable to assemble customer lists due to illness
or travel schedules of key executives). When asked which type
of service is most often used for a large international mailing,
the companies polled split about equally between the USPS and
remail. According to Hickman-Maslin, the group appears to be
a reasonable, although not scientific, cross section of U.S.
organizations engaged in international commerce; the survey is,
however, a scientific sampling of the group polled. In short,
while an exhaustive study was impossible in the time frame of
the comment period, this poll is an accurate reflection of the
opinions of a reasonably representative group of some 300 U.S.
organizations engaged in international commerce. :
The poll first asked users which service, international
remail or the comparable postal service, was better, according
to various categories. The results follow. Note that we have
inflated the USPS figures by adding in all of the “about the
same” answers to give USPS every benefit of the doubt.
USPS better or Remail better
about the same (much better)
Speed of delivery 23% 55% (49)
Reliability 26% - 49% (46)
Keeping cost down 22% 57% (54)
Convenience of use 38% 46% (44)
Value for money 19% 60% (57)
Flexibility in
unusual situations 11% 50% (47)
11
Obviously, a substantial majority of those who had an opinion
felt that international remail constitutes a superior method of
distributing a large worldwide mailing.
The more pertinent question for the instant rulemaking,
however, is not which type of service is better, but whether
competition between the two types of services is beneficial to
American international commerce. On this issue — which is the
issue posed by the proposed rule — the judgment of international
businessmen was absolutely clear. Ninety-nine percent of the
respondents field that alternative international mailing services
are important, eighty-one responding “very important.” Ninety-
four percent oppose a postal monopoly on any international
shipments. Sixty percent believe that restrictions on internation-
al remail will “injure the international commerce of the U.S.”
The entire Hickman-Maslin poll is reproduced as an Apppendix
to these comments.
12
200---— -
III. INTERNATIONAL REMAIL DOES
NOT DEPRIVE THE POSTAL SERVICE
OF SIGNIFICANT NET REVENUE.
The preamble to the proposed rule states that remail is
“depriving the Postal Service of revenues in a manner not
intended.” 44 FR 41462. Although it is the only justification
of the proposed rule that even hints at public policy, this con-
Clusory statement is nowhere supported by evidence. Clearly,
“more postal revenue,” standing alone, is hardly a complete
statement of the postal policy of the United States (see next
section). In the instant rulemaking, the presumption of sig-
nificant additional net revenue is not even factually correct, as
explained in the following analysis.
The remail industry, we estimate, will gross about $60
million in 1985, not counting traffic in books and magazines
(this is a very rough guess). Of this amount, more than half
derives from the handling of printed matter; the remainder,
perhaps $25 million, involves the remail of “first class” items.
We shall discuss the effect of the proposed rule on each type of
document traffic, and then address the negative revenue effects
of foreign retaliation against the Postal Service.
B. The proposed rule is not supported
by the traditional public policy principles
supporting the postal monopoly.
More generally, we may look behind the principle estab-
lished by the urgent letter exception to the traditional policy
principles which underpin the postal monopoly. The sound
development of the monopoly law depends upon constant refer-
ral to the principles which justify the monopoly in the first place.
The most authoritative statement of these principles is the
1973 Board of Governors’ report to Congress, The Private
1
iS
Express Statutes and Their Administration. In this report, the
Governors begin by noting the statutory mission of the Postal
Service to “bind the Nation together” and “provide prompt,
reliable, and efficient service to patrons in all areas.” Page 4,
citing 39 U.S.C. 101(a). The report notes the duty to provide
for letters sealed against inspection at a postage rate “uniform
throughout the United States.” /d., citing 39 U.S.C. 3623(d).
From these statutory duties, the report reasons:
A prohibition on rates varying with distance
creates competitive opportunities for skimming
the creams of those postal operations that are most
attractive from a business standpoint. /t would
make little sense to allow letter mail competition
without simultaneously authorizing variable rates
on letters so that the Postal Service may compete
equitably in the marketplace. But uniform nation-
wide rates for letter mail should not be lightly
discarded. Rates varying with distance would be
complicated and confusing for many citizens,
would point to increases in regulatory red tape,
and could lead to untoward political pressures for
changes in zone limits and the like.
The law requires that the Postal Service serve all
the nation [quoting 39 U.S.C. 101(b)]}. This is a
key requirement-perhaps the key requirement-if
the Postal Service is to discharge its basic function
to “provide prompt, reliable, and efficient service
to patrons in all areas ... and render postal service
to all communities.” This means that the Postal
Service must serve those areas and customers for
which operating costs are not recoverable under
a uniform pricing policy. If the Private Express
Statutes were repealed, private enterprise, unlike
the Postal Service, would be free to move into the
14
most economically attractive markets while
avoiding markets that are less attractive from a
business standpoint.
....Without abandoning the policy of self-suf-
ficiency and re-introducing massive subsidies, it
is hard to see how the Postal Service could meet
rate and service objectives in the face of cream-
skimming competition against its major product.
But abandonment of this policy would impose an
unjustifiable burden of costs on the tax-paying
public and might lead to the erosion of universal
postal service.
We believe that the uniform rate and nationwide
Service requirements are sound.... Accordingly,
the service and financial policies that are rightly
embodied in the Postal Reorganization Act re-
quire the restrictions on private letter-mail car-
riage be maintained. [Pages 5-7 (emphasis
added). ]
The Governors’ report goes on to cite other, secondary
reasons for the postal monopoly including the need to finance
the postal inspection service, which insures the safety of the
mails and protects the public from undesirable mail matter.
Page 7. The report further notes that without a monopoly
“international mail reprocity agreements would also suffer ...
Foreign governments would have the problem of whether to deal
with several, rather than one, originating mail suppliers. The
Postal Service would remain under the obligation of delivering
all incoming international mail with less than total compensation
for outgoing first-class mail.” Page 8.
Reasonable men can, and have, disagreed with some of
these principles of postal policy, but that debate is beyond the
scope of the current rulemaking. An important and valid ques-
15
tion, however, is whether the proposed rule is reasonable related
from these traditional principles. We submit that it is not.
Clearly, the proposed ban on international remail has no
logical relationship with the Postal Service’s ability to “bind the
Nation together” through universal postal service at a uniform
price. “Binding the nation” refers to domestic service; interna-
tional postal service can hardly claim to partake of the same
special importance to the nation. The need to maintain uniform
first class mail rates is irrelevant to international remail. There
is no international equivalent to the uniform rate rule. On the
contrary, the Postal Service adjusts its rates, especially its ISAL
rates, market by market depending upon demand and can very
well “compete equitable in the marketplace.”
Nor is there any international equivalent to the duty to serve
small towns at a loss. The Postal Service is “free io move into
the most economically attractive markets while avoiding
markets that are less attractive from a business standpoint.” It
has done so, offering ISAL, Presort International, and Interna-
tional Express Mail service only in certain cities in the United
States and only to certain destinations overseas. More general-
ly, the Postal Service’s costs for international service are more
or less unaffected by the remoteness of any given city. Service
to the farthest corner of Scotland costs the Postal Service the
same as service to downtown London. The Postal Service just
puts the mail on the airplane to London and lets the British Post
Office deliver it.
Of course, the Postal Service can, and has, noted that a
monopoly on international remail would generate additional
revenues to pay for losses incurred in providing domestic ser-
vice to remote cities in the United States. But this argument
would justify the monopolization of any activity, for example,
the telecommunications business (as indeed it has, in other
countries). Under traditional American principles, however, the
scope of a monopoly should be reasonably related to the activity
16
which generates losses, as the rationale articulated in the Board
of Governors’ report does.
It is clear, then, that the fundamental postal policy bases
for the postal monopoly — universal service and a uniform first
class mail rate — do not reasonably support a monopoly over
international remail.
The Governors’ report does on to mention two secondary
bases for the monopoly: the need to support the postal inspec-
tors program and certain international mail requirements. Ob-
viously, the need to pay for postal inspectors is only tangentially
related to international remail. It is doubtful that the inspection
service is much concerned with what is mailed out of the U.S..,
and the Customs Service is the primary guardian against incom-
ing contraband. Hence, the inspection service does not provide
a rational basis for monopoly over international remail.
The matter of international postal agreements is more
complicated. The Governors’ report argues that “Foreign
governments would have the problem of whether to deal with
several, rather that one, originating mail suppliers.” This is not
a problem with the remail industry. The only post office that
must deal with the remail company is one that is doing so
voluntarily and at a profit. The Governor’s report goes on to
note that “the Postal Service would remain under the obligation
of delivering all incoming international mail with less than total
compensation for outgoing first-class mail.” The Postal Ser-
vice, of course, would be obliged to deliver incoming mail, an
activity for which it is compensated by the foreign post offices
according to the internationally agreed “terminal dues” stand-
ard. Since the basic infrastructure of the Postal Service is paid -
for by the domestic postal service, it appears probable that
“terminal dues” compensate the Postal Service for the marginal
costs of delivering incoming mail. In any case, the Postal
Service benefits from a low terminal dues rate — and has fought
for one over the years — because it exports more mail than it
17
imports. Even if it did not, surely the solution is for the Postal
Service to negotiate higher terminal dues, rather than imposing
a restrictive monopoly on outgoing American mail in order to
pay for below cost delivery of foreigners’ inbound mail.
Nor does a vague allusion to “international agreements”
provide an independent policy basis. If not grounded in an
identifiable American public interest, the international agree-
ment becomes no more than a self-serving market sharing
agreement between post offices. The Postal Service would have
no excuse for entering into such an agreement.
In short, the traditional rationales for the postal monopoly
do not provide a sound basis for extending the monopoly to
include the air freighting of bulk international mailings.
*_**
Respectfully submitted,
James I. Campbell, Jr.
Attorney for the Committee on
International Remail
18
Washington, D.C.
12 December 1985
BY HAND
General Counsel
Law Department
U.S. Postal Service
955 L’Enfant Plaza
Room 5128
Washington, D.C. 20260-1113
Re: Restrictions on Private Carriage of Letters;
Proposed Clarification and Modification of
Definition and of Regulations on Extremely
Urgent Letters
Dear Sir:
In accordance with the Notice of Proposed Rulemaking, 50
Fed. Reg. 41,462 (October 10, 1985), I enclose the original and
one copy of the Comments of the United States Department of
Justice in the above-captioned proceeding.
Sincerely,
Martin L. Stern
Attorney
Antitrust Division
Enclosures
19
Before the
UNITED STATES POSTAL SERVICE
Washington, D.C. 20260-1113
IN THE MATTER OF:
Restrictions on Private Carriage of Letters; Proposed
Clarification and Modification of Definition and of
Regulations on Extremely Urgent Letters
COMMENTS OF THE UNITED
DEPARTMENT OF JUSTICE
Douglas H. Ginsburg Charles F. Rule
Assistant Attorney General, § Deputy Assistant Attorney
Antitrust Division General
Antitrust Division
Communications with respect to this document should be
addressed to:
Barry Grossman, Chief
Communications & Finance Section
Robert E. Hauberg, Jr.
Assistant Chief
Communications & Finance Section
Martin L. Stern
Jonathan M. Rich, Attorneys
Communications & Finance Section
Michael A. Williams, Economist
Economic Regulatory Section
Antitrust Division
U.S. Department of Justice
504 Safeway Building
Washington, D.C. 20530
202/724-6693
December 12, 1985
20
Before the
UNITED STATES POSTAL SERVICE
- Washington, D.C. 20260-1113
IN THE MATTER OF:
Restrictions on Private Carriage of Letters; Proposed
Clarification and Modification of Definition and of
Regulations on Extremely Urgent Letters
COMMENTS OF THE UNITED STATES
DEPARTMENT OF JUSTICE
Il. INTRODUCTION AND STATEMENT
OF POSITION
By Notice of Proposed Rulemaking ("Notice")! the United
States Postal Service has solicited comments on proposed
revisions of its regulations governing the private carriage of
“extremely urgent” domestic and international mail.
According to the Notice, private carriers, commonly
known as “remailers,” are diverting revenue from the Postal
Service by taking advantage of current Postal Service regula-
tions that allow the private carriage of “extremely urgent” mail.
Relying on ambiguities in the regulations, these remailers ship
a large number of arguably non-urgent international letters from
the United States and deposit them in foreign mailstreams for
delivery to separate ultimate addressees. Typically, a remailer
collects mail from customers at different locations in the United
States, bundles it, and ships it from one domestic point to a signle
destination overseas. When the mail arrives overseas, the
remailer or its agent deposits the mail in a foreign mail system
for delivery in that or other countries, often at relatively low
foreign postal rates.”
' 50 Fed. Reg. 41,462 (October 10, 1985) ("Notice").
? See infra discussion at 5. The Notice neither identifies the specific
Carriers engaging in remailing, indicates the customers served, nor provide
21
The Postal Service maintains that such private carriage as
currently conducted is not permitted by its current regulations
suspending application of the Private Express Statutes for ex-
tremely urgent letters. The Postal Service proposes to amend
the regulations to “leave no room for question as to the cir-
cumstances” under which private carriage of international mail
is permitted.> Apparently, once the regulations are clarified, the
Postal Service intends to ask the Department of Justice for
authority to enjoin remailers from violating the Private Express
Statutes.‘
The Department of Justice, the Executive Branch agency
responsible for the enforcement of the antitrust laws and the
promotion of competition, submits that the changes proposed
by the Postal Service would strifle the thriving, competitive
market that has developed for the carriage of international mail.
We believe that there is some question as to whether the Postal
Se:vice possesses the legal authority to extend its domestic
monopoly into international carriage in the manner proposed.
Questions of legal power aside, it appears certain that the Postal
Service’s proposal would reduce or eliminate competition in the
international postal market to the detriment of American citizens
and businesses competing abroad.
As the Postal Service acknowledges, any ability to inhibit
competition from remailers stems solely from its authority to
prohibit private carriers from transporting letters over the
any estimate of revenue received for those services. An industry journal,
however, suggests that the practice is widespread and notes that a list “of
couriers and corporations that are engaged in remail, . . . is almost a ‘Who's
Who’ of American business.” Business Mailers Review, January 7, 1985.
