# Joint Appendix — Air Courier Conference of America v. American Postal Workers Union > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0728%3A07 ## Record - **Collection:** Supreme Court brief - **Document type:** Joint Appendix - **Published:** January 1, 1991 - **Citation:** 498 U.S. 517 ## Text ‘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, interpr [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0728%3A07. Public record. Not legal advice.