# Amicus Curiae Brief — Postal Service v. Flamingo Industries (USA) Ltd.

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0640%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2004
- **Citation:** 540 U.S. 736

## Text

In The
Supreme Court of the Gnited States

¢

UNITED STATES POSTAL SERVICE,

Petitioner,

Vv.

FLAMINGO INDUSTRIES (U.S.A.) LTD.
AND ARTHUR WAH,

Respondents.

On Writ Of Certiorari To The
United States Court Of Appeals
For The Ninth Circuit

+

BRIEF OF POSTALWATCH
INCORPORATED AS AMICUS CURIAE
SUPPORTING RESPONDENTS

o

WILLIAM S. STANCIL
Counsel of Record

Suite 600, 1717 K St., NW
Washington, DC 20036
(202) 508-1042

Counsel for Amicus Curiae

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831

—— ee

TABLE OF CONTENTS

Page
EE CPI dctivrecscecnscnscesccncconscsscnessnsuonees i
TABLE OF AUTHORITIES .................:ccccsseeesssseeeeees ili
INTEREST OF AMICUS CURIAE ..............cccesseeeeees 1
SUMMARY OF ARGUMENT................:ccccseseeeeeeeeeees 1

ARGUMENT:

I. USPS is a substantial, competitive commer-
cial person that fiercely competes in a num-
ber of markets, though it persistently seeks
to deny that status and don the cloak of sov-
ereignty to avoid restraints on anticompeti-
| a TN 3

II. The Postal Service today represents but a
fraction of a large and proliferating set of
communication and transportation services
which bind the nation together, and link the
nation with others. None of these services
require sovereign status for their provision... 8

III. USPS seeks impermissible blanket immunity
from the antitrust laws for anticompetitive
conduct in any and all lines of commerce....... 12

IV. The Circuit Court’s “conduct based immu-
nity” approach is a reasonable, and neces-
sary, means of reconciling the governmental
mandate of monopoly mail delivery, and the
application of the fundamental national pol-
icy of competition to conduct not within the
necessary scope of that mandate.................... 18

li

TABLE OF CONTENTS - Continued
Page

V. The practical, or operational, justifications
offered for antitrust immunity lack eviden-
tiary basis, are self-serving as to USPS’s
proprietary interests, and are inconsistent
with USPS’s own management practices ....... 20

CONCLUSION ..0ccccccccccccoccccresecenenssssnsesssensessennnnnnnnnn 22

-~ eae —

——~—s1e ee

TABLE OF AUTHORITIES
Page
CASES:
Otter Tail v. United States, 410 U.S. 366 (1977)............... 18
Standard Oil Co. v. Federal Trade Commission, 340
crs rrcnrccenmeenensscceseccccoocece 18
U.S. v. Topco Assoc., Inc., 405 U.S. 596 (1972).............000+- 18
Federal Express Corporation v. United States Postal
Service, 151 F.3d 536 (6th Cir. 1998) .0.0............cceceeeeeeeees 7
Global Mail Ltd. v. United States Postal Service,
142 F.3d 208 (4th Cir. 1998)...............ccscccccesssrerssssssseeeress 7
MCI Communications Corp. v. Am. Tel. & Tel. Co.,
ee 18
CONSTITUTIONAL PROVISIONS:
| TT TD 9
STATUTES AND REGULATIONS:
Administrative Procedures Act 5 U.S.C.
ee 4
air reccnenenseencsnunsssnscsesces 4

Postal Reorganization Act, Pub. L. No. 91-375 (39
U.S.C.)

Se Ti occcncnsseccccensereccsscssesssessccsecsscccosccccosoocseoreee 4
SETI TiN hcrrecnccessccceseevssscenssesceesossescosceocececeoces 5

Domestic Mail Manual, Delivery to CMRA (39
EE 19

iv

TABLE OF AUTHORITIES — Continued

Page

OTHER AUTHORITIES:

ComputerUser.com, Study — 55 percent of world’s
Web traffic non-U.S. (January 25, 2001) at http://
www.computeruser.com/news/01/01/25/news6.html.........

Peter J. Ferrara, Free the Mail: Ending the Postal
Monopoly, Cato Institute (1989) ..............:cccccceeeseeeees

Rick Geddes, Neither Snow Nor Sleet ... Can
Dampen This Monopoly, Hoover, Digest No.
2-2000, (2000) available at http://www-hoover.
stanford.edu/publications/digest/002/geddes.htm!........

General Accounting Office, U.S. Postal Service
Issues Related to Corporate Governance, GAO
Report No. GGD-97-141, at 2 (August 1997).................