3 50 Fed. Reg. at 41,462.
“ L. Cox, Remarks at Meeting of the Board of Governors, United States
Postal Service 50 (September 6, 1985).
22
domestic portion of an international journey.’ Though the
Postal Service has historically asserted that its monopoly ex-
tends to international mail, its opinions indicate no specific
statutory authority other than the prohibition on private domes-
tic carriage. Moreover, the Postal Service claims that its inter-
national classifications and rates are not subject to review by the
Postal Rate Commission. We suggest that the Postal Service
cannot have it both ways. It cannot assert a monopoly of
international mail as a necessary adjunct to its domestic statutory
monopoly, i.e., when it wants to increase its revenue, and at the
same time claim that its international rates are free from the
Statutory review provided to check its domestic monopoly
power. In sum, we believe that the statute itself, as well as the
legislative history is ambiguous on the precise geographic scope
of the Postal Service’s monopoly. We, therefore, urge the Postal
Service to seek clarification from Congress, instead of sua
sponte promulgating regulations that would stifle competition
from the private sector that is providing substantial benefits to
many American citizens and businesses.
Our concern over the Postal Service’s proposal stems from
general economic policy considerations as well as from the
desire to preserve the benefits currently enjoyed by the
remailers’ customers. The United States follows a general
economic policy of fostering competition as a means of promot-
ing efficiency and consumer welfare. Congress provided for a
domestic postal monopoly because it feared that reliance on
competition would not have guaranteed universal service at
affordable rates. Whatever the current validity of these con-
cerns, the fact that government monopoly services are inherently
_ less efficient than competitive services dictates that consumer
welfare will be enhanced if the postal monopoly is construed no
more broadly than necessary to attain the goal of universal
5 «The Private Express Statutes have been consistently applied to the
domestic segment of international shipments.” 50 Fed. Reg. at 41,462
(emphasis added).
23
service. The Postal Service has adduced no evidence that con-
tinuation of international mail carriage by private firms would
undermine that goal. As a consequence, it has failed to justify
the significant consumer welfare loss threatened by its proposed
prohibition of competitive services.
II. BACKGROUND
A. The International Postal Market
American firms use remailers to send bulk mailings to
foreign addressees. These bulk mailings typically involve such
items as bank statements, periodicals, catalogues, and advertise-
ments, but rarely individual correspondence. Generally, the
remailer ships the mail to the foreign postal administration that
offers the best combination of speed and price for delivery to
the addressee. The postal administration in which the remailer
deposits the mail is not necessarily that of the ultimate recipient.
Some foreign postal administrations have sought business
by encouraging remailers to post bulk mailings in their countries
at relatively low Surface Airlift ("SAL") rates. Surface Airlift
programs compete with one another for the patronage of
remailers who are willing to introduce mail into the international
mail system anywhere in the world.
According to industry officials, when begun several years
ago, the SAL programs of foreign postal administrations cap-
tured most of the business of forwarding bulk mail originating
© It is our understanding that SAL rates are low because it is relatively
inexpensive to ship international bulk mail. A postal administration that
accepts bagged and sorted mail for delivery to other countries essentially acts
as a freight forwarder. The administration ships the mail to the destination
country by air and pays the postal administration of that country a fee called
“terminal dues” to deliver the mail to the ultimate addressees. Terminal dues
are set by the Universal Postal Union, a United Nations affiliate that regulates
the postal relationships of member countries. Terminal dues are calculated
on a per pound rate basis on the net imbalance in mail sent between two
member countries.
24
in the United States. In response, the Postal Service instituted
its own SAL service called International Surface Airlift ("I-
SAL"). According to a Postal Service report, I-SAL has recently
shown a sharp decline in volume, largely because it has not met
the needs of American mailers who have been able to rely on
“the heavy competition in the international carriage of bulk
printed items.”’ The ability of I-SAL to compete is further
hampered because it fails to provide users the efficiency offered
by private remailers. To be specific, an I-SAL customer must
deliver mail that is sorted and bagged by country of destination
to an international airport. In contrast, a remailer will pick up
mail at a customer’s place of business, sort it and bag it by
country, and arrange for delivery through a foreign postal
service’s SAL, typically at a price below the I-SAL rate.
Moreover, because remailers ship mail overseas on more flights
per week than I-SAL, they offer more timely service. Finally,
remailers typically offer service to more countries than I-SAL.®
B. The Current Statutory and
Regulatory Scheme
The Postal Service currently enjoys a statutory monopoly
over the domestic carriage of letters.? There are statutory ex-
ceptions, however, that permit non-Postal Service carriage of
7 See U.S. Postal Service, International Mail — An Overview 16-17 (1985)
(submitted to USPS Board of Governors, September 6, 1985) ("International
Mail").
8 Id. at 13, 16-17. The Postal Service is introducing a “Presort Airmail”
test program that is designed to provide service comparable to thai of the
private remailers. Under the proposed service, mailers will sort their mail by
country. The Posial Service will collect the mail and ship it overseas the
same or following day. Service will be available to all countries of the world.
Id. at 15-16.
9 The Private Express Statutes prohibit, with certain exceptions, the
establishment of a “private express for the conveyance of letters or packets
. . . Over any post route . . . or from any city, or town, or place to any city,
town, or place, between which the mail is regularly carried. . . .” 18 U.S.C.
25
letters.!° Under 39 U.S.C. § 601(b), the Postal Service has
exercised the power to suspend the Private Express monopoly
where “the public interest” so requires.
In 1979, the Postal Service suspended the Private Express
Statutes for the delivery of “extremely urgent letters.” 44 Fed.
Reg. 61,181, condified at 39 C.F.R. § 320.6. Under current
regulations, a letter is considered extremely urgent if it meets
either of two tests:
(1) the “loss of value” test, which requires that the
letter must be delivered within a specified time
and that its usefulness would be greatly reduced
if it were not delivered within that time,'! or
§ 1696. The carriage of letters by anyone “having charge or control of any
conveyance operating by land, air or water . . . otherwise than in the mail” is
similarly prohibited. 18 U.S.C. § 1694. The Postal Service has used its
rulemaking authority to define “letters” broadly. See Associated Third Class
Mail Users v. United States Postal Service, 600 F.2d 824 (D.C. Cir. 1979).
See also 39 C.F.R. § 310 1
10 For example, a letter “may be carried out of the mails” so long as the
Postal Service receives the remuneration it would have received if the ietter
“had been sent by mail.” 39 U.S.C. § 601(a).
"! In pertinent part, 39 C.F.R. § 320.6(b) provides:
(1) For letters dispatched within 50 miles of the intended des-
tination, delivery of those dispatched by noon must be complete
within 6 hours or by the close of the addressee’s normal business
hours that day, whichever is later, and delivery of those dis-
patched after noon and before midnight must be completed by
10 A.M. of the addressee’s next business day. The suspension
is available only if the value or usefulness of the letter would be
lost or greatly diminished if it is not delivered within these time
limits. . . .
(2) Letters sent from the 48 contiguous states of the United States
or to other nations are deemed “delivered” when they are in the
custody of the international or overseas carrier at its last
scheduled point of departure from the 48 contiguous States.
(Emphasis addec
26
(2) the “cost” test, which requires that the sender
demonstrate the urgency of the letter by paying a
substantial premium over regular postal rates. !2
Under the “cost” test, Postal Service regulations allow
carriers to make the comparison with Postal Service rates based
on an entire shipment of letters if all the letters are “delivered”
to the same destination:
If a single shipment consists of a number of letters
that are picked up together and delivered together
to a single destination, the applicable U.S. postage
may be computed for purposes of this paragraph
as though the shipment constituted a single letter
of the weight of the shipment. (Emphasis added)
39 C.F.R. § 320.6(c). The definition of “delivered” is the crux
of the ambiguity that has permitted remailers to flourish by using
airmail shipments as “urgent” deliveries of arguably “non-ur-
gent” individual letter items.
For purposes of the suspension of the Private Express
Statutes for extremely urgent international mail, the regulations
consider letters to be “‘delivered’ when they are in the custody
of the international or overseas carrier at its last scheduled point
of departure from the 48 contiguous states.” 39 C.F.R. §
320.6(b\(2). The remailers contend that under the current
regulations, even though mail is ultimately destined for a num-
ber of different foreign addressees, it is deemed “delivered”
when the bundle of consolidated letters arrives at the overseas
carrier. Under that reading of the regulations, shipments so
delivered meet the cost test if the carrier charges twice the
12 Tn pertinent part, 39 C.F.R. § 320.6(c) provides:
It will be conclusively presumed that a letter is extremely urgent
and is covered by the suspension if the amount paid for private
carriage of the letter is at least three dollars or twice the ap-
_plicable U.S. postage for First-Class Mail (including priority
mail) whichever is the greater.
27
domestic First Class rate based on the aggregate weight of each
shipment. By treating the consolidated package as a single letter
whose postage is determined by the weight of the entire package,
remailers can satisfy the cost test and charge a lower rate than
if the postage payable were calculated separately for each piece
of mail in the package addressed to a different addressee.'3 The
Postal Service argues that this practice of the remailers is
inconsistent with both the intent and terms of the suspension for
extremely urgent mail and proposes revising the regulations to
make it clear that the carriers’ current practices are prohibited
by the Private Express Statutes. Notice, 50 Fed. Reg. at 41,462.
C. Summary of Proposed Regulations
The Postal Service proposes three changes in its regula-
tions to reduce ambiguity in the definition of extremely urgent
mail. The first amendment construes the Postal Service
monopoly over letter carriage to include international mail by
providing “explicit notice that carriage of letters over post routes
within the United States in the course of shipment to or from
another country, as well as carriage that begins and ends within
the United States” is governed by the statutes. 50 Fed. Reg. at
41,462. This change is made by inserting the term “within the
United States” to the existing provision of 39 C.F.R. §
310.1(d).'4
The second change alters the definition of extremely urgent
international mail. The proposed regulations would eliminate
application of the “loss of value” test to international mail, by
13 50 Fed. Reg. at 41,463 (". . . postage for first class mail is based on
one-ounce increments of weight. Few letters weigh exactly one ounce, and
if several are weighed together the total will be fewer ounces than the sum
of the individual letters counted as one each . . . [thus] reducing the amount
that the carrier must charge to satisfy the twice-the-postage element of the
test.”).
14 Section 310.1(d), as modified, would state: “Post routes are routes on
which mail is carried by the Postal Service within the United States. .. .” 50
Fed. Reg. at 41,464 (emphasis on proposed change).
28
deleting the “delivered” language of 39 C.F.R. § 320.6(b).!5
International letters would be considered “extremely urgent”
only if the price charged were great enough to meet the “cost”
test.16
The third revision would restrict application of the cost test
by clarifying the definition of “destination.” The new regulation
would define “destination” as the ultimate addressee of an
individual letter, rather than the international carrier that
receives the bundle of letters. As a result of this proposed
change, a carrier would not be able to calculate the minimum
charge for an entire shipment of letters but would be required to
calculate the charge for each piece sent to a different addressee.
This change is intended to eliminate or significantly to lessen
the private carriage of international mail by raising the minimum
price that a private carrier must charge to qualify under the
“cost” test.!7
Ill. DISCUSSION
A. Itis Not Clear that Congress Intended to
Grant the Postal Service a Monopoly over
International Mai!
A number of factors raise doubt as to whether Congress
intended to extend the Postal Service monopoly to international
mail. In the first instance, the plain language of the Private
Express Statutes grants the Postal Service a monopoly over
domestic carriage.!8 With respect to an international monopoly,
the statutes are silent. Given the national economic policy of
fostering competition, the courts will require a clear expression
= See supra note 11.
'© 50 Fed Reg. at 41,463-64.
17 iq.
18 The Postal Service has relied on the prohibition against private carriage
of letters over domestic routes to claim a similar monopoly over mail sent
abroad. See, e.g., Op. Gen Counsel Postal Serv. PES 83-3 (1983) ("[T}he
Private Express Statutes apply to those portions of ‘air routes in operation’
29
of a congressional intent to create a monopoly, or otherwise
restrict competition.'? Unless, it were necessary to give the
Postal Service a monopoly over international mail in order to
effectuate some domestic policy goal, like “universal service,”
the courts would not impute to Congress an intent to create a
monopoly over international mail. As we indicate in Section
B.2, infra, there is no evidence that granting the Postal Service
a monopoly over international mail is necessary in order to
provide domestic universal service or any other domestic goal
of Congress.
which are partially as well as wholly within the United States. Therefore,
the Private Express Statutes and regulations are applicable to the carriage of
letters which are sent from the United States to other countries. . . .").
We are, of course, aware that courts “give great deference to the inter-
pretation given a statute by the agency charged with its administration.”
National Association of Greeting Card Publishers v. United States Postal
Service, 569 F.2d 570, 595 n.110 (D.C. Cir. 1979) ("NAGCP I“), rev'd on
other grounds, 103 S.Ct. 2717 (1983). On the other hand, courts have
reversed an administrative agency’s construction of its statute as impermis-
sible where it is not "sufficiently reasonable." See FAIC Securities, Inc. v.
United States, No. 84-5408, slip op. at 16 (D.C. Cir. 1985). Indeed, courts
have reversed the Postal Service’s construction of the Postal Reorganization
Act on several occasions. See, e.g., Time, Inc. v. United States Postal
Service, 685 F.2d 760, 771 (2d Cir. 1982) (Postal Service construction
rejected as simplistic and inconsistent with structure of Act); NAGCP /,
supra, at 595-598 (Postal Service construction found too “curious” and
“narrow” tc prevail over common sense reading of Act); United Parcel
Service v. United States Postal Service, 604 F.2d 1370, 1381 (3d Cir. 179),
cert. denied, 446 U.S. 957 (1980).
'9 See, ¢.g., Federal Maritime Commission v. Seatrain Lines, Inc., 411
U.S. 726, 733 (1973) (exemptions from antitrust laws strictly construed);
Otter Tail Power Co. v. United States, 410 U.S. 366, 374 (1973) ("[C]courts
must be hesitant to conclude that Congress intended to override the fun-
damental national policies embodied in the antitrust laws"); United States v.
