Petition for Writ of Certiorari — UPS Worldwide Forwarding, Inc. v. United States Postal Service

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95-9440] wre y

DES 24 1995

No. 95- *

In The pia

Supreme Court of ithe United States

October Term, 1995

AIR COURIER CONFERENCE OF AMERICA/

INTERNATIONAL COMMITTEE,

Petitioner,

UNITED STATES POSTAL SERVICE,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

PETITION FOR WRIT OF CERTIORARI

«€

L. Perer FarKas

Counsel of Record

Mary Boney DENISON

RICHARD S. TorkKKA

GRAHAM & JAMES

2000 M Street, N.W.

Washington, D.C. 20036

202-463-0800

Attorneys for Petitioner

December 14, 1995

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

Nas

QUESTIONS PRESENTED

There are two conflicts among circuits involving the

Chevron test for deference to agency statutory interpreta-

tions: first, a co -lict in principle over whether the court

may presume a broad delegation of rulemaking authority

to the agency, absent express withholding of such author-

ity; and second, a direct conflict over whether the court

may consider legislative history in Chevron step one. The

circuits also cons‘ict over the primary purpose of the

Postal Reorganization Act (PRA). The Third Circuit: (1)

presumed a broad delegation of rulemaking authority to

the United States Postal Service to abandon published

“rates” and “classes” of mail required by the PRA in

favor of privately negotiated prices for customized ser-

vices; (2) considered the legislative history of the PRA

without first considering the plain meaning of its anti-

discrimination provisions; and (3) misconstrued the legis-

lative intent by deferring to the Postal Service’s commer-

cial motives. The questions presented are:

_ 1. Whether the PRA delegates to the Postal Service

legislative rulemaking authority to issue the International

Customized Mail (ICM) rule permitting the Postal Service

to abandon published “rates” and “classes” of mail.

2. Did the court below err by first considering the

legislative history of the PRA and then applying a mis-

construed legislative intent giving deference to the Postal

Service’s commercial motives to impeach the plain mean-

ing of PRA provisions prohibiting rate discrimination?

LIST OF PARTIES

In addition to the parties named in the caption, the

parties below included UPS Worldwide Forwarding, Inc.

The Air Courier Conference of America/International

Committee is a part of the Air Courier Conference of

America, a trade association with approximately 110

members.

TABLE OF CONTENTS

Page

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RELEVANT STATUTES AND REGULATIONS ...... 1

STATEMENT OF THE CASE..............c.ccccce. 3

POP eD BELIOW 2... occ ccc ccc cccccccccces 5

GREE rs 5

2. Administrative Proceedings .................. 5

eID nc encecercerecsves 7

eno o's oid wis a's Gad edn ecb oudce 7

ee OE WINE SS eee e sce da Vivcceve 8

REASONS FOR GRANTING WRIT................. 12

I. TO RESOLVE CONFLICT IN PRINCIPLE OVER

PRESUMPTION OF RULEMAKING AUTHOR-

WUMIIIN Is NOUS baa 6 00S vKd'o 4s Chas cc ab di cereus 13

Il. TO RESOLVE DIRECT CONFLICT OVER

SCOPE OF CHEVRON STEP ONE............ 17

Iii. TO RESOLVE DIRECT CONFLICT OVER PRA’S

I 23

IV. TO CONSIDER POLICY OF DEFERENCE TO

MONOPOLIST’S COMMERCIAL MOTIVES.... 25

5 EE TR AN 30

TABLE OF AUTHORITIES

Page

CASsEs:

Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990)....... 15

Air Courier Conference of America v. American Postal

Workers Union, AFL-CIO, 498 U.S. 803 (mem.)

CEPED oo cevcsuadsigee (eedeesnlencgeertnnews te reese 5

Air Courier Conference of America v. American Postal

Workers Union, AFL-CIO, 498 U.S. 517 (1991)....5, 25

Air Courier Conference of America/International Com-

mittee v. United States Postal Service, 959 F.2d

SAUD GR Ge BO onc ho nwstedes vie reneussei 5, 15, 29

Alaska v. Babbitt, 54 F.3d 549 (9th Cir. 1995)......... 18

American Petroleum Institute v. U.S. EPA, 52 F.3d

SUES GE. Coe. WOR ces vaccbevcscsteeeyccdiescces 15

Arkansas State Bank Commissioner v. Resolution

Trust Corp., 911 F.2d 161 (8th Cir. 1990)........... 14

Brown v. Rock Creek Mining Co., 996 F.2d 812 (6th |

CO FOO ven kckcacacenga dened eutecesistens suaes 19 ;

Castellon-Contreras v. Immigration and Naturaliza- |

tion Service, 45 F.3d 149 (7th Cir. 1995)............ 19

Chevron U.S.A., Inc. v. Natural Resources Defense

Council, 467 U.S. 837 (19B4)........-cceccecess passim |

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) ......... 14 |

Cities of Newark, et al. v. Federal Energy Regulatory

Commission, 763 F.2d 533 (3d Cir. 1985) ........... 22

City of Chicago v. Environmental Defense Fund, 114

SA. TE CHO 60's venns edd sxvepesroccrsvanes 20, 21

TABLE OF AUTHORITIES - Continued

Page

Doyle v. Shalala, 62 F.3d 740 (5th Cir. 1995).......... 18

Jewish Hospital, Inc. v. Secretary of Health and

Human Services, 19 F.3d 270 (6th Cir. Oe dies dike aa 19

K Mart Corp. v. Cartier, Inc., 486 U.S. 281 (1988). .20, 21

Landgraf v. USI Film Products, 114 S.Ct. 1483 (1994) ....21

Lyng v. Payne, 476 U.S. 926 (1986)..............000.. 14

Mackie v. Bush, 809 F.Supp. 144 (D.D.C. 1993),

vacated sub nom. Mackie v. Clinton, 10 F.3d 13

a Aue ad Sad 2555 od dk Obs EE ee 26

Mail Order Ass’n of America v. United States Postal

Service, 986 F.2d 509 (D.C. Cir. 1993).............. 26

Maislin Industries, U.S., Inc. v. Primary Steel, Inc.,

See ee ee Se ke cs a ec 21, 29

MCI Communications Corp. v. American Telephone &

Telegraph Co., 114 S.Ct. 2223 (1994)............. 21, 29

Mississippi Power & Light Co. v. Mississippi ex rel.

Moore, 487 U.S. 354 (1968)... 00. ccccsccccccccccers 22

National Association of Greeting Card Publishers v.

United States Postal Service, 462 U.S. 810 (1983) ...23, 24

National Association of Greeting Card Publishers v.

United States Postal Service, 607 F.2d 392 (D.C.

Cir. 1979), cert. denied, 444 U.S. 1025 (1980) ....... 23

Oil, Chemical and Atomic Workers International

Union, AFL-CIO v. National Labor Relations

Board, 46 F.3d 82 (D.C. Cir. 1995), cert. denied,

RO ee Oe CE BA ok soe wa e385 os cbeeeenea 14, 19

TABLE OF AUTHORITIES - Continued

Peoples Gas, Light and Coke Co. v. United States

Postal Service, 658 F.2d 1182 (7th Cir. 1981)........ 16

Railway Labor Executives’ Association v. National

Mediation Board, 29 F.3d 655 (en banc), amended

38 F.3d 1224 (D.C. Cir. 1994), cert. denied, 115

SCL TSS CROP con icececchcseth + ccaststavees« 14, 15

Schering Corp. v. Food and Drug Administration, 51

F.3d 390 (3d Cir. 1995), cert. denied, 116 S.Ct. 274

C2GSE) ovocccccucizcenscssgemepasshseaeeseasesnen ss 18

Strickland v. Commissioner of Maine Department of

Human Resources, 48 F.3d 12 (1st Cir. 1995), cert.

Goted, 06 SAR. HS Eee oc tahbe adden scteae chtves 19

Sullivan v. Stroop, 496-U.S. 478 (1990) ............... 21

United States v. Wong, 2 F.3d 927 (9th Cir. 1993),

covt. Gented, 114 GAN, Ties Cerra a cone cnea ceces ces 13

UPS Worldwide Forwarding, Inc. v. United States

Postal Service, 853 F. Supp. 800 (D. Del. 1994)...... 1

UPS Worldwide Forwarding, Inc. v. United States

Postal Service, Air Courier Conference of America/

International Committee, Intervenor, 66 F.3d 621

(BG: CO FOUR ont ececcstuevaveshiiencccecseses passim

Utah v. Babbitt, 53 F.3d 1145 (10th Cir. 1995) ........ 18

STATUTES:

SS UA, GS OG COG sco cccicececsistaphuaanctawes 28

16 UGE Fp MOS. ioc cicecinveS hee veri eyes das 4

28 USGi.@ SRR) oo i6is cnee ccndbhced cub sbc%s coeewe 1

vii

TABLE OF AUTHORITIES - Continued

Page

ST Ws. Ee EE CEPOEE cc nscccocusstvecccctvetace 4

DP CicdReeke bi 4000 nkees cedeceee sede 25

EE Cinch cucoesbeebaxreress 2, 11, 21, 22

PE Cndetas Uaevh vices te ceetensieieekud 16

GED Wak veveVenddlconcocbedcestey 2, 7, %

ED wey owkgivnwidibbavbovenceeten 2, 7, 16

EE dork 6 ob0bed cus. + Raebeede ens nes 2, 21, 22

PEs ixssetabescearees cences 2, 8, 11, 22

I Gd vas vevendid cee ieee os 2, 8, 11, 21, 22

WN ee rca heise eee 16

DER cc cdnatbs dees disedbeesecedtst 3, 16

ts Vesee else cde seein estes 3, 7, 8, 11, 21

DEN s Rabie vhs cusadho iN ekeansedbhhepetereat 7

is hope pc civh ccckecbedsueeron 4, 27

DE hase bibasudeh pots 44 eines sunebce s 2i

NEY s U0 cee eVabisesdvccudeecdbcrievads 21

GS ccR pee Reae ewe b du dak senders dee cs 22

REGULATIONS:

International Customized Mail Rule, 57 Fed. Reg.