InfoWorld Magazine, You’ve got mail: 60 billion
a day by 2006 (September 6, 2002) at http://
archive.infoworld.com/articles/hn/xml/02/09/26/020
926hnemail6b.xml?s=IDGNS ..............cccccceererereeeeeeeeeeees

International Data Corporation, Worldwide Email
Usage Forecast, 2002-2006, IDC Doc #27975
(September 2002) at http://www.idc.com/getdoc.
jhtml?containerld=27975&pid=35 178981 ...............000+

Postal Rate Commission, Petition of Consumer
Actions for Review of Unclassified Services, PRC
Docket No. *2003 (October 15, 2002) available at
http://www. prc.gov/dockets.asp?node=dbt&ID=%2A
I ccoccscasccensecncccenasnctenssmenmennnsesnesenmmmmeanemmnensemunnts

Vv

TABLE OF AUTHORITIES — Continued

Postal Rate Commission, Comments of the Com-
puter & Communications Industry Association on
the Motion of the Office of the Consumer Advocate
to Request That the Commission Institute a Pro-
ceeding to Consider the Postal /Nonpostal Char-
acter of Specified Services and the Establishment
of Rules to Require a Full Accounting of the Costs
and Revenues of Nonpostal Services, PRC Docket
*2003, (January 28, 2003) available at http://
www.prc.gov/docs/36/36838/CCIA_PRC_comments.

~~

Postal Rate Commission, Comments of United
States Postal Service on Consumer Action Peti-
tion, PRC Docket No. *2003 (January 1, 2003)
available at http://www.prc.gov/docs/36/36904/

Postal Rate Commission, Substantive Comments of
the United States Postal Service, PRC Docket No.
RM2003-3 (July 2, 2003) available at http://www.
pre.gov/docs/38/38562/Substantive.comments.final.
DTI cccscniatantusnitestsremamusnmnementnenmenimmenumennenmness

President's Commission on The United States
Postal Service, Embracing the Future, at 18
(July, 2003) available at http://www.treas.gov/
offices/domestic-finance/usps/pdf/freport. pdf ..........

President's Commission on the United States
Postal Service, Statement of James I. Campbell,
at 22 (February 20, 2003) available at http://www.

treas.gov/offices/domestic-finance/usps/testimony-

USPSComments_CA-OCA_Petn.pdf ..................000+

Page

vi

TABLE OF AUTHORITIES — Continued

Page
Michel Schuyler, Antitrust Law and the Postal
Service, Institute for Research on the Economics
of Taxation (August 25, 2003) at ftp://ftp.iret.
ET cnrcetivintatrcncninicnsinannennimemnnees 12
Sidak and Spulber, Protecting Competition From
the Postal Monopoly, AEI Press (1996)..................000e00++ 11
U.S. Census Bureau, 2001 Service Annual Survey
(Feb. 2003) at pp. 8, 16 and 17, available at http:
/www.census.gov/svsd/www/sas0 Irpt.pdf...................... 9
U.S. Postal Service 1998 Annual Report at 57................... 9
U.S. Postal Service 2001 Annual Report at 21................... 9

U.S. Postal Service Office of Inspector General,
Review of the Revised Rules Governing Commer-
cial Mail Receiving Agencies, Audit Report DE-
AR-01-002, (April 4, 2001) available at http://
www.uspsoig.gov/foia_files/DE-AR-01-002%20%20
Revised%20Rules%20Governing%20Commercial%
IIIT cnssnnteinsnsineiinanntenimenianemisenntianmnnenense 19

Wickwire Gavin, What are the major differences

between USPS’s purchasing regulations and those
of other federal agencies? at http://www. wickwire.

com/practice/postal/postalfaqs. htm#dozen ....................++. 5

mew 4

1

INTEREST OF AMICUS CURIAE'

PostalWatch Incorporated (“PostalWatch”) is a not-for-
profit Virginia corporation organized in 1999, and exempt
from income tax under § 501(c)(4) of the Internal Revenue
Code. The principal functions of PostalWatch are to
monitor, report to the public and policymakers on, and
comment upon the operations, regulatory actions and
competitive activities of the United States Postal Service.
PostalWatch seeks to encourage honesty, efficiency, and
responsiveness to public needs on the part of the Postal
Service. PostalWatch seeks to discourage wasteful, unnec-
essary and anticompetitive activities by the Postal Service,
which could stifle and distort gee across broad
areas of the economy.

4

SUMMARY OF ARGUMENT

The issue in this case has broader dimensions and
implications than either party has explicitly or fully
addressed, or the Ninth Circuit fully explicated.

USPS has become a commercial entity, an economic
person, with actual and potential effects on many markets,
not merely those affected by procurement decisions. In
broader context, in its current form and in essential function,
USPS is part of a large and progressively proliferating set of

* PostalWatch files this brief with the consent of all parties. The
letters granting consent have been filed with the Court. No counsel for
a party authored this brief in whole or in part, nor did any person or
entity, other than PostalWatch or its counsel, make a monetary
contribution to the preparation or submission of this brief.

2

communications and transportation services available to
the public. Such services do not require sovereign status
for their provision.

Increasingly beset by direct and indirect competition,
USPS has expanded into lines of commerce beyond the
scope of those mandated it by Congress. However, the
protections from competition currently provided USPS’s
mail delivery functions afford it unique opportunities to
stifle and distort competition in markets directly related to
mail delivery and in other communications and transpor-
tation services. Any broad status-based exemption from
the antitrust laws for activities outside its congressionally
mandated mail delivery function, in any line of commerce,
would create broad anticompetitive potentials subject to
no adequate check.