First City Nat’l Bank, 386 U.S. 361, 368 (1967) (immunity from antitrust
laws is not lightly implied); United States v. Philadelphia National Bank, 374
U.S. 321, 350-51, (1963) (repeals of antitrust laws by implications from
regulatory statute strongly disfavored and found only where plain repugnan-
30
The different rate regulatory mechanisms that Congress
has established for domestic and foreign mail also support the
view that Congress did not intend to confer on the Postal Service
a monopoly over international mail. In enacting the Postal
Reorganization Act, Congress established a complex regulatory
scheme which the Governors of the Postal Service manage its
affairs while the independent Postal Rate Commission reviews
and recommends postal service classifications and rates.29 The
Governors may establish postal rates only after the Postal Rate
Commission reviews a rate request submitted by the Postal
Service.?!
cy exists between antitrust and regulatory provisions); Silver v. New York
Stock Exchange, 373 U.S. 341 (1963) (per se violation of antitrust laws not
exempt where statute gave defendant duty of self-regulation, but regulation
by SEC not sufficiently pervasive); United States v. Radio Corp. of America,
358 U.S. 334, 350 (1959) (anticompetitive conduct not exempt from antitrust
laws where regulatory scheme not sufficiently pervasive); Woods Explora-
tion and Producing Co. v. Aluminum Co. of America, 438 F.2d 1286, 1302
(Sth Cir. 1971) ("Our antitrust laws constitute our economic magna carta, _
designed to protect against predatory oppression. Conceived as such a writ
they must not be facilely negated.").
9 See Governors of the United States Postal Service v. United States
Postal Rate Comm'n, 654 F.2d 108, 114 (D.C. Cir. 1981); United Parcel
Service v. United States Postal Service, 604 F.2d 1370, 1373 (3d Cir. 1979),
cert. denied, 446 U.S. 957 (1980). See generally 39 U.S.C. §§ 3601-3628;
House Comm. on Post Office and Civil Service Commission, H.R. Rep. No.
91-1363, 91st Cong. 2nd Sess. (1970), reprinted in 1970 U.S. Code Cong. &
Ad. News 3649, 3658-3660, 3665-3669 ("House Report”).
2! The Commission, typically after a hearing on the record, transmits a
recommended decision to the Governors on changes in postal rates based on
specifically enumerated statutory considerations. These criteria include the
following:
(1) the establishment of a fair and equitable schedule;
**s
(4) the effect of rate increases upon . . . business, mail users, and
enterprises in the private sector of the economy engaged in the
delivery of mail matter other than letters;
31
In enacting this “carefully constructed system of checks
and balances between governmental agencies,”2? the courts
have reasoned that “Congress intended to prevent undue imposi-
tion on users of monopolized classes. . . .”2 The legislative
history graphically demonstrates the Congressional concern
that, in the absence of oversight by the Postal Rate Commission,
the Postal Service could abuse its monopoly over First Class
mail:
The temptation to resolve the financial problems
of the Post Office by charging the lion’s share of
all operational costs to first class is strong; that’s
where the big money is. The necessity for
preventing that imposition upon the only class of
mail which the general public uses is one of the
reasons why the Postal Rate Commission should
be independent of operating management.”4
Congress did not express a similar concern for regulating
the rates charged by the Postal Service for international mail.
Indeed, the Postal Service interprets the Postal Reorganization
Act as not providing any Postal Rate Commission jurisdiction
over international service classifications and rates.
ss ¢
(5) the available alternative means of sending and receiving
letters and other mail matter at reasonable costs.
39 U.S.C. § 3622(b). The Act also places strict procedural restrictions on the
Governors’ authority to establish a rates different from those recommended
by the Commission. See 39 U.S.C. § 3625.
22 Governors v. Postal Rate Comm'n, 654 F.2d at 116.
3 National Association of Greeting Card Publishers v. United States
Postal Service, 103 S.Ct. 2717, 2730, n.10 (1983).
24S. Rep. No. 91-912, 91st Cong., 2d Sess. at 13 (1970).
25 See International Mail, supra, at 8. Compare 39 U.S.C. § 407 with 39
U.S.C. § 3622. Pursuant to its authority under Section 407 to conclude
international Universal Postal Union, an organization of foreign postal
32
The freedom Congress allowed the Postal Service in setting
international rates is inconsistent with the view that Congress
intended to confer monopoly status on the Postal Service with
respect to international mail. In establishing domestic rate
regulatory authority in the independent Postal Rate Commis-
sion, Congress expressed a policy choice to protect users of the
Postal Service from unfettered pricing by a lawful monopolist.26
There is neither evidence nor reason to believe that Congress
would have been less solicitous of U.S. users of international
mail if it had intended to confer a Postal Service monopoly over
international mail. In fact, we are unaware of any situation in
which Congress has created a legal monopoly without providing
for rate regulation to protect the public from abuse of the
monopoly power. In this case, the Postal Service cannot assert,
as a necessary adjunct to its domestic monopoly and in order to
raise revenue, that its international services are to be free from
both the rigors of the market place and regulation by the Postal
Rate Commission. Courts simply would not be likely to ascribe
such an unprecedented approach to Congress.
In sum, we believe that the scope of the Postal Service
monopoly is sufficiently unclear to call into question the Postal
Service’s authority to adopt the proposed regulations. We
recognize the temptation faced by the Postal Service to assert
the authority to construe broadly the scope of its monopoly and
thereby protect itself from revenue loss, irrespective of the size
or import of such loss. Where, however, the underlying
monopolies that, inter alia, establishes the “base” rate for various weight
categories of international mail. See generally Article 19, Universal Postal
Convention, October 26, 1979, T.1.A.S. No. 9972 ("1979 Convention"). This
base rate, as a practical matter, places virtually no restriction on the Postal
Service, since UPU members may set the actual charge for international mail
Originating in their own countries anywhere from 70 percent below to 100
percent above the base rate. Jd. Member countries are also authorized to add
additional surcharges for conveyance by air. /d. at Arts. 69, 70.
2 See note 24, supra.
33
statutory authority is as “obscure” as it is here, and a broadened
monopoly would adversely effect consumer interests, Congress,
not the Postal Service is the appropriate body to determine the
scope of the Postal Service’s monopoly and authority.?’
B. The Public Interest Would Best be Served by
Permitting Competition from International
Remailers
1. Competition from the Private Sector Will
Benefit Consumers of International Postal
Service
The Postal Service, like any monopolist, has the ability and
incentive to charge supracompetitive rates for its monopoiy
services. As discussed above, there are apparently no effective
regulatory restraints being imposed on Postal Service classifica-
tions and rates for international mail. Entry by remailers has
provided the only incentive for the Postal Service to price its
international services competitively. In response to entry by
remailers, moreover, the Postal Service is now also in competi-
tion with other postal administrations.”®
27 See Associated Third Class Mail Users v. United States Postal Service,
600 F.2d at 827, n.10. The dissenting judge, with whom the majority agreed
concerning the importance of Congressional attention to ambiguities in the
scope of the postal monopoly, opined:
[T]he desired scope of the Postal Service’s monopoly is entirely
a question of public policy, properly to be determined solely by
Congress, and this court should not countenance the Postal
Service’s power and revenue grabbing simply because the
statute, the statutory history, and the agency’s own administra-
tive interpretations are conflicting and obscure.
Id. at 831 (Judge Wilkey, dissenting).
28 Mail may pass through a number of different countries on its way to
the ultimate addressee. Countries through which the mail passes on part of
the journey are compensated through the payment of “transmit fees” by the
originating country. The postal administration that delivers the letter to the
ultimate addressee is compensated by the payment of “terminal dues.” The
34
Consumers of international postal services have benefited
greatly from the competition provided by private international
carriers. Competition in this market has provided consumers
with several significant benefits. It has placed downward pres-
sure on price, and provided a strong incentive for firms to
provide efficient and innovative service. A derivative benefit is
that businesses using lower-cost, more efficient international
postal competitors can use these benefits to become more effec-
tive competitors themselves in international markets.
Apparently, private firms doing business abroad have not
been satisfied with the international service provided by the
Postal Service. A group of First Class mailers recently wrote to
the Postal Service that the ability of their firms to compete with
foreign companies is hurt by the “unreliable and at times erratic
nature of delivery for international mail. . . .This jeopardizes
business opportunities for American companies trying to sell
goods and services abroad.”29 Indeed, Postal Service officials
Postal Service reported that in 1984 transit revenue accounted for ap-
proximately 13.6 percent of total revenue from interfiational mail. Programs
such as SAL and I-SAL can be profitable because a postal administration
earns the difference between its rates and the various incidental charges such
as terminal due and transit fees. Remailers have forced postal administra-
tions to compete with one another by lowering rates and improving service
in an effort to attract this lucrative remail business.
The Universal Postal Union ("UPU"), in response to this competition, has
instituted regulations that can be viewed as an attempt to enforce an interna-
tional postal cartel. The foundation supporting the UPU is the agreement of
its members to allow “freedom of transit” for mail originating in other
countries. Article 1, 1979 Convention. Under Article 23.4 of the Conven-
tion, however, members may refuse transit of mail originating in a member
country but posted abroad. The Department has been made aware of a
number of instances where the Postal Service has relied on Article 23 in
delaying passage of mail originated by U.S. companies that was posted in
foreign countries by remailers.
29 Letter from Laurel Kamen (American Express Corp.), Richard
Coughenour (Citicorp) and Rolf Wetjen (Shearson American Express Corp.)
35
have acknowledged that the Postal Service’s performance in
international] mail has been inadequate. For example, Walter
Duka, Assistant Postmaster General for International Postal
Affairs, stated at a recent meeting of the Board of Governors
that the Postal Service has taken a number of measures to “try
and get international mail back on a healthy track,” and noted
that the purpose of these measures is to “match the delivery
claims made by the so-called remailing companies.”*° Indeed,
the Postal Service did not even offer I-SAL service until it began
to lose substantial amounts of international business. According
to Mr. Duka:
[I]international mail operates in a very competi-
tive environment. We certainly realize that we’ve
experienced significant volume losses and that we
must make our offerings more competitive.>!
The difference in price between services provided by the
Postal Service and those of remailers is quite substantial. Ac-
cording to recent reports, some remailers charge as much as 35
percent less than the Postal Service and provide better service.
As a result, private carriers have taken “nearly all of the inter-
national market for airlifted printed matter.”
Competition from remailers also has the salutory effect of
providing additional incentives for the Postal Service to provide
innovative service an to incfease operating efficiencies. Mr.
to Postmaster General Pual N. Carlin, quoted in “Erratic Service Hurting
International Firms,” Business Mailers Review, May 27, 1985.
30 W. Duka, Remarks at Meeting of the Board of Governors, United States
Postal Service 47 (September 6, 1985) ("Duka Remarks").
31 Id. at 48. See also “Price Cutting Looms for Internationa! Mail,”
Business Mailers Review, Sept. 9, 1985; “Faster Foreign Mail Service
Promised,” Business Mailers Review, June 24, 1985; “A Response to Com-
petition in Foreign Mail,” Business Mailers Review, July 22, 1985.
32 See “Price Cutting Looms for International Mail,” Business Mailers
Review, Sept. 9, 1985.
36
Duka’s response to a question by Governor Voss leaves little
doubt that remailers provide an important competitive check on
the exercise of market power by the Postal Service over inter-
national mail services.
[W]e are coming too late, I think, to try to apply
some imagination and creativity and try to be
more competitive with these private firms and I
certainly agree with you that we should have been
out ahead of them in providing better service
before they in effect have forced us to do this."
2. There is No Evidence that the Policies Under-
lying the Domestic Postal Monopoly Will be
Jeopardized by International Remail Competi-
tion
A significant Congressional policy underlying the Postal
Reorganization Act is that of “universal service”:
The Postal Service is required to develop and
provide adequate and efficient postal service at
fair and reasonable rates and to serve as nearly as
practicable the entire population of the United
States. . . .[E]effective postal service is to be
assured to residents of rural, as well as urban,
communities.*4
It has been argued that the domestic monopoly created by the
Private Express Statutes is necessary in order to support this
universal service policy, i.e., that unless private entrepreneurs
are prevented from “cream skimming” the more lucrative, high
density markets, the cost of providing postal services to all users
will effectively deny service to some users.
33 Duka Remarks at 52 (emphasis added).
¥ See House Report, supra, 1970 U.S. Code Cong. Ad. News at 3657
(1970).
37
In general, we believe that these arguments are unsound as
a matter of economic policy and do not justify the Private
Express Statutes. Rather, it has been our position that the
Private Express Statutes represent a historic deviation from this
nation’s traditional reliance on the private sector, rather than on
the government, to provide services that the public demands.
We have observed elsewhere that the Postal Service’s domestic
monopoly, coupled with the uniform rate structure mandated by
the Postal Reorganization Act, “may impede or preclude some
transactions that are cost justified and at the same time en-
courage other transactions involving the mail for which equally
good or better lower cost substitutes are available.”°5
Assuming, nonetheless, that a connection can be made
between universal service and a statutory domestic monopoly,
we do not believe that curtailing competition from international
remailers is necessary to further the policies underlying the
Private Express Statutes. The Postal Service, noting that the
Private Express Statutes are “a revenue protection measure,”
35 Testimony of Assistant Attorney General William F. Baxter before the
Subcommittee on Governmental Information, Justice and Agriculture of the
House Committee on Government Operations at 8 (May 4, 1983). See
generally, U.S. Department of Justice, “Changing the Private Express Laws:
Competitive Alternatives and the U.S. Postal Service” (January 1977.
While it may be true that a single postal firm might serve certain rural low
density markets most efficiently, the market for inter-city delivery of mail
appears to be capable of serving a number of competing firms. The result,
under the Private Express Statutes is that low-cost users of the mail subsidize
high-cost users. Rather than the hidden subsidy engendered by the present
scheme, Congress might explicitly subsidize these high-cost users. From all
indications, international mail, like inter-city mail, is not a natural monopoly.
Thus, a number of firms competing with each other could most efficiently
provide international postal services, and avoid the inefficiencies associated
with a system of hidden subsidies. Similarly, a direct subsidy to high-cost
users would address more efficiently any concern that such competition
would undermine universal service by denying local delivery a subsidy from
international postal services.