RT SINS 50 5s 5aThe cp bevbyheevisseeeeree duc 4, 6

International Customized Mail Service: Final Rule,

United States Postal Service, 58 Fed. Reg. 29778

DSR GK iad dka oecdedbiendceresds Conede oul... 1,4

viii

TABLE OF AUTHORITIES - Continued

International Mail Manual 790...................... 27

International Mail Manual, Issue 15 (July 9, 1995)..... 6

S0 CA Os i 27

RSS Mapa ater peg Gai 27

EN re pa Oar 27

OTHER AUTHORITIES:

ABA Antitrust Section, Antitrust Law Develop-

ee EE ks vk’ bo ach dats chao ksekeees 28

Black’s Law Dictionary (6th ed. 1990)............... 22

General Accounting Office, U.S. Postal Service -

Unresolved Issues in the International Mail

Market (Draft) (November, 1995)............... 12, 27

George H. Hall, Regulatory Systems for Postal Rates,

in Regulation and the Nature of Postal Delivery

Services (Michael A. Crew & Paul R. Klein-

Ge OE Bink nccks bce ktk daemnkehadees ss 28

Michael Herz, Judicial Textualism Meets Congres-

sional Management: A Potential Collision in Clean

Air Interpretation, 16 Harv. Econ. L. Rev. 175

| Er et PR et roe er er eee 19

H.R. Rep. No. 1104, 91st Cong., 2d Sess. at 12

(1970), reprinted in 1970 U.S.C.C.A.N. 3649........ 25

Alfred E. Kahn, The Economics of Regulation

CORFU, ccsica ccc cadencres lereeoi eater nae 27

William Ty Mayton, The Mission and Methods of the

Postal Power, in Governing the Postal Service (J.

Gregory Sidak ed. 1994) ........-cccccccccccccnees 24

TABLE OF AUTHORITIES - Continued

Page

Thomas W. Merrill, Judicial Deference to Executive

Precedent, 101 Yale L.J. 969 (1992)...... 15, 18, 19, 20

J. Gregory Sidak & Daniel F. Spulber, Protecting

Competition from the Postal Monopoly (AEI

a Sacha Ce cele CRKAEE ie Eo ekideeeé 28

Antonin Scalia, Judicial Deference to Administrative

Interpretation of Law, 1989 Duke L.J. 511 (1989) .... 17

John Paul Stevens, The Shakespeare Canon of Statu-

tory Construction, 140 Pa. L. Rev. 1373 (1992)...... 20

Universal Postal Union Convention, Article 20.15 .... 16

UPU, Comments on the Views of Private Opera-

tors on the Subject of Reforms in the UPU Acts,

Private Operators-UPU Contact Committee

Se edad 6 wee w o's 16

Webster’s Encyclopedic Unabridged Dictionary of

the English Language (Gramercy Books 1989)..... 25

The Air Courier Conference of America/Interna-

tional Committee (ACCA), intervenor below, petitions the

Court to issue a writ of certiorari to the Court of Appeals

for the Third Circuit which reversed summary judgment

permanently enjoining the United States Postal Service

from offering individually negotiated and priced con-

tracts for international business mail services.

OPINIONS BELOW

1. UPS Worldwide Forwarding, Inc. v. United States

Postal Service, Air Courier Conference of America/Interna-

tional Committee, Intervenor, 66 F.3d 621 (3d Cir. 1995),

Appendix (App.) la to 43a.

2. UPS Worldwide Forwarding, Inc. v. United States

Postal Service, 853 F. Supp. 800 (D. Del. 1994), App. 44a to

59a.

3. International Customized Mail Service: Final

Rule, United States Postal Service, 58 Fed. Reg. 29778

(1993), App. 60a to 83a.

JURISDICTION

The court of appeals entered its judgment on Septem-

ber 15, 1995. This Court has jurisdiction pursuant to 28

U.S.C. § 1254(1). The Air Courier Conference of America/

International Committee (ACCA) was a party below. See

district court opinion granting ACCA’s motion to inter-

vene (May 16, 1994), App. 56a to 59a, and court of

appeals opinion affirming ACCA’s standing to intervene

(September 15, 1995), App. 24a n.12.

RELEVANT STATUTES AND REGULATIONS

The text of the International Customized Mail Regu-

lation, 58 Fed. Reg. 29778 (1993), is found at Appendix

80a to 83a. Relevant statutes are set forth below.

Title 39 U.S.C.:

§ 101(d) Postal rates shall be established to apportion

the costs of all postal operations to all users of the mail

on a fair and equitable basis.

§ 40% The Puste! Service shall have the following

general powers:

* ” *

(3) to enter into and perform contracts, execute

instruments, and determine the character of, and neces-

sity for, its expenditures;

* + *

(10) to have all other powers incidental, necessary,

or appropriate to the carrying on of its functions or the

exercise of its specific powers.

§ 403 (a) The Postal Service shall plan, develop, pro-

mote, and provide adequate and efficient postal services

at fair and reasonable rates and fees. The Postal Service

shall receive, transmit, and deliver throughout the United

States, its territories and possessions, and, pursuant to

arrangements entered into under sections 406 and 411 of

this title, throughout the world, written and printed mat-

ter, parcels, and like materials and provide such other

services incidental thereto as it finds appropriate to its

functions and in the public interest. The Postal Service

shall serve as nearly as practicable the entire population

of the United States.

(b) It shall be the responsibility of the Postal Service

+ os +

(2) to provide types of mail service to meet the

needs of different categories of mail and mail users; and

* * *

fications, rates, and fees under this title, the Postal Ser-

vice shall not, except as specifically authorized in this

title, make any undue or unreasonable discrimination

among users of the mails, nor shall it grant any undue or

unreasonable preferences to any such user.

§ 404 (a) Without limitation of the generality of its

powers, the Postal Service shall have the following speci-

fic powers, among others:

* s «

(2) to prescribe, in accordance with this title, the

amount of postage and the manner in which it is to be

paid....

§ 407(a) The Postal Service, with the consent of the

President, may negotiate and conclude postal treaties or

conventions, and may establish the rates of postage or

other charges on mail matter conveyed between the

United States and other countries. The decisions of the

Postal Service construing or interpreting the provisions of

any treaty or convention which has been or may be

negotiated and concluded shall, if approved by the Presi-

dent, be conclusive upon all officers of the Government of

the United States.

STATEMENT OF THE CASE

This case presents three conflicts among the circuits

concerning statutory construction by administrative

agencies and one important policy question that the

Court should clarify as to the type of agency and rule to

which the courts should defer. The first conflict concerns

a conflict in principle over when to apply the Chevron

two-step test of deference to any agency’s construction.

The second is a direct conflict in how to apply step one of

Chevron to determine the plain meaning of a statute. The

third presents a direct conflict between circuits over the

legislative purpose of the Postal Reorganization Act of

1970. Fourth, this case presents the issue of whether the

courts should defer to the Postal Service’s commercially

motivated rules.

The Air Courier Conference of America (ACCA) is

the trade association of the expedited delivery industry.

Its International Committee includes over 20 members

from large companies like DHL Express Worldwide, Inc.,

Federal Express Corporation and UPS Worldwide For-

warding, Inc., to smaller niche market and start-up com-

petitors, who operate internationally. ACCA members

have invested substantial resources to develop their inter-

national operations and are concerned that, unless the

Third Circuit’s decision below is reversed, the Postal

Service’s rule and service at issue will cause competitive

and financial harm to a $5 billion industry vital to the

competitiveness of American firms involved in interna-

tional trade.

The underlying dispute involves the Postal Service’s

efforts to minimize the protection afforded its competi-

tors by the Postal Reorganization Act (PRA), 39 U.S.C.

§§ 101-5605 (1988), in competitive markets while main-

taining its domestic monopoly under the Private Express

Statutes (PES), 18 U.S.C. §§ 1693-1699 (1994), 39 U.S.C.

§§ 601-606 (1988). For over 200 years, postal rates in the

United States have universally been set on the public

utility model of published rates and classes of mail appli-

cable to all customers. In 1992 the Postal Service pub-

lished an interim International Customized Mail (ICM)

rule which nullified the requirement to publish rates and

classes for certain international business mail services in

order to attract large customers from private sector cou-

rier companies, such as ACCA members. The Postal Ser-

vice issued the ICM rule to allow itself to negotiate

contracts with individual customers for a customized mix

of up to three types of international mail services at

privately negotiated prices.

The District Court for the District of Delaware held

that the ICM rule violated the PRA and enjoined its

implementation. The Court of Appeals for the Third Cir-

cuit reversed. The court of appeals held that market

conditions and the Postal Service’s business judgment

justified abandonment of published rates. The decision is

at odds with the plain meaning of certain PRA provisions

and the statutory scheme as a whole. The court erred by

never considering the plain meaning of the PRA indepen-

dently of the legislative history it misconstrued. This

Court has considered and rejected agency abandonment

of statutory, published rate requirements in two other

industries. There is all the more reason to reject it here,

where the Postal Service is both the rulemaker and the

competitor who benefits from the rule in the marketplace.

If the Postal Service is to be relieved of its published rate

obligations, thereby nullifying protection of competitors

from predatory pricing, it is up to Congress, not the

Postal Service and the courts, to do so.

PROCEEDINGS BELOW

1. Predecessor Cases

This case follows Air Courier Conference of America v.

American Postal Workers Union, AFL-CIO, 498 U.S. 517

(1991) (ACCA I), and Air Courier Conference of America/

International Committee v. United States Postal Service, 959

F.2d 1213 (3d Cir. 1992) (ACCA II). In ACCA I, this Court:

(1) granted ACCA’s petition for certiorari, over the Postal

Service’s opposition, to review the District of Columbia

Circuit’s decision jeopardizing a Postal Service rule

allowing competition from international remail, see Air

Courier Conference of America v. American Postal Workers

Union, AFL-CIO, 498 U.S. 803 (1990) (mem.); (2) rejected

as untimely the Postal Service’s argument that its rules

are exempt from judicial review, 498 U.S. at 522-523; and

(3) held that postal employees’ unions lacked standing to

enforce the Private Express Statutes. In ACCA II, the

Court of Appeals for the Third Circuit held that the PRA

did not require the Postal Service to submit its published

rates for international mail services for approval by the

Postal Rate Commission.

2. Administrative Proceeding

On July 10, 1992, four months after the Third Circuit

decision in ACCA II, the Postal Service announced the

immediate implementation of its International Custom-

ized Mail (ICM) rule granting itself the authority to mar-

ket and price international mail services in a new way,

unique in the 200-year history of the Post Office Depart-

ment and its Postal Service successor. 57 Fed. Reg. 30651

(1992). Rather than publish rates for a class of service

applicable to all qualified mailers, as the Postal Service

had always done, under the ICM rule the Postal Service

would negotiate a bundled mix of international postal

services at customer-specific contract prices with large

mailers under no obligation to meet minimum mailing

requirements. “An ICM mailing may include items from

any or all of the three classes of international mail... :

Postal Union Mail, Parcel Post, and Express Mail Interna-

tional Service” without generally applicable requirements

except format specifications and size and weight limits.

Id. at 30653. Each of those services is individually the

subject of published rates and classifications in the Inter-

national Mail Manual (IMM). See, e.g., IMM, Issue 15 (July

9, 1995) (Individual Country Listings). The Postal Service

justified ICM “international service on the ground that it

was responding to increased competition from ‘private

sector alternatives’ in the hard copy communications and

parcel marketplace,” in general, and in the “bulk and

expedited services” market, in particular. 57 Fed. Reg. at

30652.