The antitrust laws embody the fundamental national
policy in favor of a competitive economy, which is to be
given the broadest feasible applicability. The construction
of Congress’s specification that the Postal Service may
“sue and be sued” to allow applicability of the antitrust
laws to anticompetitive USPS activity, while maintaining
“conduct based” antitrust immunity tailored to the precise
contours of Congress’s grant of a charter to perform mail
services with an attendant monopoly, would effect a
necessary and appropriate accommodation of relevant
policies — indeed, the only rational resolution under
current conditions.

The rationales for exemption from the antitrust laws
offered by the Solicitor General on behalf of the Postal
Service have little weight, are self-serving, and are incon-
sistent with its own administrative practice.

¢

ARGUMENT

I. USPS is a substantial, competitive commer-
cial person that fiercely competes in a num-
ber of markets, though it persistently seeks to
deny that status and don the cloak of sover-
eignty to avoid restraints on anticompetitive
conduct.

The Postal Reorganization Act of 1970 (PRA) specifi-
cally formulated the Postal Service as to operate less as a
government entity and more along the lines of a business.
Several features of that architecture, with which Postal-
Watch has become familiar in its observations of the
USPS’s operation, should be appreciated to give adequate
scope to this formulation under current conditions.

The Act set up a Board of Governors, which is analo-
gous to a Board of Directors, under which functions, a
chief executive officer — the Postmaster General.

The Service was to recover its operating expenses
from charging postage fees for its services in the market,
rather than to be funded by congressional appropriations.
Though it was allowed to borrow from the Treasury, the
legislative design clearly mandated the Service be self-
sustaining and breakeven over time.

The rates of the USPS are governed in a fashion
similar to the practice in regulated industries where
limited grants of monopoly have been allowed commercial
entities — that is, through the use of a rate-reviewing
commission: in this case the Postal Rate Commission. The
scope of this Commission’s authority is currently, however,
more limited than those of traditional regulatory agencies,
in that it operates largely in an advisory capacity.

4

In support of the business-like formulation, Congress
freed the Postal Service from direct Executive Branch
influence. In addition, Congress mandated that USPS be
self-sustaining and thus divorced from the Congressional
controls inherent in the appropriations process. In further
support of the business-like formulation, the PRA took
USPS off-line from normal agency-like oversight and
removed it from “Agency” status as defined in the Admin-
istrative Procedure Act (APA).’

Application of other laws (a) Except as provided

by subsection (b) of this section, and except as

otherwise provided in this title or insofar as such

laws remain in force as rules or regulations of

the Postal Service, no Federal law dealing with

public or Federal contracts, property, works, offi-

cers, employees, budgets, or funds, including the

provisions of chapters 5 and 7 of title 5, shall ap-

ply to the exercise of the powers of the Postal

Service.’
The USPS exemption from the Administrative Procedure
Act, taken with the APA's distinction between those
entities subject to its scope (agencies), and those not
(persons), suggests that the USPS should be treated as a
“person” rather than an “agency” in the situation pre-
sented this Court.

* 5 U.S.C. § 551 — Defimtions — (1) “agency” means each authority
of the Government of the United States, whether or not it is within or
subject to review by another agency, but does not include ... (2)
“person” includes an individual, partnership, corporation, association,
or public or private organization other than an agency.

* 39 U.S.C. § 410 —- Application of other laws.

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5

The USPS values and frequently exploits its non-
agency personhood, regularly claiming the status and
characteristics of a commercial entity where that is to its

advantage.

In claiming exemption from the Administrative
Procedures Act, USPS does not comply with the Paper-
work Reduction Act or the Small Business Regulatory
Flexibility Act. USPS regularly claims to be exemption
from agency rulemaking notice anc tomment require-
ments and is not required to adhere to normal governmen-
tal purchasing procedure and controls.‘

The Service regularly denies’ Freedom of Information
Act (FOIA) requests, citing a FOIA exemption‘ for “infor-
mation of a commercial nature.”

The USPS regularly registers its trademarks and
copyrights, has abandoned its governmental www.usps.gov
web address in favor of the commercial www.usps.com and
regularly sells, licenses or otherwise profits from the
commercialization of its intellectual property. It generates
tens of millions of dollars from the licensing of its change-
of-address database, address correction data: and stamp
artwork for commercial reproductions sold to the public.

* See Wickwire Gavin, What are the major differences between
USPS’s purchasing regulations and those of other federal agencies? at
http://www.wickwire.com/practice/postal/postalfaqs.htm#dozen.

* For the USPS’s perspective on its FOIA exemption see: Postal
Rate Commission, Substantive Comments of the United States Postal
Service, PRC Docket No. RM2003-3 (July 2, 2003) available at
http://www.prc.gov/docs/38/38562/Substantive.comments.final.rev.doc.

* 39 U.S.C. § 410(cX2).