38
argues that the private carriage of international mail “altogether
bypasses the United States Mails.”5° It provides no evidence,
however, that would indicate that competition from internation-
al carriers is causing it economic harm, let alone such great harm
as to jeopardize its ability to provide universal service.
In an analogous situation, this Administration recently
authorized, and the Federal Communications Commission ap-
proved, limited competition to the INTELSAT international
satellite monopoly 37 in the form of customized business ser-
vices roughly analogous to the customized mail services
provided by remailers. The decision was based on the con-
clusion that the benefits of competition in the provision of
specialized telecommunication services outweighed any risk to
universal service. Under circumstances similar to those present
here, the Administration determined that entry by U.S. firms
would give customers of satellite services “new service options
% Notice, 50 Fed. Reg. at 41,462.
37 INTELSAT is an acronym for the International Telecommunications
Satellite Organization, a multinational organization that owns and manages
the global public telecommunications satellite system. According to a recent
report, INTELSAT “handles about 2/3 of the world’s transoceanic telecom-
munications traffic and most international television transmissions.” See
Senior Interagency Group on International Communications and Information
Policy, “A White Paper on New International Satellite Systems” at 7 (Feb.
1985)("White Paper"). Under the Satellite Act of 1962, the President must
determine the international satellite systems “separate” from INTELSAT are
“required in the national interest” before the FCC may authorize such
systems under the Communications Act of 1934. See 47 U.S.C. § 721(a)(6).
Under the multilateral treaty covering INTELSAT, signatories may authorize
private satellite facilities for “international public telecommunications ser-
vice requirements” where those facilities are coordinated with INTELSAT
to ensure technical compatibility and the avoidance of economic harm to
INTESAT. See INTELSAT Intergovernmental Agreement, Article XIV,
Aug. 20, 1971, 23 U.S.T. 3813, 3853, TIAS No. 7532. See generally FCC
Report and Order in Docket No. 84-1299 at 45 (Sept. 3, 1985.).
39
and benefits of competition.”>* The Administration also con-
templated that competition would engender responsive innova-
tion by INTELSAT itself. In conclusion, the Administration
recognized:
Governments should not strifle private
entreprenurial initiatives absent sound and com-
pelling public policy reasons. Such incentives
should not be discouraged when the services
proposed could prove of value to customers, im-
prove their productivity and efficiency, and thus
enable American firms to compete more effec-
tively at home and abroad.
White Paper at 50.
We do not believe that the Postal Service has provided
sound and compelling public policy reasons that warrant its
attempt to eliminate competition in the market for international
mail services. Remailers provide specialized bulk mail services
to large business mailers. The Postal Service is free to compete
for that business, and if forced to innovate, may do well in
attracting such business. In any event, the Postal Service
provides no evidence that existing private competition from
remailers providing specialized international services has had
any financial impact on it of a magnitude that jeopardizes its
ability to provide universal service. To stifle such competition
in the absence of compelling policy reasons would be contrary
to the public interest. -
Vv. CONCLUSION
For the reasons set forth above, we believe that adoption
of the proposed regulations would stifle lawful competition to
the Postal Service. The Postal Service’s authority to expand its
domestic monopoly to eliminate international competition from
38 See White Paper at 2, In its report and order the FCC made detailed
findings as to the public benefits that flow from private international satellite
systems. See FCC Report and Order at 34-45; White Paper at 50.
40
remailers is far from certain, and consequently, requires Con-
gressional clarification. Weighed against this uncertain legal
authority, is the certain public benefit that accrues from private
sector competition in the provision of international postal ser-
vices. In these circumstances, the public interest would be
poorly served by amendment of the Postal Service’s regulations
to prohibit a specialized form of remailer competition in the
provision of international mail services.
Respectfully submitted,
Douglas H. Ginsburg Charles F. Rule
Assistant Attorney Genera Deputy Assistant Attorney
Antitrust Division General
Antitrust Division
Barry Grossman, Chief
Communications & Finance Section
Robert E. Hauberg, Jr.
Assistant Chief
Communications & Finance
Martin L. Stern, Attorney
Communications & Finance ‘Section
Jonathan M. Rich, Attorney
Communications & Finance Section
Michael A. Williams, Economist
Economic Regulatory Section
Antitrust Division
U.S. Department of Justice
504 Safeway Building
Washington, D.C. 20530
202/724-6693
December 12, 1985
41
January 23, 1986
The Honorable John McKean, Chair
USPS/Board of Governors
One California Street, Suite 1200
San Francisco, CA 94111
Dear Mr. McKean:
Last year we wrote to then Postmaster General Carlin in
regard to the U.S. Postal Service’s (USPS) proposed rule chan-
ges in the regulation on the restrictions on private carriage of
letters. In that letter, we asked that the USPS extend the com-
ment period from thirty days to sixty days, so the Subcommittee
could carefully review the proposed changes and the impact on
the USPS and the customers of international remailing services.
The extension was granted and the Subcommittee has now had
the opportunity to review the matter.
We also asked the USPS to provide us with answers to
several questions. The most important of which were, how
much volume and revenue is involved and how the public would
benefit. The only answer they could provide regarding our
question on volume and revenue was, “it is common
knowledge...that a number of shippers and carriers engaged in
this practice, and we infer from this and other information that
the volumes and revenues involved are significant”. Concerns
about the needs of current users of these services were not even
addressed by the USPS.
We cannot understand how the USPS could undertake an
action of this kind without even being able to give a rough
estimate of the volume and doliars involved, or without knowing
the effects of this proposal on current users of remailing services.
Further, the Subcommittee learned that of the fifty-seven com-
ments received on the proposed regulation changes, fifty-five of
them opposed the USPS proposed action.
42
In its comments, the Department of Justice (DOJ) stated,
“we believe that adoption of the proposed regulations would
stifle lawful competition to the Postal Service. The Postal
Service’s authority to expand its domestic monopoly to
eliminate international competition from remailers is far from
certain, and consequently, requires Congressional clarification.
Weighed against this uncertain legal authority, is the certain
public benefit that accrues from private sector competition in
the provision of international postal services. In these cir-
cumstances, the public interest would be poorly served by
amendments of the Postal Service’s regulations to proh‘bit a
specialized form of remailer competition in the provision of
international mail service.”
Accordingly, the Subcommittee finds no justification or
basis for the action proposed by the USPS. However, we have
instructed the Subcommittee staff to continue studying the
matter in more depth to determine if any clarification is neces-
sary. We will, of course, keep you informed of our findiggs.
Sincerely,
MICKEY LELAND
Chairman
FRANK HORTON
Ranking Minority Member
ROBERT GARCIA
Member
cc: The Honorable William D. Ford, Chairman
House Committee on Post Office & Civil
& Service and Members of the Committee
43
26 February, 1986
The Honorable Albert V. Casey
Postmaster General
United States Postal Service
475 L’Enfant Plaza, S.W., Room 10022
Washington, D.C. 20260-1000
Dear Mr. Postmaster:
I understand that on 3 March 1986, the Board of Governors
of the United States Postal Service will consider proposed rules
that, if adopted, will materially and adversely affect the ability
of remail services to compete for international mail traffic. Our
Antitrusi Division filed comments with you on 12 December
1985, opposing these proposed rules. I would like to reiterate
the concerns of this Department about the effect of the proposed
rules on competition and consumer welfare.
As the Antitrust Division has explained, there are sig-
nificant public benefits from lawful private sector competition
in the provision of international postal services. Remailers have
been able to offer service to United States businesses competing
abroad at costs and terms that are apparently viewed by users as
better than those offered by the Postal Service. | understand that
competition from remailers has forced the Postal service to
introduce new international services. By stifling lawful private
sector competition, the proposed regulations will undermine
economic efficiency and will inhibit Postal Service incentives
to innovate and to price its international services competitive-
ly —all to the detriment of consumer welfare.
Given the Administration’s policy in favor of competition
and against unnecessary regulation, | urge you to follow the
recommendation filed by our Antitrust Division and not promul-
gate the proposed rules. I understand that these same issues will
be relevant to Administration review of the 1984 Universal
44
Postal Union Convention, and I hope the Convention will be
submitted shortly for Administration review. By copy of this
letter, 1 am informing the remaining members of the Board of
Our position on this matter.
Sincerely,
EDWIN MEESE III
Attorney General
cc: Members of the Board of Governors,
United States Postal Service
45
| 28 February 1986
Honorable Albert V. Casey
Postmaster General
U.S. Postal Service Headquarters
Washington, D.C. 20260-1000
Dear Mr. Casey:
The Board of Governors of the Postal Service will consider
the issue of international remain at its March 3 meeting. The
United States Postal Service (USPS), in an October 10, 1985,
Federal Register notice, proposes to restrict private companies
from providing international remail service. The Department of
Commerce opposes this proposai. I urge you not to adopt it.
The proposal to restrict international remail service should
be put aside on the basis of business’ expressed needs and U.S.
trade policy. U.S. businesses use the services of private com-
panies for remail because their service is less expensive and
faster than the alternative being developed by USPS. Interna-
tional remail service provides a valuable service for U.S. inter-
national business firms. To prohibit U.S. companies from using
these services would place the firms at a disadvantage vis-a-vis
our foreign competitors.
In addition, the U.S. international business community
overwhelmingly opposes the USPS proposal. This is borne out
by the comments received by USPS following its Federal
Register notice as well as a poll commissioned by the Interna-
tional Remail Committee.
Please let me know if you would like further information.
Sincerely,
Malcolm Baldrige
Secretary of Commerce
46
28 February 1986
Honorable Albert V. Casey
Postmaster General
U.S. Postal Service
475 L’Enfant Plaza, S.W., Room 10022
Washington, DC 20260-1000
Dear Mr. Casey:
On October 10, 1985, the U.S. Postal Service (USPS)
proposed a revision in its regulations implementing the Private
Express Statutes that would have the effect of restricting the
operations of international “remailers.” We understand the
USPS Board of Governors plans to consider this proposal on
March 3, 1986.
The Office of Management and Budget recommends that
the Board not adopt the proposed revisions. We believe the
revisions would restrict competition in international mail ser-
vice, because international remailers would be unable to offer
many, if not all, of their current services. Competition from
international remailers has increased innovation and improved
service levels in this market. The Department of Justice has
found that private international remailers currently provide
faster service to more countries, typically at lower rates, than
does the competitive program offered by the USPS. The
proposed changes would harm consumers of international! mail
services by increasing their consumers of international mail
services by increasing their costs and reducing the quality and
variety of international mail services available to them. Since
most of the users of international remailers’ services are U.S.
firms with international activities, this action would also reduce
U.S. competitiveness abroad.
47
We are concerned that if the proposed changes are adopted,
consumers of international mail services will not be protected
either by competition or by regulation. Unlike domestic mail
rates, rates for international mail are not subject to regulation by
the Postal Rate Commission.
The rationale presented by the USPS for the proposed rule
is that current practices deprive the USPS of revenue. We do
not believe this is an adequate justification for extending the
USPS monopoly, for it would permit no limits to extending that
monopoly to any form of service where the USPS faces com-
petition. It is the policy of this Administration to foster com-
petition wherever possible, because of the benefits it produces
for consumers. We believe that the USPS should also be seeking
feasible opportunities to promote competition, within its
statutory authority and obligations.
On a related matter, we are seriously concerned about the
USPS’s delay in submitting the 1984 Universal Postal Union
Convention to the State Department. Delay in sending the treaty
forward can impede the ability of the President to exercise his
Constitutional and statutory discretion to oversee the foreign
affairs of the United States and may cast doubt on our resolve
to act expeditiously in fulfilling our international respon-
sibilities.
Sincerely yours,
James C. Miller III
Director
48
2 April 1986
Honorable Alfonse D’ Amato
United States Senate
Washington, D.D. 20510
Dear Senator D’ Amato:
I] am writing in response to your February 13, 1986 letter
to Attorney General Meese. Your letter seeks written confirma-
tion from the Department of Justice that international remailers
“are not acting illegally” under current Postal Service regula-
tions.
I am enclosing for your information a letter from the
Attorney General to Postmaster General Casey that indicates our
view that remailers currently provide “lawful private sector
competition” to the Postal Service. I also enclose a March 4,
1985 Statement of John R. McKean, who is the chairman of the
Postal Service Board of Governors. That statement indicates
that the Board of Governors views competition from remailers
as being in the public interest. That statement also indicates that
the Board of Governors has ordered the Postal Service to com-
mence a rulemaking proceeding to “remove the cloud” over
remailing that, in their opinion, is created by current Postal
Service regulations.
Under these circumstances, you may be assured that the
Department of Justice will not seek to prosecute international
remailers or their customers on the basis of the current regula-
tions.
49
We hope that you find this information useful in clarifying
the lawfulness of international remail and in minimizing the
adverse effects that the current situation has had on your
remailer constituents.
Sincerely,
John R. Bolton
Assistant Attorney General
Enclosures
ce: Louis A. Cox, Esquire
General Counsel
U.S. Postal Service
475 L’Enfant Plaza, S.W.
Washington, D.C. 20260-1100
50
POSTAL SERVICE
39 CFR Parts 310 and 320
Restrictions on Private Carriage of Letters; Withdrawal
of Proposed Rule; Advance Notice of Proposed Rulemak-
ing and Request for Information
AGENCY: Postal Service
ACTION: Withdrawal of proposed rule; advance notice of
proposed rulemaking and request for information.
SUMMARY: On October 10, 1985, the Postal Service publish-
ed in the Federal Register [50 FR 41462] a proposed modifica-
tion and clarification of the regulations on the Private Express
Statutes, with minor and procedural revisions on October 22,
1985 (SO FR 42729) and November 8, 1985 (50 FR 46464). The
proposed rule, which is hereby being withdrawn, dealt for the
most part with the carriage of intergational letters by private
firms who remail them outside the United States.