On August 10, 1992 ACCA filed comments on behalf

of the expedited delivery industry opposing the ICM rule

on the grounds that: (1) the Postal Service had failed to

cite any PRA provision which expressly confers statutory

authority to negotiate individual prices; (2) contract

prices violate the PRA’s statutory scheme; (3) ICM will

facilitate cross-subsidies and predatory pricing of inter-

national services by the Postal Service; and (4) ICM will

lead to costly piecemeal litigation to discover and chal-

lenge the Postal Service’s anticompetitive pricing.

On May 24, 1993, the Postal Service published a final

rule permanently adopting the interim ICM rule. See App.

60a to 83a. The Postal Service's final rule claimed author-

ity for the ICM rule under the contracting provision of 39

U.S.C. § 401(3),! its authority to establish international

rates under § 407(a), the incidental powers clause of

§ 401(10), and the discount rate provision of Article 20.15

of the Universal Postal Union Convention (UPU). The

Postal Service argued that the incidental powers provi-

sion eliminated the need for specific statutory authority

because the statute did not expressly prohibit contract

pricing. App. 63a. The Postal Service also invited compet-

itors to challenge ICM prices “just like they can seek

judicial review of other international rates.” App. 79a.

3. Judicial Proceedings

a. District Court

On July 22, 1993, UPS Worldwide Forwarding, Inc.

(UPS) filed suit in the District Court for the District of

Delaware seeking a permanent injunction restraining the

Postal Service from entering ICM agreements and render-

ing ICM service. UPS Complaint at 9, { 1, 853 F. Supp.

800 (D.Del. 1994) (No.93-340-JLL). The district courts

have original jurisdiction over suits against the Postal

Service under 39 U.S.C. § 409 (1988) and 28 U.S.C. § 1339

(1988). Notwithstanding the final rule’s invitation to com-

petitors to challenge ICM rates in court, on September 20,

1993, the Postal Service moved to dismiss claiming that

UPS lacked standing to sue for failure to plead injury in

fact. On October 19, 1993, ACCA moved to intervene as a

plaintiff and filed a complaint pleading actual injury to a

member who lost an account to the Postal Service’s ICM

program. ACCA Complaint { 3.

The district court heard the case on cross-motions:

the Postal Service’s motion to dismiss for lack of standing

and failure to state a claim, which ACCA opposed, and

! All section citations herein are to Title 39, unless other-

wise specified.

UPS's motion for summary judgment, which ACCA sup-

ported. On both motions, ACCA challenged the Postal

Service’s claimed authority for contract pricing under the

provisions it advanced upon publication of the final rule.

ACCA contended that the failure of these provisions to

delegate rulemaking authority for negotiated pricing

makes it unnecessary to establish any specific statutory

prohibition and that the Postal Service’s commercial self-

interest in the ICM program precluded deference to its

statutory interpretation.

On May 16, 1994, the district court held that UPS had

standing (App. 50a) and granted ACCA’s motion to inter-

vene (App. 58a). The district court did not address the

delegation issue, but held that ICM violated PRA section

403(b)(2), which requires the establishment of mail cate-

gories (App. 51a); section 403(c), which prohibits undue

or unreasonably discriminatory rates (App. 52a); section

101(d), which requires fair apportionment of costs (App.

53a); and section 407(a), which requires the Postal Service

to obtain presidential approval for international rates

(App. 55a). The court entered a permanent injunction

barring the Postal Service from implementing the ICM

program. App. 58a-59a. The Postal Service appealed.

b. Court of Appeals

On September 15, 1995, the Third Circuit upheld

UPS's standing to sue and ACCA’s standing to intervene

(App. 24a & n.12) and reversed on the merits (App. 43a).

Although ACCA briefed the delegation of authority

issue, the court of appeals did not consider whether the

PRA affirmatively delegated authority for the Postal Ser-

vice to abandon 200 years of published rates. The court,

defining the sole issue on the merits as whether ICM

service violated several provisions of the PRA, reversed.

App. 24a.

The court prefaced its consideration of the merits

with a selective review of 200 years of statutory and

regulatory history and the legislative history of the PRA.

It concluded that the Postal Service is essentially an unre-

gulated “business” when it operates in international mar-

kets. Specifically, the court noted that: (1) the 1970 PRA

“represented ‘a dramatic break with the past’ ” (App. 7a);

(2) that in 1970 Congress intended to “launch{] the Postal

Service into the commercial world” (id.) (internal punc-

tuation omitted); and (3) though the PRA retained the

“monopoly over the carriage of letters in and from the

United States,” the Postal Service has suspended its

monopoly over “extremely urgent letters” and “interna-

tional remailing” (App. 8a & n.4) (internal punctuation

omitted). On those bases, the court concluded that “a

primary purpose underlying the PRA was to require the

Postal Service to [adopt] . . . modern business practices”

(App. 30a to 31a), “to operate . . . more like a business”

(App. 40a), to conduct itself “in a businesslike way”

(App. 41a), and to seek “innovation” and “new markets”

(id.).

After elevating the legislative history’s references to

“business” and “businesslike” to the status of primary

legislative purpose, the court of appeals denigrated the

PRA sections the district court found the ICM rule to

violate. The court, finding “no specific criteria” for inter-

national rate setting (App. 25a), disparaged the PRA’s

anti-discrimination provisions as “general statements of

policy, duties and powers” (App. 28a), “list[ing] the

‘[gleneral duties’ ” (App. 29a), “ ‘[g]eneral duties’ ” (App.

34a), “merely enumerat[ing] . . . the Service’s ‘[g]eneral

duties’” (App. 36a), and “intended to list ‘[g]eneral

duties’ ” (id.).

The court of appeals was then persuaded by four

business justifications for the ICM rule. Because the dis-

trict court disposed of the case as a matter of law on

cross-motions and because one of the “facts” the court of

appeals found so persuasive was first presented by Postal

Service counsel on appeal, none of the four following

justifications was tested by discovery or the subject of

district court findings:

First, the court credited the Postal Service’s conten-

tion that it needed contract pricing to respond to varia-

tions in the way other countries charge the Postal Service

to deliver U.S. origin mail. Such variations resulted in

Postal Service rates that did not reflect costs for some

large customers. App. 26a to 27a. (The record contains no

explanation of why the Postal Service cannot account for

country-by-country cost variations by country-specific,

rather than customer-specific, rates).

Second, the court relied upon the Postal Service's

argument that increasing competition from private sector

companies with flexible rate structures “made it increas-

ingly difficult for the Postal Service to [attract]

... customers using a single published schedule of rates.”

App. 27a. (Given the procedural posture of the case,

neither the district court nor the Third Circuit could

consider (a) other possible reasons for the Postal Service’s

difficulties such as inferior service quality or (b) its

advantages over the private sector: it pays no federal,

state or local income or property taxes, borrows funds at

below market rates from the U.S. Treasury, maintains a $9

billion negative net worth, and has a $40 billion dollar

protected market.) See also infra pp. 26-27.

Third, the court found further justification in the

Postal Service’s admission that it “[e]stimated substantial

costs to negotiate aid implement the ICM agreements;

expenses were high enough so that ‘for all but the largest

volume customers, those costs in many instances could be

greater’ than what the Postal Service earned from the

ICM program.” App. 28a. (The record is silent concerning

whether the Postal Service can determine in advance

whether a particular transaction’s cost will lead to reve-

nues above or below its costs.)

Finally, the court found particularly convincing

postal counsel’s rebuttal statement at oral argument justi-

fying the ICM program’s feature of targeting large

mailers without their commitment to tender any mini-

mum amount of mail:

To require commitment would just sort of drive

[potential customers] off. I mean, if you say we

are not giving you this business until you com-

mit to it, then you never get the business.

It is better to make them the offer, get them to

try the business, and then in practice my client

informs me, once you get the business of a big

company, you tend to get all its business.

App. 30a.

The court looked at the broad statutory goal of mak-

ing the Postal Service more businesslike and “[saw] noth-

ing in the PRA that prevents the Postal Service from

innovative attempts to increase its business and profits,

as long as it stays within the bounds of the relevant

statutes.” App. 3la. Relying heavily on the Postal Ser-

vice’s explanations, the court held that:

1. The ICM program did not unfairly or inequitably

allocate costs in violation of § 101(d), because whether a

rate is “fair” or “equitable” is not capable of precise

definition and ICM service “reflects a reasonable business

decision about the most effective means to solicit new

customers” (App. 31a);

2. The ICM program did not violate “§ 403(c)’s ban

on ‘undue or unreasonable discrimination’ or . . . ‘pre-

ferences’” because that too is “difficult to define”

(App.32a) and the Postal Service had “valid reasons” to

create ICM service (App. 34a);

v. The ICM program did not violate § 403(b)(2)

because its ban on “” ‘undue or unreasonable’ discrimina-

tion and preferences” does not require rate “uniformity

or equality” (App. 35a), accepting the Postal Service’s

business judgment that ICM “may better ‘meet the needs’

of large-volume mailers” as a “category of [mail]

users .. . by offering them individualized service plans at

individual rates” (id.); and

4. The ICM program did not violate § 407 because,

even if ICM contract prices are not “rates,” they are

“other charges”? within its meaning (App. 37a); presiden-

tial consent is satisfied by failure to object (App. 39a); and

the President (after suit was filed) published a statement

in the Federal Register agreeing that “failure . . . to

object . . . is consent” (App. 38a to 39a).

In short, the court concluded, the ICM rule was sim-

ply an appropriate response to the PRA’s primary con-

gressional purposes. App. 41a.

The Third Circuit made no attempt to analyze the

plain meaning of the PRA provisions at issue and, in spite

of its reliance upon the Postal Service’s business judg-

ment with respect to three of the four provisions at issue,

the court concluded its opinion by noting that, while the

Postal Service deserved a “reduced level of deference,”

the court did “not rely on any deference that might be

due” the Postal Service under Chevron U.S.A., Inc. v.

Natural Resources Defense Council, 467 U.S. 837 (1984).

App. 43a. Moreover, although it found words in three of

the PRA provisions difficult to define, the Third Circuit

made no attempt to justify its incursion into the legisla-

tive history on the basis of any ambiguity in the provi-

sions or gap in the statute.

REASONS FOR GRANTING WRIT

ACCA respectfully petitions the Court to grant the

writ: (1) to resolve the conflict in principle among circuits

whether a presumption of delegated power, absent an

2 The meaning of “other charges” was not briefed below,

but may refer to “terminal dues” (what postal administrations

pay each other for the difference in the mail volume they deliver

for each other) and “conveyance fees” (what postal administra-

tions charge each other for forwarding mail from one foreign

country to another). See General Accounting Office, U.S. Postal

Service - Unresolved Issues in the International Mail Market

(Draft) (November, 1995) (other charges are segregated from

rate revenues).

ee eeeaeaeaenmmnnesmemnmnnmemsmmmmnrn EEE EE

express withholding of such power from an agency, suf-

fices to invoke Chevron; (2) to resolve the direct conflict

among circuits concerning the proper scope of step one of

the Chevron determination of statutory “plain meaning”;

(3) to resolve the direct conflict in principle between

circuits concerning the primary legislative intent of the

PRA; and (4) to consider the recurring policy issue of

whether the Postal Service’s interpretations of the PRA

warrant deference when they are driven by its commer-

cial self-interests as a government-owned monopoly seek-

ing to attract customers of private sector competitors in

competitive markets.