6 | 7

Taking all these factors and others into account, the | is not a “person” continues a consistent course of action
General Accounting Office has characterized the Postal | that has been rejected by several lower courts.

Service as a “corporation-like organization”.’ ag mee
é e 6th Circuit als Court in Federal Express

It is true, as the Solicitor General suggests in his brief Corporation v. Stet dee Postal Service, 151 Rsd 536
that in 1970 Congress surely intended that the USPS : (6th Cir. 1998) observed a recurring pattern of behavior:
continue a service widely depended upon by the general
public. It is also true that the USPS is limited to a signifi-
cant degree in its management discretion as to facilities,
rates and other matters directly related to its letter-mail
monopoly. These limitations are largely symmetrical with
and counterbalanced by its protections from competition.’

As previously indicated, this circuit adopts the
well reasoned decisions of the Fourth and Eighth
Circuits, which refute USPS’r contention that it
is not a “person” accountable for its misdeeds -
proscribed by the Lanham Act. In its arguments,
the Postal Service has illustrated a penchant of
some federal government agencies and officers to
proactively seek the benefits and protections af-
forded by the law while simultaneously endeav-
oring to avoid the responsibilities and burdens
imposed by legal restraints and standards of
conduct, which constrain others. In this case, de-
spite its apparent vigorous participation, as a
quasi-private enterprise, in roiling free market
competition with private sector commercial
document carriers, the Postal Service has hastily
elevated the shield of governmental privilege
when accused of competitive wrongdoing... .
Congress did not intend to launch [USPS] into
the commercial world and also to immunize
USPS from liability for federally-created com-
mercial torts such as the Lanham Act.

In rejecting similar immunity claims in the 1998 tort
action Global Mail Ltd. v. United States Postal Service,
142 F.3d 208 (4th Cir. 1998) the Fourth Circuit concluded,

- These factors recognized, it is obvious that Congress
moved in the direction of making the Postal Service
operate along the lines of commercial enterprises, and in
doing so waived sovereign immunity for commercial
conduct. As the 9th Circuit Court observed, in this context
the “sue and be sued” clause of U.S.C. 39 should be com-
pelling evidence of Congressional intent that the USPS
respond to those laws which generally govern commerce in
the United States.

The USPS’s effort in this court to remove itself from
constraints on anticompetitive conduct by asserting that it

” General Accounting Office, U.S. Postal Service Issues Related to
Corporate Governance, GAO Report No. GGD-97-141, at 2 (August
1997).

* Whether these symmetries and counterbalances in fact work out
well in an increasingly diverse and competitive United States market is
by no means currently clear or assured in the future. This version of the

“regulato pacts” long prevalent in the United States be | , '

miu, 0 has comund i ow areas. r we enent ply USPS is not an enterprise that occasionally af-

debates on the future of the postal monopoly. fects commercial firms indirectly in its endeavors.
Rather, the language and the legislative history of

the PRA make clear that Congress intended USPS

8

to be a full-fledged competitor in the business of
carrying letters, parcels and packages, and USPS
has fulfilled that intention by competing head-to-
head with a host of private courier services... .
In sum, we hold that § 409(c) does not limit the
PRA’s waiver of sovereign immunity such that
USPS is liable in tort only for those torts cogni-
zable by the FTCA.

The Sherman Act is designed primarily to protect
competition, rather than competitors. But firms through-
out the economy have a protected interest in the opportu-
nities available in competitive, unconstrained markets.
And the general public has an interest in the benefits of
such free and fair competition. Such competitive opportu-
nities and public benefits will not be available in full
measure where the USPS is allowed to participate in
private competitive markets yet evade antitrust strictures

by denying “personhood.”

II. The Postal Service today represents but a
fraction of a large and proliferating set of
communication and transportation services
which bind the nation together, and link the
nation with others. None of these services re-
quire sovereign status for their provision.

In this proceeding, the Postal Service attempts to cast
its role as “quintessentially sovereign.” If that were ever
the case, it is no longer the case in the today’s communica-
tion and transportation environment.

When the Constitution was cast, its essence was to
link together diverse states into one political and commer-
cial entity. It therefore endowed Congress with the ability

9

to facilitate commerce between the States in general,
including communications. Thus, in Article 1, Chapter 8,
Clause 7, Congress was authorized, not directed, “To
establish Post Offices and Post Roads”. This was a limited
grant of authority, upon which Congress expanded to
create the modern-day Postal Service.

Communication capabilities were relatively limited in
1789. But during the past two centuries, means of com-
munications have proliferated greatly. Progressively,
telegraph, telephone, “facsimile”, radio, television, “cou-
rier” services, and now the Internet continue to weave an
ever-denser web of communications services binding the
Nation together.

The Postal Service’s share of this expanding commu-
nication sector was 10 percent in 2001, trending down-
ward from nearly 12 percent in 1998."