The Postal Service received a significant number of com-
ments on the proposed rule. Following review of the comments,
the Chairman of the Board of Governors of the Postal Service
issued a statement, which is ced below. The Chairman
noted, among other things, that the remail issue has generated
considerable controversy about the proper scope of the Private
Express Statutes and implementing regulations. Accordingly,
the Chairman announced that a new rulemaking proceeding will
be initiated as soon as a factual record is fully developed. The
Postal Service has sent a letter to each commenter, a sample of
which is reproduced below, requesting information for that
record. The principal purpose of this notice is to request the
same information from other members of the public.
51
DATE: Withdrawal of the proposed rule is effective March 20,
1986. Comments and information needed to develop a full and
factual record must be received on or before April 30, 1986.
ADDRESS: Written comments and information should be ad-
dressed to the General Counsel, Law Department, United States
Postal Service, Washington, DC 20260-1113. Copies of all
written comments will be available for inspection and
photocopying between 9:00 a.m. and 4:00 p.m., Monday
through Friday, in Room 5128, 955 L’Enfant Plaza, SW.,
Washington, DC.
FOR FURTHER INFORMATION CONTACT: Charles D.
Hawley, (202) 268-2970.
SUPPLEMENTARY INFORMATION: As noted above, the
Postal Service is undertaking to develop a factual record in
preparation for a new rulemaking proceeding and has sent a
letter to each commenter soliciting information for that record.
The Postal Service requests the same information from other
members of the public. Accordingly, a sample of the letter is
reproduced here, along with the Statement of the Chairman of
the Board.
List of Subjects in 39 CFR Parts 310 and 320
Postal Service, Computer technology, Advertising.
W. Allen Sanders,
Associate General Counsel, Office of General Law and Ad-
ministration.
March 14, 1986.
Dear : For the reasons more fully discussed
in the enclosed statement by John McKean, Chairman of the
Board of Governors, the Postal Service is undertaking to gather
information and develop a factual record in preparation for the
initiation of a new rulemaking proceeding relating to the practice
of international remailing. We are writing to you, s a person
52
who submitted comments in response to our earlier notice of
proposed rulemaking on this subject, to solicit information for
that record.
The particular focus of our inquiry is the appropriate scope
of a new suspension of the Private Express Statutes which may
be necessary to serve the interests of our customers. We solicit
information from you as to the kind or kinds of private services
which in your experience have met, or in your estimation would
meet, your needs or the needs of the public, with respect to letters
being sent to addressees in foreign countries, more satisfactorily
than those provided by the Postal Service. Of greatest value to
us in this respect would be information that addresses such
points as the following:
* The nature of the correspondence;
* The degree of urgency and the type of harm that would
be caused by delay;
* Any differential in promptness of service between let-
ters that are “remailed” and those sent through the
Postal Service;
* Whether the correspondence is eligible for private car-
riage under the current loss-of-value test of the suspen-
sion for extremely urgent letters (see 39 CFR 320.6(b),
copy attached);
* The extent to which the correspondence is intra-com-
pany;
* The extent to which letters privately carried to foreign
countries are “remailed” or are delivered to the addres-
sees by private means;
* Any estimate of the volume of letters “remailed” over
the past year;
¢ Any differential in cost between letters privately car-
ried and letters sent through the Postal Service;
53
¢ The extent to which considerations of cost rather than
speed of delivery determine the choice of carrier for
letters sent overseas; and
* The extent to which a suspension for remailing would
preserve the benefits of desirable competition between
the Postal Service and private companies.
This is by no means an exhaustive list of points that may
be material to the development of the full factual record that we
need as a basis for proposing a new suspension of the Statutes.
We welcome any additional information and urge that it be as
factual and specific as possible. We also solicit your views as
to the scope of a suspension which will best serve the relevant
interests, and we invite you to suggest specific language for an
implementing regulation.
We anticipate proceeding in accordance with the following
schedule:
April 30, 1966 — Responses due to solicitation of informa-
tion for factual record.
May 22-23, 1966— Meeting with interested persons to
discuss responses and parameters of proposed suspension.
June 16, 1966 — Publish notice of proposed rulemaking in
Federal Register.
July 16, 1966 — Comments due on proposed rule.
August 29, 1966 — Publish notice of final rule.
We ask that you send your response so as to reach me not
later than Wednesday, April 30, 1966.
We are withdrawing the earlier proposal in order to avoid
uncertainty over its status while this new proceeding is pending.
To the extent that the earlier proposal dealt with the suspension
for extremely urgent letters on matters other than international
remailing, we anticipate initiating a further proposal in the near
future.
54
If you have questions, my telephone number is (202)
268-2970.
Sincerely,
Charles D. Hawley,
Assistant General Counsel, General
Administration Law Division, Law Department
Enclosures
39 CFR 320.6(b)
(b)(1)For letters dispatched within 50 miles of the intended
destination, delivery of those dispatched by noon must be com-
pleted within 6 hours or by the close of the addressee’s normal
business hours that day, whichever is later, and delivery of those
dispatched after noon and before midnight must be completed
by 10 A.M. of the addressee’s next business day. For other
letters, delivery must be completed within 12 hours or by noon
of the addressee’s next business day. The suspension is avail-
able only if the value or usefulness of the letter would be lost or
greatly diminished if it is not delivered within these time limits.
For any part of the shipment of letters to qualify under this
paragraph (b), each of the letters must be extremely urgent.
(2) Letters sent from the 49 contiguous states of the United
States to other jurisdictions of the United States or to other
nations are deemed “delivered” when they are in the custody of
the international or overseas carrier at its last scheduled point of
departure from the 48 contiguous states. Letters sent from other
jurisdictions of the United States or from other nations into the
48 contiguous staies are deemed “dispatched” when they are in
the custody of the domestic carrier, having been passed by
United States Customs, if applicable, at the letters’ point of
arrival in the 48 contiguous states.
(3) Except as provided in this paragraph (b)(3), the times
and time limits specified in paragraph (b)(1) of this section are
55
not applicable to any locations outside the 48 contiguous states.
The times and time limits specified in paragraph (b)(1) are
applicable to letters dispatched and delivered wholly within
Alaska, Hawaii, Puerto Rico or a territory or possession of the
United States. The regulations provided in paragraph(b)(2)
relating to the delivery and dispatch of letters are applicable by
analogy to letters shipped between these jurisdiction and other
nations.
Statement of John R. McKean, Chairman, United States
Postal Services Board of Governors, on Remail Issue
March 4, 1986
_As some of you may be aware, the Postal Service recently
initiated a rulemaking concerning its regulations under the
private Express Statutes. That rulemaking involved the rules
bearing on the carriage of international mail by private firms
who remail it outside the United States.
In response to this proposed rulemaking, the Postal Service
has received a significant number of comments. The Board of
Governors has been kept informed of the nature of these com-
ments.
The remail issue has generated considerable controversy
about the proper scope of the monopoly under which we operate.
It is worth emphasizing that Congress entrusted us with this
monopoly not for our own benefit but in order to let us better
serve the American people. The critical question raised by this
rulemaking is whether enforcement of the monopoly in this
context would advance or retard consumer welfare and the
interests of this nation.
It is the sense of the Board that private sector competition
with the Postal Service in the provision of international remail-
ing services can—and already does— produce significant
56
benefits for the public. Ultimately, even the Postal Service itself
can benefit from this kind of competition.
Many businesses appear to view the private sector alterna-
tive as preferable to the service we are providing — preferable in
terms of price and service. That tells us something important
about the way we are now doing our job in this area. The
monopoly was not intended to protect us from having to face up
to our own shortcomings. I am glad to say that the competition
from private remailers has already spwited us on to improve our
own efforts and be more competitive in providing international
mail services.
As things now stand, therefore, remail services would
appear to advance consumer welfare while at the same time
fostering innovation and economic efficiency.
The Board of Governors does not believe that any attempt
to suppress this kind of competition would advance the long-
term objectives of the Postal Reorganization Act or otherwise
enhance the welfare of our customers and the American people.
Yet we have to deal with the laws and regulations now on the
books. As now drafted, they do not appear to leave room for
the lawful operation of international remail services. At the very
least there is a serious question on this point.
The Board of Governors believes that the appropriate
course of action under these circumstances-is to change our
regulations to make them conform to sound public policy.
Accordingly, we are announcing today that the Postal Service
will soon be initiating another rulemaking proceeding, this time
to remove the cloud that now hangs over the international! remail
services and preserve the benefits of desirable competition
between the Postal Service and private companies.
The Private Express Statutes permit us to suspend their
application when the public interest so requires. Such a suspen-
sion must be predicated on a fully developed factual record. The
57
Postal Service intends to take the steps necessary to gather
information in this regard and proceed with a new rulemaking
as quickly as possible.
[FR Doc. 86-6107 Filed 3-20-86; 8:45 am]
Billing Code 7790-13-
58
March 26, 1986
The Honorable John McKean, Chairman
Board of Governors
United States Postal Service
475 L’Enfant Plaza, S.W.
Washington, D. C. 20260
Dear Mr. McKean:
I was extremely disturbed by the letter dated March 14,
1986 by an Assistant General Counsel of the USPS in which he
couched the Remailing Issue in terms of a suspension of the
Private Express Statutes. As you are well aware and as the
author of the March 14, 1986 letter should be aware, the Remail-
ing Issue does not, in any way, involve a suspension of the
Private Express Statutes.
As noted in the comments of the U.S. Department of Justice
dated December 14, 1984, it is not clear that Congress intended
to grart USPS a monopoly over international mail as well as
domestic mail. Indeed, applicable canons of statutory inter-
pretation and relevant case law tend to indicate that Congress
did not intend for the monopoly to extend to international mail.
At best; the intent of Congress on this issue is ambiguous. Until
this issue is resolved as a matter of law, the USPS need not and
should not even consider suspending the Private Express
Statutes.
The regulations originally proposed by the USPS, in effect,
extend the monopoly to international mail. This is a wholly
improper exercise of the rule making authority of the USPS.
The scope of the monopoly is a question of public policy and is
to be determined only by Congress. Until Congress makes this
determination, the issue of suspending the Private Express
Statutes is not even relevant.
59
We strongly advise both the Board and the USPS not to
persist in this misinterpretation of the law and of the Remailing
Issue.
Sincerely,
MICKEY LELAND
Chairman
ML/dl
60
May 2, 1986
U.S. Department of Justice
Antitrust Division
Charles D. Hawley, Esquire
Assistant General Counsel
United States Postal Service
475 L’Enfant Plaza, S.W.
Washington, D.C. 20260-1100
Re: Restrictions on Private Carriage of Letters;
Withdrawal of Proposed Rules; Advance
Notice of Proposed Rule-making and Request
for Information
Dear Mr. Hawley:
I am writing in response to your March 18, 1986 letter to
the Department of Justice ("Department") requesting informa-
tion that might be considered by the Postal Service in fashioning
a suspension of the Private Express Statutes for international
remail services. I understand that an identical letter has been
sent to all parties that filed comments in the remail rulemaking.!
Pursuant to the March 4, 1986 statement by John McKean,
Chairman of the Board of Governors of the Postal Service
("McKean Statement"), the Postal Service was ordered to
withdraw the previously proposed rules on which we and others
commented,? and to initiate a new rulemaking to “preserve the
‘Restrictions on Private Carriage of Letters; Withdrawal of Proposed
Rules; Advance Notice of Proposed Rulemaking and Request for Informa-
tion, 51 Fed. Reg. 9852 (March 21, 1986) ("Notice").
Restrictions on Private Carriage of Letters; Proposed Clarification and
Modification of Definition and of Regulations on Extremely Urgent Letters;
50 Fed Reg. 41462 (October 10, 1985); See also Comments of the United
States Department of Justice, In the Matter of Restrictions on Private Car-
riage of Letters; Proposed Clarification and Modification of Definition and
61
benefits of desirable competition between the Postal Service and
private companies.” The letter and Notice represent that the
information requested is needed “as a basis for proposing a new
suspension of the [Private Express] Statutes” and solicit “views
as to the scope of a suspension which will best serve the relevant
interests” and specific language for implementing regulations."4
The Department sees no need for a new rule. As the
Attorney General has stated, international remail represents
“lawful private sector competition to the Postal Service.”5
Moreover, the Department has indicated that it will not
prosecute remailers or their customers on the basis of current
Postal Service regulations.6 Under these circumstances, a
protracted rulemaking will only serve to raise uncertainty as to
the legal status of lawful private sector services that numerous
executive agencies and the Board of Governors of the Postal
Service find beneficial to consumers.
Furthermore, even if a new rule were necessary to clarify
that international remail is lawful, the comments filed in the
earlier remail proceeding and the Postal Service’s own internal
reports provide an ample record on which to base any rule that
the Postal Service deems necessary to “remove the cloud” over
remail that it sees under current regulations.” The information
request and the accompanying procedural schedule will only
delay resolution of this matter.
of Regulations on Extremely Urgent Letters, December 12, 1985, ("Depart-
ment Comments”).
*Notice, 51 Fed. Reg. at 9853.
“Notice, 51 Fed. Reg. at 9852.
*See Letier from Attorney General Edwin Meese to Postmaster General
Albert V. Casey, February 26, 1986 (copy attached).
*See Letter from Assistant Attorney General John R. Bolton to Senator
Alfonse D’Amato, April 2, 1986 (copy attached).
"Id. at 51 Fed. Reg. 9853. See generally Department Comments at 19-22.
62
In sum, the Postal Service’s conduct of the remail proceed-
ing may reflect a fundamental reluctance to accept the benefits
of marketplace competition, contrary to the expressed mandate
of the Board of Governors:
The Board of Governors does not believe that any
attempt to suppress this kind of competition
would advance the long-term objectives of the.
Postal Reorganization Act or otherwise enhance
the welfare of our customers and the American
people.§
Consistent with this policy pronouncement, and the policy of
this Administration to foster and promote private sector com-
petition in international mail, we strongly urge the Postal Ser-
vice to abandon the remail proceeding. Alternatively, the Postal
Service should resolve the proceeding expeditiously on the basis
of the existing record so that the benefits of private sector
competition may continue to be enjoyed by consumers on
international! mail services.
Please include this document in the public file of this
proceeding.