TO RESOLVE CONFLICT IN PRINCIPLE OVER

PRESUMPTION OF RULEMAKING AUTHORITY

The Third Circuit limited its consideration of the

merits to “the district court’s holding that the Postal

Service’s promulgation of the regulation establishing the

ICM service violated several provisions of the PRA.”

App. 24a. The court held that “ICM service does not

contravene the PRA.” App. 43a. In so doing, the court

rejected, sub silentio, ACCA’s contention that the issue on

appeal, as framed by the Postal Service and ultimately

adopted by the court of appeals, “begs the question of the

source of [the Postal Service’s] authority to negotiate ICM

arrangements with individual mailers.” Brief for Appel-

lee ACCA at 11, UPS Worldwide Forwarding, Inc. v. United

States Postal Service, 66 F.3d 621 (3d Cir. 1995) (No.

94-7423). The court thus “presumed” that the Postal Ser-

vice had rulemaking authority that encompassed the ICM

rule.

It is predictably difficult to find a majority opinion

articulating such a presumption. However, dissents to

Eighth and Ninth Circuit opinions have ascribed such a

presumption to majority panels in United States v. Wong, 2

F.3d 927, 938 (9th Cir. 1993), cert. denied, 114 S. Ct. 2705

(1994) (Norris, J., dissenting) (majority made unwar-

ranted inferences from silence; “legislative silence does

not in itself constitute delegation of authority”) and

Arkansas State Bank Commissioner v. Resolution Trust Corp.,

911 F.2d 161, 179 (8th Cir. 1990) (Heaney, J., dissenting)

(majority attempted to create a gap or an ambiguity

where none exists; “no administrative agency can boot-

strap itself into a position where it can by rule fill a gap

or resolve an ambiguity where neither exists”). Such pre-

sumptions conflict with the law in the District of Colum-

bia and other circuits.

The District of Columbia Circuit has held, en banc,

that agency authority cannot be presumed in the absence

of a specific prohibition to its exercise:

[A]n agency’s power is no greater than that

delegated to it by Congress. . . . The [National

Mediation] Board errs grossly in suggesting that

“the question is whether the Act expressly pre-

cludes the Board from choosing” to adopt the

Merger Procedures. . . . Quite to the contrary,

the question is whether the Board’s “exercise of

quasi-legislative authority” is “rooted in a grant

of such power by the Congress and subject to

limitations which that body imposes.”

Railway Labor Executives’ Association v. National Mediation

Board, 29 F.3d 655, 670 (en banc) (RLEA), amended 38 F.3d

1224 (D.C. Cir. 1994), cert. denied, 115 S.Ct. 1392 (1995),

quoting, Lyng v. Payne, 476 U.S. 926, 937 (1986) and Chrys-

ler Corp. v. Brown, 441 U.S. 281, 302 (1979) (citations

omitted). The D.C. Circuit recéntly reiterated its RLEA

decision:

Were courts to presume a delegation of power

absent an express withholding of such power,

agencies would enjoy virtually limitless hege-

mony, a result plainly out of keeping with Chev-

ron and quite likely with the Constitution as

well.

Oil, Chemical and Atomic Workers International Union, AFL-

CIO v. National Labor Relations Board, 46 F.3d 82, 90 (D.C.

Cir. 1995), cert. denied, 116 S.Ct. 81 (1995) (Edwards, C.J.)

quoting RLEA, 29 F.3d at 671 (emphasis in original);

accord, American Petroleum Institute v. U.S. EPA, 52 F.3d

1113, 1119 (D.C. Cir. 1995) (“EPA cannot rely on its gen-

eral authority to make rules necessary to carry out its

functions when a specific statutory directive defines the

relevant functions in a particular area.”)

Whether a rulemaking agency must first establish its

authority to act or the challengers must first establish an

express withdrawal of such authority, has importance

beyond the issue of whether the Postal Service has such

authority here. The issue implicates whether and under

what circumstances the courts need even begin their two

step analysis under Chevron U.S.A., Inc., v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984). Chev-

ron presupposes “an exercise of delegated authority.”

Even pre-Chevron, “[l]egislative rules were the product of

a specific delegation of authority from Congress to an

administrative agency to interpret a specific statutory

term or fill in a statutory gap.” Merrill, supra note 3, at

973.

Had the Third Circuit considered the delegation

issue, it would not have found the threshold delegation.

The PRA does not contain a “broadly worded authoriza-

tion” of rulemaking authority. ACCA II, 959 F.2d at 1226

(Becker, J., concurring). Moreover, the Third Circuit's

determination here that the PRA’s primary purpose was

to make the Postal Service “more businesslike” is antithe-

tical to a delegation of any rulemaking authority.

Furthermore, in publishing the final ICM rule, the

Postal Service responded to ACCA’s comments by identi-

fying three PRA provisions and one UPU provision upon

which it based its delegated authority to issue the rule. It

* Thomas W. Merrill, Judicial Deference to Executive Prece-

dent, 101 Yale L.J. 969, 987 (1992), citing Adams Fruit Co. v.

Barrett, 494 U.S. 638 (1990).

‘te

advanced the same provisions before the courts. The pro-

visions do not support the Postal Service’s claim of dele-

gated authority. First, § 401(3) confers only procurement

contracting authority as it is limited to the Postal Ser-

vice’s “expenditures.” See generally, Peoples Gas, Light and

Coke Co. v. United States Postal Service, 658 F.2d 1182, 1189

(7th Cir. 1981) (Postal Service’s authorization for procure-

ment expenditures governed by §§ 401(3) and 401(2)).

Second, § 407 authorizes the Postal Service to negotiate

postal agreements with foreign countries and to establish

international rates. There is nothing in that section even

remotely suggesting rulemaking authority or the author-

ity to negotiate private contracts with domestic customers

for international mail services. Third, § 401(10) cannot

expand the Postal Service’s rulemaking authority to cover

ICM contracts because (a) § 401(10) is specifically limited

to the Postal Service’s exercise of “specific powers” under

§ 404; (b) § 404 does not include any rulemaking author-

ity; and (c) the only reference to postage rates in

§ 404(a)(2) requires that it be prescribed “in accordance

with this title.” Fourth, UPU* Article 20.15 authorizes

volume discounted rates, not individually negotiated

prices and has no force of U.S. law.

None of the provisions upon which the Postal Service

relies confers authority to issue rules that depart from the

requirement of published rates reflected in the plain

meaning of the PRA or to enter customer-specific con-

tracts at privately negotiated prices for customized ser-

vices. The Third Circuit erred by presuming such

authority in conflict with the District of Columbia Circuit.

4 The Universal Postal Union is an international organiza-

tion of postal administrations which, contrary to the court of

appeals determination (App. 32a n. 13), disclaims any regula-

tory authority over private sector expedited delivery firms. See

UPU, Comments on the Views of Private Operators on the Sub-

ject of Reforms in the UPU Acts, Private Operators-UPU Contact

Committee (October 18, 1993).

Il.

TO RESOLVE DIRECT CONFLICT

OVER SCOPE OF CHEVRON STEP ONE

On review of agency actions, Chevron requires a two-

step review of an agency’s construction of a statute it

administers. In step one, courts must determine whether

Congress has directly spoken to the precise issue. If the

intent of Congress is clear, that is the end of the matter. If

the statute is silent or ambiguous with respect to the

specific issue, the court must go to step two to determine

whether the agency’s answer is based on a permissible

construction of the statute. Chevron, 467 U.S. at 843.

A conflict exists among the circuits over the proper

scope of Chevron step one. May the court consider legisla-

tive history in step one without first concluding that the

statute is silent or ambiguous, as the Third Circuit did

here? Or is the consideration of the legislative history the

exclusive province of step two, as the Sixth, Seventh and

District of Columbia Circuits have held and some of this

Court’s decisions have suggested?

The court of appeals considered the legislative his-

tory of the PRA first and the PRA provisions that the

district court held the ICM rule to violate second. It never

considered the plain meaning of the anti-discrimination

provisions or the statute as a whole. The court of appeals

decision can be viewed in two ways. It either expanded

the scope of Chevron step one to include incursion into

the legislative history, properly deferred until step two,

or it reversed the sequence of the two Chevron steps. In

either case, the effect was to misuse the legislative history

to “impeach” the plain meaning of the anti-discrimina-

tion provisions of the PRA. Antonin Scalia, Judicial Defer-

ence to Administrative Interpretation of Law, 1989 Duke L.J.

511, 521 (1989).

Specifically, in step one, the court considered the

legislative history of the PRA, finding a legislative pur-

pose that gave primacy to the Postal Service’s commercial

goals. In step two, the court found that the imprecise

standards of what it considered unimportant PRA provi-

sions were somehow superseded by the Postal Service's

commercial considerations that it considered consistent

with the legislative intent. Therefore, the court con-

cluded, the Postal Service’s interpretation of the statute

was reasonable, even without reliance upon the “reduced

level of deference” purportedly due the Postal Service

under Chevron.5 App. 43a. The court of appeals’ consider-

ation of the legislative history first, and the meaning of

the statute second, aligns it with other circuits which

have either held or adopted a methodology showing that,

post-Chevron, the courts may consider both Congressional

intent and plain meaning of the statute in Chevron step

one. See, e.g., Doyle v. Shalala, 62 F.3d 740, 745 (5th Cir.

1995); Utah v. Babbitt, 53 F.3d 1145, 1148 (10th Cir. 1995);

Alaska v. Babbitt, 54 F.3d 549, 552 (9th Cir. 1995); Schering

Corp. v. Food and Drug Administration, 51 F.3d 390, 398 (3d

Cir. 1995), cert. denied, 116 S.Ct. 274 (1995).

In Utah, the Tenth Circuit construed step one of Chev-

ron to allow consideration of the legislative history to

determine Congressional intent:

In determining the meaning of a statute, we look

at not only the statute itself but also at the larger

statutory context. We may ascertain the intent of

Congress through statutory language and legis-

lative history. When aid to construction of the

meaning of words, as used in the statute, is

available, there certainly can be no rule of law

which forbids its use, however clear the words

may appear on superficial examination.

Utah, 53 F.3d at 1148 (citations and internal punctuation

omitted).

> Merrill interprets fhe Supreme Court’s recent decisions to

have replaced the sliding scale of variable deference with a

binary, “all-or-nothing” determination of the deference issue.

Merrill, supra note 3, at 977.