The “e-mail” feature of the Internet, taken alone, now
accommodates roughly twenty-two times the message

* In 2001, “Broadcasting and telecommunications” (1997-NAICS
513), “Couriers and messengers” (1997-NAICS 492), “Online informa-
tion services” (1997-NAICS 514191), and the Postal Services (1997-
NAICS 491110) generated revenues totaling $642.6 billion, of which
USPS’s $65.8 billion represented 10.2 percent. The Postal Service’s
share of these categories continues to trend downward from 1998 when
revenues of $60.1 billion represented 11.9 percent of the combined total
of $501.2 billion (NAICS code 513 includes wire-line and wireless
telephony, cable TV networks and distribution, and radio and television
broadcasting, NAICS 492 includes messenger services, and air and
ground parcel deliverers, and NAICS 514191 includes internet service
providers). U.S. Census Bureau, 2001 Service Annual Survey (Feb.
2003) at pp. 8, 16 and 17, available at http//www.census.gov/svsd/
www/sas0Iirpt.pdf, U.S. Postal Service 2001 Annual Report at 21, U.S.
Postal Service 1998 Annual Report at 57.

10

volume of physical mail."” Such messages are cheaper,
faster, and much more easily manipulated and dissemi-

nated than letter messages.

These communications services have generally been
performed by private, rather than government, entities, in
the United States.

Thus, demonstrably, it is no longer necessary that the
“sovereign” perform communication services, in order to
bind the nation together. There is nothing inherent in the
function of transporting messages written on paper, using
ink, or like materials, between private, commercial, and
other parties in the United States, which uniquely re-
quires sovereign status or sovereign immunity.

” In the rapidly expanding, mutable Internet world, census data
becomes quickly out of date. InfoWorld Magazine reported on Septem-
ber 26, 2002, an International Data Corporation study pegging world-
wide e-mail message volume at 31 billion messages daily, projecting 60
billions daily by year 2006. The final report of the President’s Commis-
sion on The United States Postal Service states that the approximately
200 billion pieces of mail the USPS delivers each year makes up
roughly 40% of the worldwide mail volume. Thus worldwide mail
volume is approximately 1.4 billion letters per day or 1/22 the global
volume of e-mail. A July 18, 2003 ComputerUser.com report puts the
United States share of internet traffic at about 45%. InfoWorld Maga-
zine, You’ve got mail: 60 billion a day by 2006 (September 6, 2002) at
http//www.archive.infoworld.com/articles/hn/xml/02/09/26/020926hnemail
6b.xml?s=IDGNS; International Data Corporation, Worldwide Email
Usage Forecast, 2002-2006, IDC Doc #27975 (September 2002)
at http//www.idc.com/getdoc.jhtml?containerld=27975&pid=35 178981,
President’s Commission on The United States Postal Service, Embrac-
ing the Future, at 18 (July, 2003) available at http//www.treas.gov/
offices/domestic-finance/usps/pdf/freport.pdf, ComputerUser.com, Study
- 55 percent of world’s Web traffic non-U.S. (January 25, 2001) at
http://www.computeruser.com/news/01/01/25/news6.html.

eee =?

11

Indeed, mounting competitive pressures on USPS
have put in question its continued viability in its current
form. This, and a worldwide tendency toward deregulation
and privatization of functions historically performed or
regulated by government entities,” has led to considerable
scholarly discussion on needs to reorganize USPS, includ-
_ —_— that the postal monopoly should be abol-
ished.

Various legislative “reform” proposals have been
offered in Congress in recent years. A Presidential Com-
mission empanelled to study the USPS has recently issued
its report” and recommendations, which will undoubtedly
be followed by new legislative initiatives.

" Recognizing a reduced dependence on hard-copy communications
and the changing needs of their citizenries, many industrialized nations
around the world are making significant strides in liberalizing and de-
monopolizing their, once perceived to be necessarily governmental,
postal and telecommunication authorities. For a brief overview
demonstrating the trend towards liberalization and de-monopolization
of foreign postal administrations see The President’s Commission on
the United States Postal Service, Statement of James I. Campbell, at 22
(February 20, 2003), available at http://www.treas.gov/offices/domestic-

* See, for example, Peter J. Ferrara, Free the Mail: Ending the
Postal Monopoly, Cato Institute (1989); Rick Geddes, Neither Snow Nor
Sleet ... Can Dampen This Monopoly, Hoover, Digest No. 2, 2000,
(2000) available at http//www-hoover.stanford.edu/publications/digest/
002/geddes. html.

As to protecting competitors from extension of the USPS monopoly
into competitive lines of commerce, see Sidak and Spulber, Protecting
Competition From the Postal Monopoly, AEI Press (1996).

” President’s Commission on The United States Postal Service,
Embracing the Future (July, 2003) available at http//www.treas.gov/
offices/domestic-finance/usps/pdf/freport. pdf. .

12

All this is not to say that traditional mail services are
not a significant service. Though economic forces press
increasingly hard on the historically evolved postal service
structure, necessary institutional adaptations will be
carefully and contentiously hammered out. The histori-
cally developed expectations of mail service by individual
citizens and various constituencies, such as commercial
mass mailers, will condition the pace and scope of change
in the ways mail services will be defined and delivered in
the future.