Sincerely,
Charles F. Rule
Deputy Assistant Attorney General
Antitrust Division
Enclosures
SSee Notice, 51 Fed. Reg. at 9853. See also Department Comments at
19-22.
63
POSTAL SERVICE
39 CFR Parts 310 and 320
Restrictions on Private Carriage of Letters; Meeting
AGENCY: Postal Service.
ACTION: Notice of public meeting.
SUMMARY: This document provides notice of a public meet-
ing relating to the initiation of a new rulemaking proceeding
concerning the Private Express Statutes and the practice of
international remailing. All persons desiring to attend the meet-
ing should notify the Postal Service by May 15, 1986.
DATES: 10:00 A.M., Thursday, May 22, 1986 (If necessary,
on Friday, May 23, 1986.)
ADDRESS: Conference Room, Room No. 5183, 955 L’Enfant
Plaza SW., Washington, DC (The location is subject to change
if the number of persons desiring to attend exceeds the capacity
of this conference room.)
FOR FURTHER INFORMATION CONTACT: Charles D.
Hawley, (202) 268-2970.
SUPPLEMENTARY INFORMATION: The Postal Service in-
tends to hold a public meeting in connection with its undertaking
to gather information and develop a factual record in preparation
for the initiation of a new rulemaking proceeding concerning the
practice of international remailing, as previously announced on
March 21, 1986, in the Federal Register (51 FR 9852).
Discussion will focus n comments submitted by interested per-
sons in response to the March 21, 1986 Federal Register notice,
the need of the public for international services not met by the
Postal Service, and the scope of a proposed suspension of the
Private Express Statutes to permit international remailing.
However, no decision on the nature or scope of a proposed
suspension will be made or announced at this meeting. The
64
meeting is scheduled for May 22, 1986, at 10:00 a.m., and, if
necessary, will reconvene on May 23, 1986. All persons desir-
ing to attend the meeting are asked to notify the Postal Service,
at the telephone number listed above, by the close of business
on May 15, 1986. If the anticipated seating requirements exceed
the capacity of the announced meeting room, a change in the
room location will be announced on or before May 19, 1986.
Fred Eggleston,
Assistant General Counsel, Legislative Division
[FR Doc 86-10556 Filed 5-9-86; 8:45 am]
65
POSTAL SERVICE
39 CFR Part 320
Restrictions on Private Carriage of Letters; Proposed,
Suspension of the Private Express Statutes; International
Remailing
AGENCY: Postal Service.
ACTION: Proposed rule.
SUMMARY: On March 21, 1986 the Postal Service published
in the Federal Register (51 FR 9852) an advance notice of
proposed rulemaking and request for information on which to
develop a factual record concerning international remailing, and
also withdrew a previously published proposed rule.
The purpose of this document is to propose a new suspen-
sion of the Private Express Statutes for international remailing.
This suspension would implement the statement of March 4,
1986 by John McKean, Chairman of the Board of Governors,
that the cloud should be removed from the practice of interna-
tional remailing. See 51 FR 9853. The proposed suspension
would permit the private uninterrupted carriage of letters from
the United States to a foreign country for ultimate delivery
outside of the United States.
DATE: Comments must be received on or before July 17, 1986.
ADDRESS: Written comments should be addressed to the
General Counsel, Law Department, United States Postal Ser-
vice, Washington, D.C. 20260-1113. Copies of all written
comments will be available for inspection and photocopying
between 9:00 AM and 4:00 PM, Monday through Friday, in
Room 6147, 475 L’Enfant Plaza, West, SW., Washington, D.C.
(until on or about June 23, 1986, the location will be Room 5128,
955 L’Enfant Plaza, SW., Washington, DC.).
- 66
FOR FURTHER INFORMATION CONTACT: Charles D.
Hawley (202) 268-2970.
SUPPLEMENTARY INFORMATION: On October 10, 1985,
the Postal Service proposed to amend several provisions of the
regulations, 39 CFR Parts 310-320. that implement the Private
Express Statutes. 50 FR 41462 (1985). The purpose of the
proposal for the most part was to clarify the administrative
suspension of the Siatutes for extremeiy urgeat letters, 39 CFR
320.6, with respect to the practice of international “remailing.”
Private firms, believing themselves to be acting pursuant to this
suspension, had begun to carry bulk shipments of letters from
American firms, entirely outside the United States Mails, to
foreign countries. There the letters, addressed to individuals in
countries other than the United States, were deposited with a
foreign post office, or “remailed,” and delivered to their various
addresses as ordinary mail.
The Postal Service had determined in an advisory opinion,
39 CFR 310.6 that the carriage of letters in bulk, under the
circumstances characteristic of the remailers’ operations, did not
comply with the terms of that suspension. Advisory Opinion
83-7 (May 11, 1983). During December 1984, the Postal Ser-
vice requested the Department of Justice to authorize suit to
enjoin the activities of those remailers who were continuing to
violate the Private Express Statutes in contravention of the
advisory opinion. In August 1985 the Department informed the
Postal Service that it declined to do so.
While we do not question the Postal Service’s authority to
regulate the solely domestic activities of international courier
services, our decision is based on the conclusion that the Postal
Service’s implementing regulations may reasonably be con-
strued to permit the complained of activity.
The effect of this decision was to allow the private carriage
of letters that were not extremely urgent under the color of a
suspension adopted by the Postal Service for letters that were
67
extremely urgent. Of perhaps more importance, its effect was
to create a significant exception to the Private Express Statutes
that had never been approved, or even contemplated, either by
Congress, or by the Postal Service in the exercise of its power
to suspend the operation of the Statutes, 39 U.S.C. 601(b). To
correct this situation and to restore the suspension for extremely
urgent letters to its original purpose, the Postal Service in
October 1985 proposed the clarifying amendments noted above.
In response to the publication of this notice, the Postal
Service received approximately sixty comments, virtually all of
them critical of the proposal. Subsequently, John McKean,
Chairman of the Board of Governors of the Postal Service, stated
on March 4, 1986, that the Postal Service would be initiating a
new rulemaking proceeding to remove the cloud of [doubt as to
lawfulness] that now hangs over the international remail ser-
vices and preserve the benefits of desirable competition between
the Postal Service and private companies.
As the first step in implementation of this statement, the
Postal Service on March 21, 1986, published in the Federal
Register a notice withdrawing the October 10, 1985 proposal
and soliciting information on the benefits to the public of
remailing to become part of a “fully developed factual record”
upon which to predicate a new suspension (51 FR 9852). In the
hope of further supplementing the record, the Postal Service on
May 12, 1986 announced that it would hold a public meeting
(51 FR 17366), which was held on May 22, 1986. A transcript
of that meeting is included in the record of this rulemaking.
In the related proceedings described above, the Postal
Service has heard the views of a great many members of the
public and several other Federal agencies on the question of the
benefits which the public may receive from the availability of
private international remail services. It is clear that the over-
whelming majority of those who have commented favor a
regulation which permits such services. The reasons which they
68
advance are several: It is faster, less expensive, more reliable,
and more responsive than the air mail service provided by th
Postal Service. It is said that American business is better able
to empete in foreign markets when service of this nature is
available. Competition in the provision of international letter
delivery service is also said to be inherently beneficial, both to
the customers who use this service and to the Postal Service
itself. a
' Some commenters have also directed criticism against the
terms of the proposed amendments. In view of the fact that those
proposals have been withdrawn, we think it unnecessary to
respond to these criticisms.
Applicability of Private Express Statues to International
Shipments of Letters
One comment raised the threshold question of the ap-
plicability of the Private Express Statutes to international ship-
ments of letters. This is fundamental, of course, because, if the
Statutes were not applicable, no suspension or exception would
be needed to permit the activities of the remailers. The Postal
Service is not persuaded, however, that there is any merit to this
comment. It is based on the commenter’s views of public
policy, but it fails to take into account clear expressions of the
intent of Congress to apply the Statutes to letters leaving and
entering this country.
This intent can be seen most clearly with respect to two of
the statutes which contain provisions relating to the transporta-
tion of letters by vessels to and from foreign countries. 18 U.S.C.
1699; 39 U.S.C. 602. The legislative history of the 1952 amend-
ment to 18 U.S.C. 1699 leaves no room for doubt that Congress
contemplated the application of the Statutes to letters arriving
from foreign countries. See S. Rep. No. 1794, 82d Cong., 2d
Sess. June 19, 1952:
69
Under excising law, no vessel arriving in a given port is
allowed to break bulk until all letters on board are delivered to
the nearest post office. To illustrate how this works is to take
the port of Boston, generally the first call on the North Atlantic
route of vessels from Europe. . .
The text of 39 U.S.C. 602(a) relating to outgoing letters is,
if anything, even more clear on this point:
§602. Foreign letters out of the mails
(a) Except as provided in section 601 of this title, the master
of a vessel departing from the United States for foreign ports
may not receive on board or transport any letter which originated
in the United States that-
(1) has not been regularly received from a United States
post office. ...
We continue to adhere, therefore, to our conclusion that the
Statues are applicable to the carriage of international letters
within the United States.
A second related point raised by several commenters is that
there is no need for action by the Postal Service because other
agencies of the Executive Branch, particularly the Department
of Justice, have concluded that remailing is lawful under current
regulations.
We find no merit in this comment, either. The Postal
Service is in the best position to know its own intention when it
adopts a suspension. The Advisory Opinions have stated these
intentions consistently through the years. Furtherore, the
regulation at issue has never been the subject of adjudication, or
of an Opinion of the Attorney General. Under these circumstan-
ces, we think it was reasonable for Chairman McKean to con-
clude that a further rulemaking is necessary.
A number of other comments challenge on various grounds
the authority of the Postal Service to regulate the private carriage
70
of letters and, as a carrier of letters, to adopt regulations which,
it is said, unfairly handicap competing private firms also
engaged, or wishing to engage, in the international carriage of
letters. We consider, however, that these comments are not well
taken. In adopting the regulations contained in Parts 310-320,
Title 39, Code of Federal Regulations, the Postal Service has
merely implemented the private Express Statutes. It is these
Statutes which limit the private carriage of letters upon which
postage has not been paid.
This is not a situation in which the postal Service is
imposing regulatory limitations upon an industry which would
otherwise conduct its operations free of governmental restraint.
The regulations define, interpret, and clarify the Statutes and, in
the case of Part 320, relax for specific limited purpose, the
restrictions of the Statutes, to provide as lawful basis for private
carriage which the Statutes otherwise would not permit. If the
postal regulations, and particularly those in Part 320, were not
in effect, the result would not be unrestricted private competition
with the Postal Service but no lawful private carriage at all,
except as allowed by very limited statutory exceptions.
In enacting the Private Express Statutes, Congress has
made the policy decision that the revenues of the Postal Service
should be protected by restricting the private carriage of letters.
The Postal Service is not simply one of several enterprises
providing letter delivery services. It is, rather a Government
agency which is to be “operated as a basic and fundamental
service” for the American people. 39 U.S.C. 101(a). While the
Postal Service has endeavored, since the enactment of the Postal
Reorganization Act, to operate in conformity with the business
practices and management methods of the private sector, it is
nonetheless al public entity and as such is not free to disregard
Congress decision. Under the circumstances, we conclude that
there is no valid basis for suggesting that the Postal Service is
unlawfully or unfairly attempting to regulate the private sector.
71
The Public Interest in Remailing
As we have noted above, the overwhehiing majority of the
comments on our proposals have favored allowing the remailers
to compete with the Postal Service and have advanced a number
of reasons for this result. Greater sped of delivery, in com-
parison with air mail, and its resultant benefits to America’s
ability to compete in overseas markets is perhaps the most
frequently raised point. The record is less than fully factual as
to this matter. Two commenters have submitted tables showing
a comparison of delivery times for letters sent via the Postal
Service and via remailers to various cities in Europe, Asia,
Africa, and Latin America. These comparisons almost invariab-
ly show remailed items with a shorter delivery time. Little or
no explanation is given, however, of the manner in which these
tables were compiled, of whether they show average times for
more than one remailer, of what period of time or what volume
of letters the figures represent, in short, how valid the com-
parisons are. The figures themselves show wide fluctuations
between cities, in the differentials between the Postal Service
and remailers and in some instances between times by the same
mode to the same city. While the apparently anecdotal character
of these tables does not add to their credibility, they may well
be the most reliable compilations available on this subject. They
are, moreover, consistent with the conclusory statements of a
number of other commenters.
On the issue of the need for remailing services to assist in
making American business more competitive in the world
market, the comments provide little more than conclusions. It
seems self-evident that a more prompt and reliable letter
delivery service would, to some extent, assist parties to existing
or prospective business transactions by facilitating written com-
munication. What is less clear, however, is the extent to which
any difference that may exist between air mail and remail is
significant in this respect, particularly given the wide fluctua-
_—
72
tions in the delivery time of remail services which we have noted
above. We had sought to obtain information from the public
which would permit us to determine whether there is a range of
time within which delivery is critical to the success of competi-
tive efforts, but our efforts were not successful. Nonetheless,
notwithstanding the imprecision of the data, we think it
reasonable to conclude that in general the availability of remail
services assists American firms in competing internationally.
As to the cost of remail, we have little factual information
about the rates charged by remailers. The comments frequently
assert that they are lower and we know from observation of
promotional material distributed by remailers that they charac-
teristically advertise rates thatare lower than air mail, sometimes
simply a percentage of the air mail rates. While many comments
assert that speed or reliability, rather than price, is the main
incentive for the use of remailers’ services, we have no doubt
that the remailers as a group charge lower rates than the prevail-
ing rates for the Postal Service’s international air mail service.
As with the previous points, the record contains little hard
evidence as to either the comparative reliability of remail
delivery or of the responsiveness of the remailers to the needs
of their customers, save that the collection of letters from
customers’ locations is a characteristic of remailers services.
Other than that, we have only the generalized and conclusory
statements of commenters to support these points.
There is little or no reliable information as to the amount
of revenues diverted to date by the activities of remailers.
Estimates run from about $25 million to $500 million annually.