The Fifth, Third, Ninth and Tenth Circuits’ so-called

“intentionalist” approach is in direct conflict with the

District of Columbia, Sixth, and Seventh Circuits’ “tex-

tualist” approach.® The textualist circuits hold that plain

meaning must, in the first instance, be determined from

the text of the statute and that consideration of legislative

history is appropriate only at step two of the Chevron

inquiry:

First and foremost, of course, Chevron instructs

that unless the statute’s provisions are ambig-

uous, we are simply to give effect to the unam-

biguously expressed intent of Congress. The

reason for this requirement is obvious: through

excursion into legislative history, a writer can

find support for virtually any position.

Jewish Hospital, Inc. v. Secretary of Health and Human Ser-

vices, 19 F.3d 270, 274 (6th Cir. 1994), quoting Brown v. Rock

Creek Mining Co., 996 F.2d 812, 818 (6th Cir. 1993)

(Batchelder, J., dissenting) (citations omitted); accord

Castellon-Contreras v. Immigration and Naturalization Ser-

vice, 45 F.3d 149, 153 (7th Cir. 1995) (plain language of

statute is conclusive of congressional intent, except in

rare cases where plain language would: (1) produce

results demonstrably at odds with the drafters’ intent, (2)

lead to an absurd result, or (3) thwart the purpose of the

overall statutory scheme); see Oil, Chemical and Atomic

Workers Intern. Union, 46 F.3d at 90 (under Chevron,

“absent plain meaning in a statute” courts defer to reason-

able agency interpretation) (emphasis in original).

The First Circuit noted the conflict in Strickland v.

Commissioner of Maine Department of Human Resources, 48

F.3d 12, 16-17 (1st Cir. 1995), cert. denied, 116 S.Ct. 145

(1995). That court found that “it remains unclear whether,

ism Meets Congressional Management: A Potential Collision in

Clean Air Interpretation, 16 Harv. Econ. L. Rev. 175, 198-200

(1992).

and if so, to what extent, a court engaged in the first stage

of a Chevron inquiry may use other tools of statutory

construction, such as legislative history.” Id.

This Court has suggested a resolution but has not

specifically resolved the conflict. In cases beginning with

K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988), it has

placed greater emphasis in step one of the Chevron test on

the plain meaning of the statute and appears to have

limited the consideration of legislative history: “the court

must look to the particular statutory language at issue, as

well as the language and design of the statute as a whole”

(citations omitted). The court has shifted step one from

the “specific intentions” rubric of the intentionalist school

to the “plain meaning” rubric of the textualist school.

Merrill, supra note 3, at 991. Only if that examination had

resulted in a determination that the specific provisions

were either ambiguous or left a gap that Congress speci-

fically intended the Postal Service to fill, would there

have been any need for the court of appeals to go on to

step two for a consideration of the legislative history.”

Recently, in City of Chicago v. Environmental Defense Fund,

114 S.Ct. 1588, 1593-94 (1994), the Court held that the

most reliable guide for reconciling diverse statutory pur-

poses is the enacted text.

The textualist circuits hold and the K Mart and Chi-

cago decisions suggest that the Third Circuit should have

7 Justice Stevens suggests five canons of statutory construc-

tion for the five acts of Shakespeare’s plays. Had the Third

Circuit followed them in order, ACCA likely would not be

petitioning this Court. Justice Steven suggests, first, “read the

statute.” Only if there is ambiguity, do the next four canons

come into play. Second, “[rJead the entire statute.” Third, read

the text “in its contemporary context.” Fourth, if “ambiguity

persists” and you are “desperate, or even if you just believe it

may shed some light on the issue, consult the legislative his-

tory.” Finally, “use a little common sense” to avoid “an absurd

result.” John Paul Stevens, The Shakespeare Canon of Statutory

Construction, 140 Pa. L. Rev. 1373 (1992).

started step one with a determination of the plain mean-

ing of the PRA provisions at issue and, if necessary,

broadened its inquiry into the PRA’s design as a whole.

See also Sullivan v. Stroop, 496 U.S. 478 (1990); Landgraf v.

USI Film Products, 114 S.Ct. 1483, 1510, 1522 (Scalia, J.,

concurring) (1994). Given that the court of appeals here

found no specific ambiguity in the statute, and no gap in

the statute the Postal Service is delegated authority to fill,

its review of the legislative history was at least prema-

ture, if not irrelevant.

Had the court of appeals confined its analysis in step

one to plain meaning based on the enacted text as sug-

gested by K Mart and Chicago, it could not have reversed

the district court based either on the Postal Service’s

business justifications or on any difficulty with the mean-

ing of certain terms in the statute. The appropriate anal-

ysis would have proceeded as follows:

First, there is nothing in the text of the non-

discriminatory rate, class and cost provisions at issue to

suggest that the Postal Service has discretion to disregard

them for business reasons. Indeed, neither the Postal Service

nor the Third Circuit has identified any provision elsewhere

in the PRA providing such discretion. See Maislin Industries,

U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116 (1990). In Maislin,

this Court held that the ICC did not have statutory discretion

to abandon the “filed-rate doctrine.” Similarly, in MCI Com-

munications Corp. v. American Telephone & Telegraph Co., 114

S.Ct. 2223, 2233 (1994), the Court refused to permit the FCC

to abandon the filed-rate doctrine.

Second, the text of the anti-discrimination provisions

clearly adheres to the public utility published rate and

class model. Indeed the term “rate,” which is used repeat-

edly in the non-discrimination provisions,’ itself

® “Rates” is used as follows: “postal rates” in § 101(d),

“reasonable rates” in § 403(a), “rates” in § 403(c), “rates of

postage” in § 407(a), “Postal Rate Commission” in Chapter 36,

“rate or rates of postage” in § 3622.

encompasses the utility model and the non-discrimina-

tion concept. It is an unambiguous term of art in the

public utility model which Black’s Law Dictionary at 1261

(6th ed. 1990) defines as follows:

Rate. In connection with public utilities, a

charge to the public for a service open to all and

upon the same terms.

Third, the following statutory terms modifying the

terms “rates” and “costs” confirm the statutory design

adopting the public utility model: the requirement that

costs be apportioned “on a fair and equitable basis” in

§ 101(d), that the rates be “fair and reasonable” in

§ 403(a), and that such rates avoid “undue or unreason-

able discrimination [and] . . . preferences” in § 403(c). The

modifying terms are all part of the public utility lexicon

and are consistent with the use of “rate” in the statute.?

Fourth, references to “categories of mail and mail

users” in § 403(b)(2), mail “classifications” in § 403(c) and

a “mail classification schedule” in § 3623 further support

the plain meaning of the statute as requiring published

rates and classes as opposed to contract prices and cus-

tomized services. See supra note 9. The statute has plain

meaning: it requires published “rates” and thereby pro-

hibits private deals. That should have ended the inquiry.

9 The court of appeals appears to attempt to justify its

incursion into the legislative history in step one by finding

difficulty in defining “fair” and “equitable” and “undue or

unreasonable discrimination of preferences.” However, what is

at issue is not whether any particular ICM price is discrimina-

tory, but whether the statutory use of those terms precludes the

Postal Service from abandoning published rates and classes.

The court’s definitional difficulties are irrelevant. See, e.g., Cities

of Newark, et al. v. Federal Energy Regulatory Commission, 763 F.2d

533 (3d Cir. 1985) (Becker, J.); Mississippi Power & Light Co. v.

Mississippi ex rel. Moore, 487 U.S. 354 (1988) (using similar terms

without apparent difficulty).

III.

TO RESOLVE DIRECT CONFLICT

OVER PRA’S PRIMARY PURPOSE

The Third Circuit’s determination of the PRA’s pri-

mary purpose (1) conflicts directly with the District of

Columbia Circuit’s determination and this Court's sug-

gestions of congressional intent, (2) is at odds with the

public utility ratemaking model adopted by the PRA, and

(3) misconstrues “businesslike” as used in legislative his-

tory.

First, the Third Circuit determined that the primary

purpose underlying the PRA was to require the Postal

Service to adopt “modern business practices.” App. 30a

to 3la, see App. 7a, 40a, 41a. In contrast, the District of

Columbia Circuit has held that “[iJn the context of postal

ratemaking, . . . the dominant objective of Con-

gress ... was... the prevention of discrimination among

the mail classes.” National Association of Greeting Card

Publishers v. United States Postal Service, 607 F.2d 392, 403

(D.C. Cir. 1979), cert. denied, 444 U.S. 1025 (1980).

The Supreme Court has not addressed any “primary

purpose” or “dominant objective” of the PRA directly.

However, it has recognized the nondiscrimination objec-

tive in the context of a challenge to domestic rates, stating

that Congress:

attempted to remove undue price discrimination

and political influence by placing ratesetting in

the hands of a Rate Commission, composed of

“professional economists, trained rate analysts,

and the like,” independent of Postal Service

management, and subject only to Congress’

“broad policy guidelines.”

National Association of Greeting Card Publishers v. United

States Postal Service, 462 U.S. 810, 822 (1983) (NAGCP)

(citations omitted). The broad guidelines constraining the

Postal Service, as referenced by this Court in NAGCP, are

the anti-discriminatory provisions of § 101. In NAGCP,

the Court noted that protection against discrimination

and cross-subsidies benefits consumers and competitors

alike: “Congress intended to prevent undue imposition

on users of monopolized classes [of mail], and to prevent

unfair competition . . . ” vis-a-vis “the general publi-

c...and enterprises in the private sector of the economy

engaged in the delivery of mail... .” Id. at 829 n.24. In its

decision below, the Third Circuit denigrated and

impeached the “broad policy guidelines” constraining

discrimination by the Postal Service, elevating the Postal

Service’s commercial motives over the anti-

discrimination provisions as the gauge for permissible

postal rates. See App. 24a to 26a.

Second, the Third Circuit misconstrued the term

“businesslike” in the legislative history to increase the

Postal Service’s discretion to abandon its published rates.

As used in the legislative history, “businesslike” was a

shorthand term for removing Congress from the rate-

making process. “Businesslike” is simply used as an an-

tonym for “political.” This interpretation is reinforced by

Justice Blackmun’s use of the phrase for a unanimous

Court in NAGCP:

Congress sought to ensure that the Postal Ser-

vice would be managed “in a businesslike way.”

There is no suggestion in the legislative history

that Congress viewed the exercise of discretion

[by the Postal Rate Commission] as an evil in

itself. Congress simply wished to substitute the

educated and politically insulated discretion of

[Postal Rate Commission] experts for its own.”

NAGCP, 462 U.S. at 822-823.

Commentators agree: “business practices” was a term

of art in the 1970 reorganization. William Ty Mayton, The

Mission and Methods of the Postal Power, in Governing the

Postal Service 60, 90 (J. Gregory Sidak ed., 1994). “These

words referred simply to an allocation to the Post Office,

as opposed to Congress, of major portions of a service

that otherwise continued as a government operation.” Id.