Our basic point is this: the imperial robes in which the
USPS has garbed itself in this proceeding, as a sovereign
entity performing a uniquely sovereign set of services, are,
in economic terms, in today’s communications markets,
diaphanous. Workable law related reasonably to economic
reality, we suggest, cannot be premised off the USPS’s
time worn, self-serving, increasingly transparent preten-
sions.“

III. USPS seeks impermissible bianket immunity
from the antitrust laws for anticompetitive
conduct in any and all lines of commerce.

The USPS has traditionally offered parcel post and
other “special” services, as non-monopoly, “non jurisdic-
tional” or “non-postal” services competitive with private
sector services.

“ For a perceptive economics oriented perspective on the antitrust
law issues presented in this case see, Michel Schuyler, Antitrust Law
and the Postal Service, Institute for Research on the Economics of
Taxation (August 25, 2003) at ftp://ftp.iret.org/pub/ADVS-159.PDF.

13

As alternative technology, communication and trans-
portation markets have evolved — particularly e-mail — and
USPS revenues have been subjected to increasing competi-
tive pressure, the USPS has responded by attempting to
develop services of the sort used by its direct and indirect
competitors. One illustrative example is USPS eBillPay
and Send Money, which provides USPS-branded bill
presentment services and person-to-person transfers and
bill payments with electronic cash transfers.

Recently Consumer Action, a California based con-
sumer watchdog organization, joined by the Postal Rate
Commission’s Office of Consumer Advocate, has peti-
tioned” the Postal Rate Commission to inquire into the
financial results of such initiatives. In its petition, Con-
sumer Action lists fourteen services about which it is
concerned. Postal management’s response in PRC Docket
*2003 furnishes the most recently available public cata-
logue of USPS’s “non-jurisdictional” initiatives, beyond
its traditional mail service programs.

We think it fair to say that at this point USPS’s
initiatives are exploratory and in the process of evolution.
It is also fair to say that USPS clearly seeks to expand
upon the scope of services directly and clearly authorized

by Congress.

“ Postal Rate Commission, Petition of Consumer Actions for
Review of Unclassified Services, PRC Docket *2003, (10/15/2002)
available at http://www.prc.gov/dockets.asp?node=dbt&ID=%2A2003.

* Postal Rate Commission, Comments of United States Postal
Service on Consumer Action Petition, PRC Docket *2003 (1/30/2003)

} at http//www.prc.gov/docs/36/36904/USPSComments_CA-OCA_
Petn. pdf.

14

Such initiatives raise a host of significant competitive
issues, which will be addressed for years to come.

PostalWatch is concerned about issues of “fair compe-
tition.” These include issues raised by USPS’s clear desire
to exploit the best of both worlds — the use of a governmen-
tal grant of market protections and claims of “sovereign”
status, as well as preferential access to Treasury financ-
ing, while aggressively pursuing commercial aims far in
excess of its statutory charter. PostalWatch is concerned
about issues of cross subsidization, deceptive advertising,
dissipation of postal revenues on ill conceived and poorly
executed adventures beyond basic postal services, disin-
centives to economy and efficiency resultant from market
protections, and similar issues. Consumer Action and the
Postal Rate Commission’s Office of Consumer Advocate are
apparently concerned about cross subsidization and
income dissipation issues, as well.

’ Private sector vendors of information services are
concerned about the effects of a protected monopoly
entering competition with them. In a recent filing with the
Postal Rate Commission, the Computer and Communica-
tions Industry Association (CCIA) points out that the
Postal Service has discussed plans to assign e-mail ad-
dresses to all Americans or all physical addresses, to take
control of the .us web domain, and to deploy computer
kiosks in all post offices for sending and retrieving e-mail.
CCIA fears more.”

" In its filing, CCIA quotes former Postmaster General William
Henderson articulating the Postal Service’s vision, in a published
interview, as follows.

(Continued on following page)

—— ——

15

As we read the thrust of the Presidential commission’s
recommendations, they are that the USPS organization be
further modified along corporate lines, that its scope be
limited to “products and services directly related to the
delivery of letters, newspapers, magazines, advertising
mail, and parcels” (Report, p. 28), that the universal
service obligation be maintained substantially in current
form but the USPS be given much more freedom in man-
aging and disposing of facilities, and that the Postal Rate
Commission be elevated to an independent regulatory
body (termed the Postal Regulatory Board), with modern-
ized, incentive based rate controls.

And the next [strategy] is to leverage our own electronic in-
frastructure for commercial purposes. We have on every —
on most every — will have on most post offices that have
POS, a point-of-sale machine, a backup satellite capability
... It now has voice and video capability, which makes it an
enormous tool, a giant highway, and it’s more reliable than
optical fiber because we have optical fiber into the POS ma-
chines. So it’s a huge asset that this organization has, that
it’s now looking and thinking about who — and you say who
could use it? Well, anyone could use it who has a data
transmission need. It’s completely secure. You would just
lock into the post office, and you could transmit data any-
where in the world.