One comment to the original proposal concluded that the net
revenue loss to the Postal Service was in the neighborhood of
$3 million a year. Without attempting to determine the accuracy
of these estimates, we can say that the total amount of revenues
of the Postal Service from international mail-much of which is
not letters and so is not protected from competition by the
73
Statutes-was $882.3 million for the most recently published
figures. Annual Report of the Postmaster General, 1985. We
conclude that the loss of revenues of what is necessarily a lesser
amount is not so adverse to the Postal Service as to outweigh
the perceived benefits to the public interest from allowing
remailing to continue by virtue of the suspension which follows.
Proposed Suspension for International Remailing
For the reasons given above the Postal Service proposes to
amend its regulations by adding a new suspension for interna-
tional remailing. This new suspension, which would be codified
as $320.8 of title 39, Code of Federal Regulations, would
suspend the operation of the Statutes
to permit the uninterrupted carriage of letters from a point within
the United States to a foreign country for deposit in its domestic
or international mails for delivery to an ultimate destination
outside the United States.
This, we think, fairly summarizes the essential character of
remailing. It is intended as a forthright acceptance of that
practice as the Postal Service now understands it. It is essential,
however, that the terms of the suspension be adhered to in good
faith and that the suspension not be broadened by abuse to
encompass private carriage under circumstances not con-
templated in its adoption.
We particularly invite attention to two provisions of this
paragraph. The first is “uninterrupted” as a qualification of
allowable carriage. By this we mean simply that to come within
the terms of the suspension the carriage of letters from a point
within the United States to the point at which they are deposited
in a foreign mail stream must be substantially continuous. It is
not necessary that they be continuously in the hands of a single
Carrier, nor is it a violation of the terms of the suspension if they
are held for sortation or mixed with letters originated by another
sender. They must not, however, be opened, read, or otherwise
74
used in the course of carriage, nor may they be delivered during
carriage to any person not involved in that carriage. To help in
explaining the meaning of this qualification, we have included
in the text of the proposed regulation two contrasting examples
of circumstances in which carriage is and is not interrupted.
This qualification does not alter the current practice of remail-
ing. It is intended rather to ensure that the suspension does not
serve as a pretext for allowing private carriage of letters from
one point to another wholly within the United States.
The second provision to which we particularly invite atten-
tion is that which requires that letters carried under the suspen-
sion be for ultimate delivery outside the United States. The
suspension is not intended for the delivery of letters sent to
persons within this country. That would be totally at odds with
the revenue protection purposes of the Private Express Statutes
and would in no way advance the public interest in improved
delivery of letters to foreign locations. As with the requirement
that carriage be uninterrupted, this provision is intended to
ensure that the suspension not be abused. This provision is
reinforced by proposed paragraph (b) which states:
This suspension shall not permit the shipment or carriage
of a letter or letters out of the mails to any foreig 1 country for
subsequent delivery to an address within the United States.
Finally, as was true in the adoption of the suspension for
extremely urgent letters, see 39 CFR 320.6(e), the regulation
provides in proposed paragraph (c) an administrative sanction
which may be brought into play in the event of a violation of the
substantive terms of the suspension. This sanction is the revoca-
tion of the suspension as to the particular s/.ipper or carrier for
a period of up to a year. This procedure, which involves an
opportunity for a hearing before the Postal Service’s Judicial
Officer Department, offers a flexible means of enforcement of
the limited restrictions which qualify the suspension. They are
reasonable and appropriate under the circumstances.In view of
75
the above considerations, the Postal Service proposes to amend
39 CFR Part 320 as follows:
List of Subjects in 39 CFR Part 320
Postal Service, Computer technology, Advertising.
PART 320-SUSPENSION OF THE PRIVATE EXPRESS
STATUTES
1. The authority citation for Part 320 is revised to read as
Set forth below, and the authority citations following all the
sections in Part 320 are removed.
eee 39 U.S.C. 401.404,601-101;18U.S.C. 1693-
2. Anew §320.8 is added to read as follows:
§320.8 Suspension for international remailing.
(a) The operation of 39 U.S.C. 601(a)(1) through (6) and
§310.2(b)(1) through (6) of this chapter is suspended on all post
routes to permit the uninterrupted carriage of letters from a point
within the United States to a foreign country for deposit in its
domestic or international mails for delivery to an ultimate
destination outside the United States.
Example (i) The letters to overseas customers of commer-
cial firm A in Chicago are carried by Carrier B to New York
where they are delivered to Carrier C for carriage to Europe.
Carrier C holds the letters in its distribution center overnight,
then sorts them by country of destination and merges them with
letters of other firms to those countries before Starting the
carriage to Europe in the morning. The carriage of firm A’s
letters is not interrupted. The suspension for international
remailing applies to the carriage by Carrier B and by Carrier C.
Example (2) The bills addressed to foreign customers of
the Chicago branch office of commercial firm D are carried by
—_—
76
Carrier E to new York where they are delivered to the accounting
department of firm Ds home office. The accounting department
uses the information in the bills to prepare its reports of accounts
receivable. The bills are then returned to Carrier E which carries
them directly to Europe where they are entered into the mails of
a foreign country. The carriage of the bills from Chicago to
Europe is interrupted in New York by the delivery to firm D’s
home office. The suspension for international remailing does
not apply to the carriage from Chicago to New York. It does
apply to the subsequent carriage from New York to Europe.
(b) This suspension shall not permit the shipment or
carriage of a letter or letters out of the mails to any foreign
country for subsequent delivery to an address within the United
States.
Example (1) A number of promotional letters originated
by firm F in Los Angeles are carried by Carrier G to Europe for
deposit in the mails of a foreign country. Some of the letters are
addressed to persons in Europe, some to persons in the United
States. The suspension for international remailing does not
apply to the letters addressed to persons in the United States.
(c) Violation by a shipper or carrier of the terms of this
suspension is grounds for administrative revocation of the
suspension as to such shipper or carrier for a period of one year
in a proceeding instituted by the General Counsel in accordance
with Part 959 of this chapter.
The failure of a shipper or carrier to cooperate with an
authorized inspection or audit conducted by the Postal Inspec-
tion Service for the purpose of determining compliance with the
terms of this suspension shall be deemed to create a presumption
of a violation for the purpose of this paragraph (c) and shall shift
to the shipper or carrier the burden of establishing the fact of
compliance. Revocation of this suspension as to a shipper or
carrier shall in no way limit other actions as to such shipper or
carrier to enforce the Private Express Statutes by administrative
77
proceedings for collection of postage (see §310.5) or by civil or
criminal proceedings.
_ Fred Eggleston,
Assistant General Counsel, Legislative Division.
[FR Doc. 86-13565 Filed 6-16-86; 8:45 am)
78
Before the
UNITED STATES POSTAL SERVICE
Washington, D.C. 20260-1113
IN THE MATTER OF:
Restrictions on Private Carriage of Letters; Proposed Suspen-
sion of the Private Express Statutes; International Remailing
COMMENTS OF THE UNITED STATES
DEPARTMENT OF JUSTICE
Douglas H. Ginsburg Charles F. Rule
Assistant Attorney General Deputy Assistant
Antitrust Division Attorney General
Antitrust Division
Communications with respect to this document should be
addressed to:
Barry Grossman, Chief Robert E. Hauberg, Jr.
Communications Assistant Chief
and Finance Section Communications and
Finance Section
Marten L. Stern Michael A. Williams
Jonathan M. Rich, Economist
Attorneys Communications Economic Regulatory Section
and Finance Section |
Antitrust Division
U.S. Department of Justice
Washington, D.C. 20530
(202)724-6693
July 17, 1986
79
I. INTRODUCTION AND STATEMENT OF POSITION
By Notice of Proposed Rulemaking,’ the United States
Postal Service has solicited comments on a proposed regulation
that expressly would permit international remail. The new rule
would suspend the Private Express Statutes to “permit the
uninterrupted carriage of letters from the United States to a
foreign, country for ultimate delivery outside the United
States”.” The Department of Justice “Department” supports the
proposed regulation.
In late 1985, the Postal Service proposed a rule to make
remail unlawful. The Executive Branch — including the
Department’ — and numerous private parties raised strong
' 51 Fed. Reg. 21,929 (June 17, 1986).
? 51 Fed. Reg. at 21,929. The Postal Service emphasizes that the new
rule would only permit remail if the carriage of mail is “uninterrupted”- The
rule would allow a remailer to sort mail within the United States and to
transfer mail to another carrier for part of the journey. It would not, however,
allow a company to intercept letters to amend them or read them before they
go overseas. 51 Fed. Reg. at 21,931-21,932. The suspension would not permit
remailers to carry letters “out of the mails to any foreign country for
subsequent delivery within the United States”. Id.
> 50 Fed. Reg. 41,562 (October 10, 1985).
* Comments of the United States Department of Justice Before the
United States Postal Service, In the Matter of Restrictions on Private Carriage
of Letters; Proposed Clarification and Modification of Definition and of
Regulations on Extremely Urgent Letters, December 12, 1985 (“Remail
Comments”); Letter from Attorney General Edwin Meese III to Postmaster
General Albert V. Casey, February 26, 1986; Letter from Secretary of
Commerce Malcolm Baldridge to Postmaster General Albert V. Casey,
February 28, 1986; Letter from Office of Management and Budget Director
James C. Miller II] to Postmaster General Albert V. Casey, February 28,
1986; Letter from Council of Economic Advisers Chairman Beryl W.
Sprinkel to Postmaster General Albert V. Casey, February 27, 1986.
80
objections to that proposal.” On March 4, 1986, John McKean,
Chairman of the Board of Governors of the Postal Service,
declared that the Postal Service would instead _.. a
regulation that would clearly legitimate remail.. The instant
proposal implements that order.
Before proposing this regulation, the Postal Service
solicited information on remail and international! mail service.
The Department filed comments in that proceeding® questioning
the need for a new rule in light of the Attorney General’s
conclusion that remail is “lawful private sector competition to
the Postal Service”” and the Department’s statement that it will
not prosecute remailers or their customers’ on the basis of
current regulations.
In our view, the proposed regulation is based on an ample
factual record that demonstrates that competition in internation-
al mail is in the public interes*. The proposal, in conformance
5 See, e.g., Comments of the New Postal Policy Cow. |, In the Matter
of Restrictions on Private Carriage of Letters; Proposed Clarification and
Modification of Definition and of Regulations on Extremely Urgent Letters,
December 12, 1985.
© Statement of John McKean, Chairman of the Board of Governors of
the United States Postal Service, March 4, 1986.
7 Restrictions on Private Carriage of Letters; Withdrawal of Proposed
Rules; Advance Notice of Proposed Rulemaking and Request for Informa-
tion, 51 Fed. Reg. 9852, 9853 (March 21, 1986).
8 Letter from Charles F. Rule, Deputy Assistant Attorney General,
Antitrust Division, to Charles D. Hawley, Assistant General Counsel, United
States Postal Service, In the Matter of Restrictions on Private Carriage of
Letters; Withdrawal of Proposed Rules; Advance Notice of Proposed
Rulemaking and Request for Information, May 2, 1986.
. Letter from Attorney General Edwin Meese III to Postmaster General
Albert V. Casey, February 26, 1986.
10 Letter from John R. Bolton, Assistant Attorney General, Office of
Legislative Affairs, to Senator Alfonse D’Amato, April 2, 1986.
81
with Administration policy, unambiguously recognizes the bencfits
of private sector competition in international mail. Moreover, the
adoption of this rule would send a clear signal to mailers and foreign
nations that the Postal Service will not interfere with the legitimate
private competition in international mail.!? Accordingly, the
Department supports the proposed regulation.
II. DISCUSSION
A deep-seated tenet of American government is that com-
petition enhances consumer welfare and therefore should be
protected and fostered by the government. 13 Even regulated
markets function best when competition is encouraged to the
vy As President Reagan wrote to Postmaster General Casey on May 1,
1986, it is the policy of the Administration to “permit and promote competi-
tion in international mail.”
12 The Department continues to question the Postal Service’s authority
to regulate competition in international mail. See Remail Comments, supra,
at 12-18. The Postal Service relies on 39 U.S.C. § 602 as the basis for this
authority. 51 Fed. Reg. at 21,930. However, by its very terms, Section 602
does not prohibit the conduct of remailers that rely on air transportation.
Rather, Section 602 merely “prohibits a vessel from departing from the
United States for foreign ports from receiving letters on board except from
the Postal Service.” 39 U.S.C. § 602 (a). Section 602 is silent as to other -
forms of conveyance. In contrast, in the Postal Reorganization Act and other
parts of the Private Express Statutes, Congress clearly distinguished between
“vessels” and other forms of conveyance and employed specific terms to
cover other forms of conveyance when It choose to do so.
Our belief that Congress did not intend to confer a monopoly over
international mail on the Postal Service is not based solely on the plain
meaning of Section 602. Congress’ apparent failure to authorize the Postal
Rate Commission to review international rates is inconsistent with the view
that Congress intended to shelter the Postal Service from competition in
international mail. Remail Comments, supra, at 16-18. We are aware of no
situation in which Congress has conferred a legal monopoly without provid-
ing for rate regulation to protect consumers. /d. at 17.
13 See, e.q., R. Bork, The Antitrust Paradox 15-49 (1979).
82
maximum extent consistent with other regulatory goals. Thus,
the Supreme Court has often held that ro Om agencies must
fscilitate competition:
A pittiieisiandnadeannbiatentiiadie
tions in a variety of economic affairs. Even where
Congress has chosen Government regulation as the
primary device for protecting the public interest, a
policy of facilitating competitive market structure and
performance is entitled to consideration. 4
Fostering competitive markets simply is the most effective way
to “improve services and reduce costs to our citizens.”
The benefits to consumers fostered by competition among
remailers and the Postal Service in international mail amply
demonstrate the salutory effects of competition. Many com-
menters stated that remail service is faster and cheaper than the
Postal Service’s own international mail service. As the Postal
Service recognizes, hard statistical evidence of the superiority
of remail is unnecessary. The fact that consumers use remailers
is conclusive evidence that they provide a service demanded by
the public. '® Indeed, even if remailers had not captured a
4 Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc.,
419 U.S. 281, 298 (1974). Similarly, the Court wrote in United States v.
Philadelphia National Bank, 374 U.S. 321 (1963), that, when an industry is
highly regulated, it is especially important that competition not be limited:
[T}hat there are so many direct public controls over unsound
competitive practices in the industry refutes the argument that
private controls of competition are necessary in the public inter-
est and ought therefore to be immune from scrutiny under the
antitrust laws.