The legislative history contains variations on this theme

that confirm this usage. For example, operation of the

Postal Service in a “businesslike” manner was an antidote

to the “revolving door” political patronage system

believed to shorten the tenure of Postmasters General

when the Postal Service was thought to need continuity

of top management. H.R. Rep. No. 1104, 91st Cong., 2d

Sess. at 12 (1970), reprinted in 1970 U.S.C.C.A.N. 3649.

Indeed, there is no suggestion in the word “busi-

nesslike” of unfettered pricing discretion. See definitions

of “businesslike” and “business,” Webster’s Encyclopedic

Unabridged Dictionary of the English Language (Gram-

ercy Books 1989) (suggesting efficiency and profit-making

activity). Contrary to the Third Circuit’s mistaken impres-

sion (App. 7a, 31a), the PRA did not make the Postal

Service into a for-profit enterprise. Rather, it retained its

character as a “basic and fundamental service provided to

the people by the Government. . . . ” § 101(a). Moreover,

there is nothing contradictory about businesslike com-

mercial enterprises having to publish rates. See Maislin

(requiring published rates by for-profit truckers).

Finally, the Third Circuit’s misuse of the term “busi-

nesslike” in the legislative history to override the anti-

discrimination provisions in the statute runs afoul of the

raison d’etre of the Postal Service and the Private Express

Statutes, namely, “to provide postal services to bind the

Nation together.” § 101(a); see ACCA I, 498 U.S. at 527

(“The PES enable the Postal Service to fulfill its respon-

sibility to all communities at a uniform price. .. . ”).

Without uniform rates and classes, there is no justifica-

tion for the PES or the Postal Service itself.

IV.

TO CONSIDER POLICY OF DEFERENCE

TO MONOPOLIST’S COMMERCIAL MOTIVES

The Third Circuit purported “not [to] rely on any

deference” to the Postal Service in reaching its decision.

App. 43a. However, in reversing the district court’s hold-

ing that the ICM rule violated three anti-discrimination

provisions, the court of appeals cited the Postal Service's

business justifications. See supra pp. 9-12. Thus, in spite of

the court’s disclaimer, its deference is unmistakable. Even

“reduced” deference raises the policy issue of whether

the Postal Service’s interpretations of the PRA, motivated

by commercial considerations and affecting competitive

markets, warrant deference. The courts should accord no

deference because a monopolist’s attempt to influence

competitive markets warrants Sherman Act skepticism,

not Chevron deference.

The Postal Service is unique among American public

institutions. On the one hand, the Postal Service has “the

‘status of a private commercial enterprise’ ” (App. 43a),

has no sovereign immunity (id.), is outside the congres-

sional appropriation process and receives no tax funds,!°

and is managed by a Board of Governors that cannot be

removed by the President. Mackie v. Bush, 809 F.Supp. 144,

148 (D.D.C. 1993), vacated sub nom. Mackie v. Clinton, 10

F.3d 13 (D.C. Cir. 1993); see Mail Order Ass'n of America v.

United States Postal Service, 986 F.2d 509, 512-13 (D.C. Cir.

1993). Thus, neither the Legislative nor Executive

Branches has the normal “democratic” control over the

Postal Service. See Chevron, 467 U.S. at 865. Further, the

Postal Service calls itself a “big business”;"! it claims that

each of its “seven product lines would qualify as a For-

tune 200 company on its own.”!2 In 1994, it had revenues

10 The Postal Service has been “totally self-supporting”

since 1982 with all of its operations “funded from the sale of

stamps and none of them from taxes.” U.S. Postal Service

Advertisement, Wall St. J., November 20, 1995 at A15.

11 Bill McAllister, “Postmaster General Touts Bottom-Line

Gains on Wall Street Visit,” Washington Post, November 18,

1995 at A4 (quoting Postmaster General Marvin T. Runyon

speaking to New York Society of Security Analysts).

12 U.S. Postal Service, PostalFACTS (January 1995) (docu-

ment can be retrieved from the Postal Service’s Internet site at

http: \\\www.usps.gov \history \ pfact95.htm).

of nearly $50 billion,’> of which it derived nearly $40

billion from First and Third Class mail protected by the

PES"* and $1.6 billion from international mail markets!

not protected by the PES.

On the other hand, the Postal Service claims author-

ity to issue quasi-legislative rules (including the ICM

rule), rules broadening’® and narrowing!” the scope of its

monopoly and rules governing the terms under which it

and its competitors may compete.’* Putting aside

whether the Postal Service actually has all the authority it

claims under the PRA, is it the type of “agency,” and is

the commercially motivated ICM rule the type of agency

action, properly subject to Chevron deference?

Significant potential for predatory pricing and price

discrimination exists when a monopoly in one market

competes in collateral competitive markets; it can elimi-

nate competition in the competitive market and can lead

to inefficiencies in the monopoly market. II Alfred E.

Kahn, The Economics of Regulation 247 (1971); see also I

Kahn 172, 176. This is a recognized problem in the deliv-

ery industry when postal administrations offer some ser-

vices for which they have a lawful monopoly and some

services where competition with private entities is

allowed. In such cases, postal rates must relate explicitly

13 United States Postal Service, The 1994 Annual Report of

the Postmaster General 30-31 (1995).

4 Id.

15 GAO Report, supra note 2 at 12.

16 See 39 C.F.R. § 310.1(a) (1995) (defining the statutory term

letter).

'7 See 39 U.S.C. § 601 (1988); 39 C.F.R. §§ 320.6, 320.8 (1995).

See App. 8a.

18 See, e.g., 39 C.RR. § 320.6(c) (1995) (privately carried

letter is presumed urgent and outside PES at twice priority mail

rate); IMM 790 (1995) (defining mail posted abroad by US.

residents as U.S. origin mail subject to additional domestic post-

age charge for delivery).

to the underlying cost of services of the postal adminis-

tration and there is a need for attention to the structure

and process of governmental oversight, including the

monitoring of meaningful cost figures. George H. Hall,

Regulatory Systems for Postal Rates, in Regulation and the

Nature of Postal Delivery Services 223, 232 (Michael A.

Crew & Paul R. Kleindorfer eds., 1993).

These problems inhere to the Postal Service’s interna-

tional service, where it is both the competitor and sole

government oversight, because of the Postal Service's

ability to “take advantage of its autonomy and protected

letter mail monopoly to subsidizé its entry and expansion

in competitive markets.” J. Gregory Sidak & Daniel F.

Spulber, Protecting Competition from the Postal Monop-

oly 1 (AEI Press 1996). This raises a fundamental issue

“whether Congress’ grant of a monopoly to the Postal

Service over the delivery of letter mail should be used to

restrict or supplant private commerce in other markets.”

Id. “(T]he diversion of business from private companies

by a public enterprise is tantamount to government regu-

lation of competitive markets.” Id. at 87.

The PRA’s purpose of preventing price discrimina-

tion and predatory pricing is among the goals of the

Sherman Act, 15 U.S.C. §§ 1-7 (1994). See generally 1 ABA

Antitrust Section, Antitrust Law Developments 195-274

(3d. ed. 1992). The use of price discrimination and preda-

tory pricing by monopolies to gain advantage in competi-

tive markets is of particular concern. See generally id. at

250; ABA Antitrust Section, Annual Review of 1992 Anti-

trust Law Developments 95 (1993). The Postal Service’s

business justifications for the ICM rule confirm the pri-

vate sector’s concerns about predatory intent. The Postal

Service. admits that it cannot offer the ICM service to all

because the negotiation and implementation costs alone

could exceed its earnings. App. 28a. It also admits its goal

to use the bundling of ICM services to get all the business

of big companies. App. 30a. These suggestions of below-

cost pricing and predation warrant scrutiny under the

PRA and the antitrust laws, alike. That scrutiny will be

Se ae er

We Ee Br

5 oe et

re FRE

PSN oe a SG

impeded by the Third Circuit’s acquiescence to the Postal

Service’s self deregulation from the rate publication

requirement.

There is an additional danger in the Third Circuit's

“businesslike” rationale. Although the court limited its

holding to international rates, the “businesslike” lan-

guage of the legislative history is not confined to interna-

tional ratesetting. Thus as ACCA II’s determination that

the Postal Service need not seek Postal Rate Commission

(PRC) approval for published international rates led the

Postal Service to “push the envelope” to escape the

requirement of publication altogether, unless reversed,

the Third Circuit’s decision may lead to additional self-

deregulation domestically by the Postal Service. Other

than the fact that it is “plain wrong,” there is little to keep

the “businesslike” rationale from being tested to deregu-

late domestic postal services in competitive markets.

Already the Postal Service has created domestic discounts

without PRC approval. On July 19, 1994 the Postal Service

announced a “partnership” with Price Costco Stores

whereby Price Club and Costco Stores would discount

postage on Express Mail and Priority Mail that the Postal

Service sells them at “face value.” U.S. Postal Service,

News Release No. 68 (July 18, 1994).19

Finally, the issue of whether changed circumstances

in the marketplace justify the abandonment of statutory

filed or published rate requirements has reached this

Court in two other industries: trucking and telecom-

munications. Each time, the Court said no. Maislin, 497

U.S. 122, 126-27, 135 (ICC’s new “Negotiated Rates” pol-

icy rejected by Court in view of statutory duties and

prohibition of discrimination in favor of strict filed-rate

requirements); MCI Telecommunications Corp., 114 S.Ct. at

19 Document can be retrieved from the Postal Service’s Internet

site at http:\ \www.usps.gov\ news \press\95\95068new.htm.

2231 (dominant firm required to file rate even after dereg-

ulation to prevent “unreasonableness and discrimina-

tion”). No deference was accorded to either the ICC or

the FCC, the government agencies in those cases. There is

even less reason to defer to the Postal Service, a rule-

maker with a commercial self-interest.

CONCLUSION

For the reasons set forth above, this petition for a

writ of certiorari should be granted.

Respectfully submitted,

L. Perer FarKas

Counsel of Record

Mary Boney DENISON

RICHARD S. TorKKA

GRAHAM & JAMES

2000 M Street, N.W.

Washington, D.C. 20036

202-463-0800

Attorneys for Petitioner

December 14, 1995

UPS WORLDWIDE FORWARDING, INC.

UNITED STATES POSTAL

SERVICE, Appellant.

Air Courier Conference of America/

International Committee

(Intervenor in District Court).

No. 94-7423.

United States Court of Appeals,

Third Circuit.

Argued March 10, 1995.

Decided Sept. 15, 1995.

Before: BECKER, SCIRICA, and WOOD, Jr.*, Circuit

Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

In this case, UPS Worldwide Forwarding seeks to

prevent the United States Postal Service from implement-

ing a new service for customers that ship significant

quantities of international mail. In response, the Postal

Service attacks UPS’s standing to bring suit. The district

court determined that UPS had standing but that the

Postal Service exceeded its authority in promulgating the

new program. We will reverse.