Postal Rate Commission, Comments of the Computer & Communica-
tions Industry Association on the Motion of the Office of the Consumer
Advocate to Request That the Commission Institute a Proceeding to
Consider the Postal /Nonpostal Character of Specified Services and the
Establishment of Rules to Require a Full Accounting of the Costs and
Revenues of Nonpostal Services, PRC Docket *2003, (January 28, 2003)
available at http://www. prc.gov/docs/36/36838/CCLA_PRC_comments.doc.

"

16

As to the scope of the postal monopoly,” the Presiden-
tial Commission suggested the following:

The Commission also recommends that the
Postal Regulatory Board be tasked with clarify-
ing and administering the scope of the postal
monopoly. Given the Postal Service’s status both
as a monopoly and a competitor, administrative
authority over the monopoly should reside out-
side the institution. It is inappropriate for a
commercial organization to decide the scope of a
law that restrains its competitors. To the con-
trary, it is a fundamental premise of American
justice that the law should be administered by
persons without a financial interest in the out-
come. (Report, p. 65).”” -

In issuing certiorari, this Court has undertaken to
define the scope of controls external to USPS on anticom-
petitive conduct, under existing law. We submit that the
Court should therefore, in accord with its own traditions and
the fundamental concepts recognized by the Presidential

In describing to the President's Commission the scope of the
postal monopoly at present, Campbell observed with acute insight
“What most mailers now think of as an ancient monopoly is in truth a
set of administrative regulations bearing little relationship to the acts
of Congress... . At best, the purpose and scope of the postal monopoly
law are uniquely murky.” Statement of James I. Campbell, supra, at 21.

* In proposing that a Postal Regulatory Board govern the scope of
the postal monopoly, the Presidential Commission did not deal in detail
with all of the issues presented in this case. Such issues may — we
presume will — surface in Congressional consideration of the Commis-
sion’s recommendations. The scope of the regulatory authority to be
given any such Postal Regulatory Board, if created, and the relation-
ships between its functions and the application of the antitrust laws
will, again, presumably, be addressed at that time.

~ A wee ee ee eee

17

Commission, here and now provide clear guidance that
activities beyond the USPS’s core monopoly are subject to
judicial restraint under the antitrust laws.

Under the extremely expansive, status-based immu-
nity the USPS seeks it would be free to engage in price
fixing, market allocations, and other per se violations of
the antitrust laws, as well as practices otherwise subject
to “rule of reason analysis,” in any market of its choosing,
without, Congressional appropriations related oversight,
any direct Executive Branch controls, any regulatory
check from the Postal Rate Commission, or any judicial
review under the antitrust laws. And it would be free to
leverage its statutory grant of monopoly to restrain compe-
tition in any such line of commerce, without any such
check.

USPS is proposing a massive overreach, based pri-
marily on its proprietary interests rather than governmen-
tal needs.

Conceivably this Court could craft a decision on the
specific facts of this case which would avoid ruling on such
broad ranging matters. But the USPS has asserted such a
broad status-based immunity, and the Circuit Court has
crafted an approach for disposing of such a claim. If such
broad issues are to be addressed, we recommend the
approach taken by the Circuit Court below.

18

IV. The Circuit Court’s “conduct based immu-
nity” approach is a reasonable, and neces-
sary, means of reconciling the governmental
mandate of monopoly mail delivery, and the
application of the fundamental national pol-
icy of competition to conduct not within the
necessary scope of that mandate.

This Court has long and consistently stated that the
fundamental national economic policy of the United States
is that of fostering and relying upon competitive markets.
E.g., U.S. v. Topco Assoc., Inc., 405 U.S. 596, 610 (1972);
Standard Oil Co. v. Federal Trade Commission, 340 U.S.
231, 248 (1951).

The USPS argues that apart from the clear “sue and
be sued” language, a plaintiff must show that there is an
explicit, statutorily mandated right of action against the
USPS. But the long-standing rule under the antitrust laws
is that they are to be applied absent an explicit statutory
immunity, or a “plain repugnancy” between the antitrust
laws and any specialized regulatory scheme. See Otter Tail
v. United States, 410 U.S. 366 (1977); MCI Communica-
tions Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081 (7th Cir.

1973).

We can agree with the USPS argument that the
Congress did not intend that either the government or
private parties would be able to maintain actions against
the USPS for exercise of its monopoly grant to perform its
mandated mail delivery function and acts and practices
reasonably ancillary thereto. Putting aside issues of
sovereignty, particular causes of action could be plainly
repugnant to the basic, specific responsibilities entrusted
to the Postal Service, and the (somewhat limited) regula-
tory system paralleling the grant of monopoly services.

—_

te ——— ee

19

But there is no evidence that Congress intended that
the USPS should be free to use the leverage provided it in
its basic mail-delivery function to restrain competition in
related markets,” or to engage in classic anticompetitive
behavior to restrain competition in any other sector of the
economy which it might choose to enter.