Id. at 352. See also FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S.
238, 244-46 (1968).
15 Letter from President Ronald Reagan to Postmaster General Albert
V. Casey, May 1, 1986.
1© Chairman McKean was therefore clearly correct when he stated that
remail provides significant benefits to the public. 51 Fed. Reg. at 9853.
83
significant share of the international mail market, their exist-
ence would enhance consumer welfare by spurring the Postal
Service to improve services and reduce, prices.
III. CONCLUSION
The Department of Justice strongly endorses the decision
of the Postal Service not to attempt to interfere with the opera-
tion of a competitive market in isternational mail service. As
the record in this proceeding has demonstrated, competition in
that market has provided, and will continue to provide, sig-
nificant consumer benefits in terms of price and quality of
service. In accordance with that record, numerous judicial
pronouncements, and the policies of the Administration, the
public interest will best be served by decisions of the Postal
Service that promote and foster such private sector competition.
Douglas H. Ginsburg
84
Respectfully submitted,
Assistant Attorney General
Antitrust Division
July 17, 1986
Charles F. Rule
Deputy Assistant Attorney General
Antitrust Division
Barry Grossman, Chief
Communications and Finance
Section
Robert E. Hauberg, Jr.
Assistant Chief
Communications and Finance
Section ~
Martin L. Stern, Attorney
Communications and Finance
Section
Jonathan M. Rich, Attorney
Communications and Finance
Section
Michael A. Williams
Economist
Economic Regulatory Section
Antitrust Division
U.S. Department of Justice
Washington, D.C. 20530
(202) 724-6693
85
BEFORE THE
UNITED STATES POSTAL SERVICE
WASHINGTON, D.C. 20260 - 1113
IN THE MATTER OF:
Suspension of the Private Express Statutes
for International Remailers
COMMENTS OF THE AMERICAN POSTAL
WORKERS UNION, AFL-CIO, NATIONAL
ASSOCIATION OF LETTER CARRIERS, AFL-C10
The American Postal Workers Union, AFL-CIO
("APWU"), is a voluntary incorporated labor organization with
approximately 250,000 members, and is the exclusive collective
bargaining representative of approximately 250,000 employees
of the United States Postai Service ("USPS") in the Clerk,
Maintenance, Special Delivery Messenger, and Motor Vehicle
Service crafts nationwide. The National Association of Letter
Carriers, AFL-CIO ("NALC"), is a voluntary unincorporated
labor organization with approximately 280,000 members, and
is the exclusive collective bargaining representative of ap-
proximately 220,000 employees of the USPS in the City Letter
Carrier craft nationwide. APWU and NALC members are
directly affected in their employment opportunities, and as
members of the public and users of the mails, by encroachments
on the Private Express Statutes ("PES").
Remailers are used to send bulk mailings, typically involv-
ing such items as bank statements, periodicals, catalogues, and
advertisements, but rarely individual correspondence. The
remailer ships the mail to a foreign postal administration for
deposit in its mailstream, paying foreign postage, but no U.S.
postage. The postal administration in which the remailer enters
the mail is not necessarily that of the ultimate recipient.
86
Although all parties agree that this mail letter is in no sense
time-sensitive, these companies asserted the right to carry such
letters out of the mails under the “extremely urgent letters”
suspension of the PES. 39 C.F.R. Sec. 320.6. After the Depart-
ment of Justice declined to seek injunctive relief, assertedly
because the USPS’s regulations were ambiguous as they applied
to remailers, the USPS served notice on October 10, 1985, of its
intent to clarify the rules applying the PES to remailers. 50 FR
41,462. Thereafter, upon orders of John McKean, Chairman of
the USPS Board of Governors—in-circumstances and for
reasons not fully known—on March 21, 1986, the USPS
withdrew its proposal and invited comments on the total exemp-
tion of remailers from the PES. 55 FR 9852. Now the USPS
proposes to promulgate such a rule. 51 FR 21,929. These
comments are submitted pursuant to the notice of June 17, 1986,
in opposition to the proposed rule.
I. History of the PES
The modern postal monopoly is said to be the “foundation
of the postal system.” Priest, The History of the Postal Monopo-
ly in the United States, 18 Jour. of Law & Econ. 33-38 (1975)
("Hist."); Statutes Restricting Private Carriage of Mail and their
Administration, Comm. on P.O. & C.S. Print No. 93-5, 93d
Cong., Ist Sess. 55-56 (June 29, 1973) ("1973 Rept."). A
monopoly was found in the Articles of Confederation. It was
established by the Continental Congress in 1775; and, in 1782,
Congress prohibited competition with the Post Office. Con-
sidered an important investment in the infrastructure of the new
nation, George Washington used this power as a political means
of unifying the country by subsidizing service to the South and
West in exchange for their support for the national government.
In 1792, Congress embarked on a large-scale expansion of
postal routes, and greatly increased penalties for violations. By
1794, it was necessary to crack down on carriage of mai! by
transportation employees. Hist. at 45-55; 1973 Rept. at 57.
87
In 1825, Congress clarified end tightened the PES.
Amendments in 1827, 1836, and 1838 plugged loopholes in
them. The rates in effect the subsidization of frontier routes as
- country expanded westward. Hist. at 55-56; 1973 Rept. at
7-58.
By 1820, private expresses and messengers had begun to
cut into the monopoly, and by 1840, there was widespread
abandonment of the government’s service. It responded with
stricter enforcement o the 1825 and 1827 acts. But court
decisions created loopholes in these laws. In 1844-1845, reform
of the post office was the “leading public issue of the day.” Hist.
at 62. The postmaster general declared that “the only method
to defeat the private expresses is to enact stricter laws prohibit-
ing private carriage and to impose heavier penalties for viola-
tions. Jd. at 63.
The PES as we know them were drafted by Senator Wil-
liam Merrick of Maryland and passed in 1845, “the only major
congressional consideration of the postal monopoly in the
nation’s history.” Jd. at 65. Congress concluded that (1) the
Postal Service could never successfully compete with private
expresses; (2) it had a duty to serve rural and frontier areas; (3)
cross-subsidization was necessary and desirable; and (4) a
monopoly was necessary to cross-subsidization. This law was
consciously anti-"free-enterprise," and private expresses were
viewed as “selfish” and “predatory.” Hist. at 65-66; 1973 Rept.
at 58-59. This 1845 law was successful in eliminating the threat
to the national postal system. 1973 Rept. at 59. Th act has been
called “comprehensive” and “airtight.” Hist. at 57-58. The last
loophole — that for city delivery —was closed in 1863. 1973
Rept. at 59. Free city delivery was established that year, and
rural free delivery in 1896. /d. at 61.
; The various exceptions to the PES were codifications of
existing practices. The “special messenger” exception is the
oldest, found in the 1972 statute, and the “cargo” exception was
88
recognized in 1810. 1973 Rept. at 57. Later, private carriage
outside the mails was permitted if postage was prepaid and the
letters dated and sealed. Jd at 59; see 39 U.S.C. sec. 601. In
1879, Congress provided an exception for private carriage of
stamped letters being delivered the post office. Jd.; see 18
U.S.C. sec. 1696(a). “Letters of the carrier” was added in 1909
in recognition of longstanding practice. 1973 Rept. at 59. The
PES were put into the criminal code at the time of 1909 codifica-
tions. Jd. In 1934, the “special messenger” exception was
limited to carriage of twenty-five letters. Hist. at 67 n.168.
When the Postal Reorganization Act ("PRA") was passed
in 1970, Congress ordered the Board of Governors to study
whether to continue the PES in their current form. P.L. 91-375,
84 Stat. 719, sec. 7 (Aug. 12, 1970). The Report cited above
concluded that they should continue, and that they should be
administered in a systematic way through the rulemaking
process (at 9-14). It also asserted the right to suspend the PES
when public interest so required (at 11), see 39 U.S.C. sec. 601
(b); 39 C.F.R. Part 320.
II. The Purpose of the PES
The PES have been found to be constitutional. See. e.g.,
United States v. Black, 569 F.2d 1111 (10th Cir.), cert. denied,
435 U.S. 944 (1978). Their purpose is to preserve the USPS’s
revenue base, and to prevent “cream skimming,” i.e., the opera-
tion of businesses which are not bound by the USPS’s universal
service and uniform rate requirements, and which pick and
choose among the sources of cheaper, easier, and “cleaner” mail,
and thus undersell the USPS’s rates. See, e.g., United States
Postal Service v. Brennan, 574 F.2d 712, 715 (2d Cir. 1978)
(quoting Blackham v. Gresham, 16 F. 609, 612 (C.C.S.D.N.Y.
1883):
If private agencies can be established [to carry
letters and other mail matter] the income of the
government may be so reduced that the economy
89
might demand a discontinuance of the system; and
thus the business which it is the right and duty of
the government to conduct for the interest of all,
and on such terms that ail may avail themselves
of it with advantage, may be handed over to
individuals or corporations who will conduct it
with the sole view of making money, and who
may find it for, their profit to exclude localities or
classes from the benefit of the services.
Id. See also 1973 Rept., App. F (1973). The PES is a “revenue
law.” United States v. Bromley, 53 U.S. (12 Harv.) 93, 13 L.Ed.
905 (1851). They apply to all classes of mail, and prohibit the
private carriage of letters over post routes. Associated Third
Class Mail Users v. USPS, 600 F.2d 824 (D.C. Cir. 1979). “[A]
policy concern clearly implicated in the quest for the proper
scope of the monopoly [is] the need to shield postal operations
from competition so the Posta! Service can adopt nonmarket
solutions in its effort to further various rational goals... .” /d.
at 826. See, e.g., PRA sec. 101 (postal policy). “[P]public
policy . . . must be well defined and documented, and is to be
ascertained by reference to the laws and legal precedents and
not from general considerations of supposed public interests.’”
W.R. Grace & Co. v. Local Union 759, URWA, 103 S. Ct. 2177,
2183 (1983) (quoting Muschany v. United States, 324 U.S. 49,
66 (1945)).
III. The Proposed Rule Changes of October 10, 1985
The Federal Register notice of March 21, 1986, withdrew
that of October 10, 1985. The latter had proposed to “clarify”
the PES regulations to remove what was truly a nonexistent
ambiguity in the current regulations which prohibit the private
carriage of letters by so-called “international remailers” because
their operations fail to qualify for the “extremely urgent letter”
suspension. We agree with the USPS that this suspension was
never intended to allow bulk shipment of non-priority mail
90
without payment of U.S. postage. To the extent that the
proposed suspension acknowledges that current regulations
apply to remailers, we agree.
We disagree entirely with the Justice Department’s opinion
that the regulations were too vague to enforce. That Department
has no particular expertise in postal matters; it should have
accepted the USPS’s interpretation of its own statutes and
regulations. Because the USPS’s reasoning was neither “plainly
erroneous [n]Jor inconsistent with the purpose of the statutes,”
National Retired Teachers Ass’n v. USPS, 430 F. Supp. 141,
145 n. 20 (D.D.C. 1977), a reviewing court would have sus-
tained the USPS’s reading of its own statute. See Rockville
Reminder, Inc. v. USPS, 480 F.2d 4, 7 (2d Cir. 1973).
The fact that this Administration’s Department of Justice
refused to allow the USPS to sue to enjoin their operations, 39
U.S.C. 409 (d), is no reason to change the regulations. The
USPS is an independent establishment of the Executive Branch
of the Government. 39 U.S. sec. 201. Such statutory inde-
pendence ought to insulate the USPS from the intrusions of
politics and ideology in the formulation and implementation of
policy and the administration of its own statute. Such protection
from political and ideological interference ought not be relaxed
to permit the Department of Justice to review and, in effect,
regulate the USPS’s most fundamental policy and litigation
decisions. Unlike the USPS, which is by statute independent
and non-political, 39 U.S.C. sec. 201, 1002, administrations
change, along with their ideological agendas. If need be, others
affected by remailers are certain to enforce the PES. See NALC
v. Independent Postal System of America, Inc., 470 F.2d 265
(10th Cir. 1972); APWU v. React Postal Services, Inc., 771 F.2d
1375 (10th Cir. 1985).
91
IV. The Record Does Not Demonstrate That the
Proposed Suspension is in the Public Interest
¢ The USPS proposed to suspend the PES under 39 U.S.C.
sec. 601(b): “The Postal Service may suspend the operation of
a part of [sec. 601(a)] upon any mail route where the public
interest requires the suspension” (emphasis added). It is not
sufficient that the suspension is not repugnant to the public
interest; the public interest must affirmatively require the
suspension. The history of the PES, outlined above,
demonstrates that, from the founding of the Republic, Congress
created the monopoly, and at every turn strengthened it. It
legislated a blanket prohibition, and closed every known
loophole in it, except where it saw fit expressly to make excep-
tions. (As the USPS is aware, the “extremely urgent letter”
suspension is not among the legislated exceptions.) In the PES,
and in the policies of the PRA, Congress has forcefully spoken
on where it sees the public interest.
The Uurden is especially heavy on the USPS to demonstrate
that the public interest requires a deviation from the general rule.
Any countervailing policies must be among those embodied in
specific Statutory pronouncements. W.R. Grace, supra. Mere
Citation to one set of statutes — the antitrust laws — does not make
the case for those who support the suspension. Those laws do
not legislate the so-called “free market system” into law. They
establish principles regulating and fostering competition where
competition exists. Nothing in the Constitution demands that
Congress allow competition. Self-evidently, the operation of a
postal service has always been a function of a government,
where competition is not the rule. There is simply no legal right
to compete with the federal government, or to remove the
government from a commercial sphere which it has exclusively
occupied since the Articles of Confederation. Cf. Tennessee
Electric Power Co. V. TVA, 306 U.S. 118 (1937). Turning to
92
the specifics in the record, there exists no support for a finding
that the proposed suspension is in the public interest.
A. The Record is Unreliably
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.