* The Honorable Harlington Wood, Jr., United States Cir-

cuit Judge for the Seventh Judicial Circuit, sitting by designa-

tion.

In July 1992, the Postal Service announced the cre-

ation, on an interim basis, of an International Customized

Mail (“ICM”) service. See 57 Fed.Reg. 30651 (1992).

Despite protests from UPS, a large delivery company that

competes with the Postal Service, the Postal Service

adopted the ICM program on a permanent basis in May

1993. See 58 Fed.Reg. 29778 (1993).

Under the ICM service, qualifying international

mailers negotiate individualized service agreements with

the Postal Service to establish the kind of services to be

provided and the rate of postage. To qualify for the

service, international mailers must be capable, on an

annual basis, of mailing at least one million pounds of

international mail or paying at least two million dollars

in international postage. Id.

Two months after publication of the permanent regu-

lation, UPS filed suit in the District of Delaware, alleging

the ICM service violated several provisions of the Postal

Reorganization Act (“PRA”), Pub.L. No. 91-375, 84 Stat.

719 (1970) (codified at 39 U.S.C. §§ 101-5605). The Postal

Service disagreed, claiming that its promulgation of the

ICM regulation did not exceed its statutory authority. The

Postal Service alsc contended that UPS lacked standing to

file the action. Air Courier Conference of America/Inter-

national Committee (“ACCA”), an unincorporated asso-

ciation of firms engaged in letter and parcel delivery

services, then filed a motion to intervene.

Subsequently, the district court granted UPS’s motion

for summary judgment. UPS Worldwide Forwarding, Inc. v.

United States Postal Serv., 853 F.Supp. 800 (D.Del.1994).

First, the court held that UPS had standing to challenge

the Postal Service program. Id. at 804. Second, the court

found the ICM service violated several sections of the

PRA, codified at 39 U.S.C. §§ 101(d),! 403(b)-(c),2 and

407(a)> (1988), and issued an injunction barring the Postal

Service from operating the program. Id. at 804-07. Finally,

! Section 101 provides statements of “Postal policy”:

(d) Postal rates shall be established to apportion the

costs of all postal operations to all users of the mail on

a fair and equitable basis.

2 Section 403 provides the “[g]eneral duties” of the Postal -

Service:

(b) It shall be the responsibility of the Postal Service -

(2) to provide types of mail service to meet the

needs of different categories of mail and mail

users. ...

fications, rates, and fees under this title, the Postal

Service shall not, except as specifically authorized in

this title, make any undue or unreasonable discrimi-

nation among users of the mails, nor shall it grant any

undue or unreasonable preferences to any such user.

3 Section 407 governs “[i]nternational postal arrange-

ments”:

(a) The Postal Service, with the consent of the Presi-

dent, may negotiate and conclude postal treaties or

conventions, and may establish the rates of postage.or

other charges on mail matter conveyed between the

United States and other countries. The decisions of

the Postal Service construing or interpreting the pro-

visions of any treaty or convention which has been or

may be negotiated and concluded shall, if approved

by the President, be conclusive upon all officers of the

Government of the United States.

the court granted ACCA’s motion to intervene. Id. at

806-07. The Postal Service appealed.

The district court had jurisdiction under 28 U.S.C.

§§ 1331 and 1339 (1988) and 39 U.S.C. § 409(a) (1988). We

have jurisdiction under 28 U.S.C. § 1291 (1988). Our

review of these issues of standing and statutory construc-

tion is plenary. See Polychrome Int'l Corp. v. Krigger, 5 F.3d

1522, 1530 n. 19 (3d Cir.1993) (“We have plenary review of

the district court’s judgment on standing.”); Resolution

Trust Corp. v. Cityfed Fin. Corp., 57 F.3d 1231, 1237 (3d

Cir.1995) (“Our review of the construction of federal stat-

utes is plenary.”).

Il.

Before addressing standing and the merits, we con-

sider the history of the statutory sections and regulations

at the core of this dispute. This review takes us back more

than two hundred years.

In 1789, the First Congress established a Post Office

and provided for the appointment of a Postmaster Gen-

eral. See Act of Sept. 22, 1789, ch. 16, 1 Stat. 70; National

Ass'n of Greeting Card Publishers v. United States Postal

Serv., 462 U.S. 810, 813, 103 S.Ct. 2717, 2721, 77 L.Ed.2d

195 (1983). Three years later, Congress approved a statute

that “established basic mail rates, granted the Post Office

Department a monopoly on mail delivery and authorized

the creation of post roads.” See Joseph W. Belluck, Increas-

ing Citizen Participation in U.S. Postal Service Policy Mak-

ing, 42 Buff.L.Rev. 253, 257 (1994); see also Act of Feb. 20,

1792, ch. 7, 1 Stat. 232. Under this Act, Congress set the

rates not only for domestic mail, but also for letters and

parcels sent abroad. Id. § 26, 1 Stat. at 239.

In 1825 and 1827, Congress passed laws prohibiting

the private carriage of letters via stage, boat, horseback,

or on foot, thereby “target[ing] transportation of mail

which even then was contracted out to private carriers.”

Air Courier Conference of America v. American Postal

Workers Union, 498 U.S. 517, 526, 111 S.Ct. 913, 919, 112

L.Ed.2d 1125 (1991). In the 1825 statute, Congress once

again set the rate for domestic and international mail. See

Act of Mar. 3, 1825, ch. 64, §§ 13, 34, 4 Stat. 102, 105, 112.

Despite the prohibitions on private carriers of mail,

“high postal rates enabled private expresses to make

substantial inroads into the domestic market for delivery

of letters and the 1825 and 1827 Acts proved unsuccessful

in prosecuting them.” Air Courier Conference, 498 U.S. at

526, 111 S.Ct. at 919. In response, Congress passed a

series of laws between 1845 and 1851 reducing postage

rates. Belluck, supra, at 258. Congress believed the 1845

Act, which strengthened the postal monopoly and

reduced rates, “would have the dual virtues of driving

private expresses out of business and increasing mail

volume of the Post Office.” Air Courier Conference, 498

U.S. at 527, 111 S.Ct. at 919 (citing Act of Mar. 3, 1845, 5

Stat. 732). The 1851 Act continued the trend of reducing

rates, but for the first time permitted those international

rates set by Congress to be changed via “postal treaty or

convention already concluded or hereafter to be made.”

See Act. of Mar. 3, 1851, ch. 20, § 1, 9 Stat. 587, 588. The

Act also provided:

[T]he Postmaster General, by and with the

advice and consent of the President of the

United States, shall be, and he hereby is, autho-

rized to reduce or enlarge, from time to time, the

rates of postage upon all letters and other mail-

able matter conveyed between the United States

and any foreign country, for the purpose of

making better postal arrangements with other

governments, or counteracting any adverse

measures affecting our postal intercourse with

foreign countries. . . .

Id. § 2, 9 Stat. at 589. In 1872, Congress combined into one

statutory section the authority of the Postmaster General

to negotiate postal treaties and change international rates.

See Act of June 8, 1872, ch. 335, § 167, 17 Stat. 283, 304

(“[T]he Postmaster General, by and with the advice and

consent of the President, may negotiate and conclude

postal treaties or conventions, and may reduce or

increase the rates of postage on mail matter conveyed

between the United States and foreign countries.”).

Although technology advanced rapidly over the next

century, the organization of postal services remained

largely unchanged. Congress continued to set domestic

mail rates, see 39 U.S.C. chs. 51-69 (1964), and the Post-

master General retained the authority to change interna-

tional rates, with the advice and consent of the President.

Id. § 505. Congress also maintained the Post Office

monopoly over mail delivery in an effort to keep reve-

nues high and mailing costs low. Air Courier Conference,

498 U.S. at 527-28, 111 S.Ct. at 919-20.

By 1970, however, the Post Office “faced a major

financial crisis” that resulted in significant backlogs of

mail and postal worker strikes. Belluck, supra, at 262, 265.

Congress responded by passing the Postal Reorganization

Act, an overhaul of the entire postal system that repre-

sented “a dramatic break with the past.” See Mail Order

Ass'n of America v. United States Postal Serv., 986 F.2d 509,

512 (D.C.Cir.1993); see also H.R. No. 1104, 91st Cong., 2d

Sess. (1970), reprinted in 1970 U.S.C.C.A.N. 3649, 3651-52.

The PRA “abolished the Post Office Department,

which since 1789 had administered the Nation’s mails,”

and replaced it with the United States Postal Service, an

independent agency within the executive branch. National

Ass’n of Greeting Card Publishers, 462 U.S. at 813, 103 S.Ct.

at 2721. The Act divested Congress of control over postal

rates, id., with domestic rates set through a complex

process involving the Postal Service, Postal Rate Commis-

sion, and Governors of the Postal Service, and interna-

tional rates set by “[t]he Postal Service, with the consent

of the President.” Air Courier Conference of America v.

United States Postal Serv., 959 F.2d 1213, 1216-23 (3d

Cir.1992) (quoting 39 U.S.C. § 407(a)). Congress also

ordered the Postal Service to become self-sustaining, gen-

erating enough revenue to cover its expenses, thereby

“launching ‘the Postal Service into the commercial

world.’ ” Loeffler v. Frank, 486 U.S. 549, 556, 108 S.Ct. 1965,

1970, 100 L.Ed.2d 549 (1988) (quoting Franchise Tax Bd. of

California v. United States Postal Serv., 467 U.S. 512, 520,

104 S.Ct. 2549, 2554, 81 L.Ed.2d 446 (1984)); see also H.R.

No. 1104, 91st Cong., 2d Sess., reprinted in 1970

U.S.C.C.A.N. at 3665. At the same time, the Act generally

required fairness and forbade undue discrimination or

preferences in the establishment of postal rates and ser-

vices. See 39 U.S.C. §§ 101(d), 403(c).

The PRA continued the Postal Service’s statutory

monopoly “over the carriage of letters in and from the

United States,” see Air Courier Conference, 498 U.S. at

519, 111 S.Ct. at 915. (citing 18 U.S.C. §§ 1693-1699 and 39

U.S.C. §§ 601-606), but it permitted the Postal Service to

suspend its monopoly “where the public interest

requires.” Id. (citing 39 U.S.C. § 601(b)). In 1979, the

Postal Service suspended its monopoly over “extremely

urgent letters” sent within the United States and abroad,

thus allowing private couriers such as UPS to compete

with it in the overnight delivery of letters. See id. (citing

39 C.F.R. § 320.6). In 1986, it went further by generally

suspending its monopoly over mail sent abroad. See id. at

519-20, 111 S.Ct. at 915-16; see also 39 C.F.R. § 320.8.4

Ill.