PostalWatch submits that little reflection is required
to see that the Postal Service’s argument for blanket
status-based antitrust immunity for any actions, in any
line of commerce, attendant to its claim of “sovereign”
status, would lead to absurd and impermissible results.
The Postal Service would be free to use the force of gov-
ernment, acting as a “sovereign”, to extend its monopoly
scope, and to cartelize markets in its own interests, and in
the essentially commercial interests, which it shares with
actual and potential competitors.

Thus, it appears to us, taking into account the larger
scope of competitive issues we have attempted to outline,

* For example, the Postal Service recently attempted to use its
ability to withhold mail to control competition between itself and
private mailbox stores, and between such private stores and “business
center” operations. USPS engaged in a classic price related agreement
among competing entities to structure competition in such markets.
Notwithstanding the USPS’s arguments to the contrary, we do not
think USPS’s statement of justifications would survive review under
the antitrust laws in a judicial proceeding. See 39 C.F.R. 111 — D042.2.6
— Domestic Mail Manual — Delivery to CMRA. The USPS’s own Office of
Inspector General found Postal Management's actions to lack any
adequate evidentiary basis. See: U.S. Postal Service Office of Inspector
General, Review of the Revis. ' Rules Governing Commercial Mail
Receiving Agencies, Audit iceport DB-AR-01-002, (April 9, 2001)
available at http://www.uspsoig.gov/foia_files/DE-AR-01-002%20%20
Revised%20Rules%20Governing%20Commercial %20Mail%20Rece. pdf.

20

one is necessarily led to the view of the Ninth Circuit, to
the effect that Courts can, and must, distinguish between
those restraints which might be imposed by the Postal
Service which are directly and properly attendant to
whatever grant of monopoly service Congress may have
accorded the Postal Service, and those which are not
reasonably ancillary to such monopoly services.

The Circuit Court’s invocation of the “conduct based
immunity” doctrine aptly integrates deference to the scope
of the monopoly currently given the USPS, and the defer-
ence to be given to the policy and provisions of the anti-
trust laws.

V. The practical, or operational, justifications
offered for antitrust immunity lack eviden-
tiary basis, are self-serving as to USPS’s pro-
prietary interests, and are inconsistent with
USPS’s own management practices.

The USPS arguments that it should not be burdened
by the costs of litigation to determine whether its practices
beyond the necessary scope of mail delivery are anticom-
petitive would be offered by any private firm seeking to
avoid constraint on anticompetitive conduct, and can have
little weight. Litigation costs are the necessary attendant
to judicial review to preserve competition in the economy
as a whole, and may be minimized by avoiding anticom-
petitive conduct.

Any argument that the USPS would suffer great
burdens in distinguishing between its basic mail delivery
functions and other functions would be meretricious.
Postal Service management now regularly makes a num-

ber of such distinctions. We have pointed out that USPS

21

management routinely differentiates between “postal” and
“non-postal” services in its efforts to avoid or minimize the
impact of Postal Rate Commission review of its prices and
classes of service in “competitive” — that is, non-mail —
lines of commerce. Its management surely can distinguish
between its mail services and other markets affected by
mail services, faced with allegations that it is attempting
to leverage its monopoly into such related markets.

USPS’s bold assertion on p. 28 of the Solicitor Gen-
eral’s initial brief on the merits that “Congress has there-
fore entrusted the Postal Service with the responsibility
for determining whether its operations are anti-
competitive, and if so whether other public benefits none-
theless warrant its actions” must be given highly qualified
meaning.

It is true that within the scope of its monopoly ser-
vices, the USPS should weigh whether its actions may, as
to their impact on other parties, have anticompetitive
consequences. But we can see no support in legislative
history, in logic, or in sound public policy for extending
such an assertion to mean that the Congress has given the
USPS a warrant to determine whether and how it will
extend its monopoly to restrain competition in markets
related to mail delivery but not within its central scope, or
freely to engage in anticompetitive conduct in lines of
commerce other than mail service.

In mandating that the USPS operate more as a
business, Congress was successful in endowing the USPS
with a profound proprietary instinct. That instinct should
not be allowed the sovereign, indeed imperial, and un-
checked, scope which the USPS advocates.

¢

22

CONCLUSION

If and as this Court addresses the broad issues posed
on appeal of the Ninth Circuit ruling, rather than dispos-
ing of the claim of Flamingo Industries on grounds par-
ticular to it, PostalWatch, as Amicus Curiae, respectfully
urges the Court to affirm the holding of the Circuit Court
below, to the effect that the scope of any immunity of the
antitrust laws as may be accorded the USPS be limited to
“conduct based immunity” related to the necessities of its
specific mandates to deliver mail, that the USPS not be
allowed to extrapolate its specific authorities so as to
prejudice competition in markets related to mail delivery
in contravention of the provisions of the antitrust laws,
and that it not be permitted to conduct extensive and
expanding commercial undertakings without the checks of
the competitive policies embodied in the antitrust laws.

Respectfully submitted,

WILLIAM S. STANCIL
Counsel of Record

Suite 600, 1717 K St., NW
Washington, DC 20036
(202) 508-1042

Counsel for Amicus Curiae

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0640%3A09. Public record. Not legal advice.