Article III] of the Constitution restricts the “judicial

power” of the United States to the resolution of “cases”

and “controversies.” See Valley Forge Christian College v.

Americans United for Separation of Church & State, Inc., 454

U.S. 464, 471, 102 S.Ct. 752, 757-58, 70 L.Ed.2d 700 (1982).

Subsumed within this restriction is the requirement that

“a litigant have ‘standing’ to challenge the action sought

to be adjudicated in the lawsuit.” Id. U.S.C.A. Const. Art.

3, § 1 et seq. Standing has constitutional and prudential

components, both of which must be satisfied before a

* Section 320.8 suspends the postal monopoly for “interna-

tional remailing,” which involves “bypassing the Postal Service

and using private courier systems to deposit with foreign postal

systems letters destined for foreign addresses.” Air Courier Con-

ference, 498 U.S. at 520, 111 S.Ct. at 915-16.

litigant may seek redress in the federal courts. Id.; Wheeler

v. Travelers Ins. Co., 22 F.3d 534, 537 (3d Cir.1994).

| A.

Earlier this year, the Supreme Court reiterated the

three elements necessary to satisfy “the irreducible con-

stitutional minimum of standing”:

First, the plaintiff must have suffered an ‘injury

in fact’ — an invasion of a legally protected inter-

est which is (a) concrete and particularized, and

(b) actual or imminent, not conjectural or hypo-

thetical. Second, there must be a causal connec-

tion between the injury and the conduct

complained of. . . . Third, it must be likely, as

opposed to merely speculative, that the injury

will be redressed by a favorable decision.

United States v. Hays, __ U.S. __, __, 115 S.Ct. 2431,

2435, 132 L.Ed.2d 635 (1995) (quoting Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 2136, 119

L.Ed.2d 351 (1992)).

In this case, there is no dispute that UPS meets the

constitutional standing requirements. First, as a competi-

tor of the Postal Service with authority to compete in the

international parcel delivery market,5 UPS stands to lose

clientele lured to the Postal Service by the ICM service.

Although UPS may not have demonstrated any lost busi-

ness yet, the “injury in fact” component of standing

merely requires that such injury be “imminent.” Id.; see

also Schering Corp. v. FDA, 51 F.3d 390, 395 (3d Cir.1995)

5 See 39 C.F.R. §§ 320.6, 320.8 (1994); see also supra part II.

10a

(noting that “threatened injury” suffices for Article Ill

standing). Second, the requisite “causal connection”

between UPS's injuries and the Postal Service’s conduct is

clear; in fact, the Postal Service created the ICM program

with the express purpose of “attract[ing] customers that

currently use its competitors and [that] would not other-

wise use the Postal Service for their international mail-

ings. If the Postal Service is successful, the additional

volume will come from competitors, not from the Postal

Service’s other international services.” 58 Fed.Reg. 29778,

29780. Finally, a decision favorable to UPS will undoubt-

edly redress its injuries. If we uphold the district court’s

decision for UPS, the Postal Service will not be able to

implement the ICM service, and UPS cannot lose cus-

tomers to a program that does not exist.

In addition to the Article III standing requirements,

federal courts have developed prudential standing con-

siderations “that are part of judicial self-government.”

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct.

2130, 2136, 119 L.Ed.2d 351 (1992). These prudential

standing rules require that:

(1) a litigant “assert his [or her] own legal

interests rather than those of third parties,” (2)

courts “refrain from adjudicating ‘abstract ques-

tions of wide public significance’ which amount

to ‘generalized grievances,’” and (3) a litigant

demonstrate that her interests are arguably

within “the zone of interests” intended to be

protected by the statute, rule or constitutional

provision on which the claim is based.

lla

Wheeler v. Travelers Ins. Co., 22 F.3d 534, 538 (3d Cir.1994)

(citations omitted); see also Valley Forge Christian College v.

Americans United for Separation of Church & State, Inc., 454

U.S. 464, 474-75, 102 S.Ct. 752, 759-60, 70 L.Ed.2d 700

(1982).°

6 Intervenor ACCA contends that the Postal Service has

waived its right to object to prudential standing because of its

notice in the Federal Register announcing the ICM service:

Since the Postal Rate Commission does not have juris-

diction to challenge over international rates, the

Postal Service’s competitors cannot challenge ICM or

any other international rates in that forum. However,

the Postal Service’s competitors can seek judicial

review of ICM rates just like they can seek judicial

review of other international rates.

58 Fed.Reg. 29778, 29782 (1993).

Despite the Postal Service’s statement inviting judicial

review, it is uncertain whether prudential standing may be

waived. The Supreme Court has given mixed signals. In Craig v.

Boren, 429 U.S. 190, 192-94, 97 S.Ct. 451, 454-55, 50 L.Ed.2d 397

(1976), the Court hinted that the first prudential standing

requirement—which requires a party to assert its own rights, not

the rights of others—could be waived by a defendant. See Elkin v.

Fauver, 969 F.2d 48, 52 n. 1 (3d Cir.) (citing Craig for the proposi-

tion that “prudential standing [is] not jurisdictional”), cert.

denied, ___ U.S. __, 113 S.Ct. 473, 121 L.Ed.2d 379 (1992); Lindley

for Lindley v. Sullivan, 889 F.2d 124, 128-29 (7th Cir.198%) (sim-

ilarly citing Craig). But, in later cases, the Supreme Court has

indicated plaintiffs always must satisfy the prudential standing

rules. In Bender v. Williamsport Area School District, 475 U.S. 534,

546 n. 8, 106 S.Ct. 1326, 1334 n. 8, 89 L.Ed.2d 501 (1986) (citing

Warth v. Seldin, 422 U.S. 490, 517-18, 95 S.Ct. 2197, 2214-15, 45

L.Ed.2d 343 (1975)), the Court stated:

The rules of standing, whether as aspects of the Art.

III case-or-controversy requirement or as reflections

of prudential considerations defining and limiting the

role of the courts, are threshold determinants of the

12a

The first step in satisfying prudential standing is for

the litigant to demonstrate that it has asserted its “own

propriety of judicial intervention. It is the respon-

sibility of the complainant clearly to allege facts dem-

onstrating that he is a proper party to invoke judicial

resolution of the dispute and the exercise of the

court’s remedial powers.

Furthermore, recent Supreme Court opinions have held broadly

that a party may never waive standing, but they have not

expressly cited prudential standing. See, e.g., United States v.

Hays, ___ U.S. __, __, 115 S.Ct. 2431, 2435, 132 L.Ed.2d 635

(1995) (“The question of standing is not subject to waiver. . . . ”);

National Org. for Women, Inc. v. Scheidler, __ U.S. __, __, 114

S.Ct. 798, 802, 127 L.Ed.2d 99 (1994) (“Standing represents a

jurisdictional requirement which remains open to review at all

stages of the litigation.”).

From these cases, many of our sister circuits have deter-

mined that prudential standing cannot be waived. See Commu-

nity First Bank v. National Credit Union Admin., 41 F.3d 1050, 1053

(6th Cir.1994) (“We find no authority for the plaintiffs’ argument

that prudential standing requirements may be waived by the

parties. Recognizing a distinction between prudential and con-

stitutional standing requirements in this context might give

careless parties power to override congressional intent.”); Ani-

mal Legal Defense Fund, Inc. v. Espy, 29 F.3d 720, 723 n. 2

(D.C.Cir.1994) (“Standing, whether constitutional or prudential,

is a jurisdictional issue which cannot be waived or conceded.”);

Thompson v. County of Franklin, 15 F.3d 245, 248 (2d Cir.1994)

(quoting National Wildlife Fed’n v. United States, 626 F.2d 917, 924

(D.C.Cir.1980)) (“[A]ppellee’s purported waiver of prudential

standing challenge is necessarily ineffective because standing

implicates federal jurisdiction.”). At least one circuit has

resolved the issue differently. See Lindley for Lindley v. Sullivan,

889 F.2d 124, 128-29 (7th Cir.1989) (“Because the Secretary failed

to suggest in the district court that prudential considerations

should bar David from suing on his parents’ behalf, we cannot

consider these arguments here.”).

13a

legal interests rather than those of third parties.” Wheeler,

22 F.3d at 538; see also Valley Forge, 454 U.S. at 474, 102

S.Ct. at 759-60; Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct.

2197, 2205, 45 L.Ed.2d 343 (1975). The Postal Service

alleges that UPS does not meet this first requirement

because it has sued under provisions of the PRA that

purportedly exist to protect users of the mail, not compet-

itors: “Because plaintiff does not claim to be injured as a

mailer, it may not challenge alleged violations of statu-

tory provisions that protect mailers from undue discrimi-

nation.” Appellant’s Brf. at 14.

Our jurisprudence has not decisively settled the matter.

Recently, we raised the matter of constitutional and prudential

standing, even when the parties agreed that standing existed.

See Wheeler v. Travelers Ins. Co., 22 F.3d 534, 537 (3d Cir.1994)

(citation omitted) (“[WJe have an independent obligation to

consider jurisdictional issues, and ‘the doctrine of standing

. . » goes to the subject matter jurisdiction of the district court

and the validity of its judgment ab initio.’ ”); see also Bennun v.

Rutgers State Univ., 941 F.2d 154, 168 (3d Cir.1991) (referring to

“those constitutional and prudential [standing] limitations that

restrict a court’s power to act and so must be resolved before we

can proceed further on the merits”), cert. denied, 502 U.S. 1066,

112 S.Ct. 956, 117 L.Ed.2d 124 (1992). But in Elkin, 969 F.2d at 52

n. 1, while defendants did not challenge plaintiff’s standing, we

analyzed the issue because of our “independent obligation to

ensure that federal jurisdiction is present in cases that come

before us.” Although we found that plaintiff satisfied the Article

III standing requirements, we declined to decide whether he

satisfied the prudential rules. Id.; see also Ditri v. Coldwell Banker

Residential Affiliates, Inc., 954 F.2d 869, 872 (3d Cir.1992) (“We

find it unnecessary to decide the so-called standing issue which

would, at best, only involve prudential standing.”).

Because we determine that UPS has standing here, we need

not resolve the issue of whether prudential standing may be

waived.

l4a

We believe the Postal Service confuses this first ele-

ment of prudential standing, that plaintiff assert its own

rights, with the third element, that plaintiff's complaint

be within the “zone of interests” the statute was designed

to protect or regulate. See, e.g., Director, Office of Workers’

Compensation Programs v. Newport News Shipbuilding &

Dry Dock Co., _.. US. _, —., 115 §.Ct. 1278, 1283, 131

L.Ed.2d 160 (1995). Under the zone of interests test, a

plaintiff must demonstrate the “interest he seeks to vindi-

cate is arguably within the ‘zone of interests to be pro-

tected or regulated by the statute’ in question.” See id.

(citations omitted); see also infra part III.B.3. The first

element only mandates that litigants assert their own

legal rights, not those of others. Wheeler, 22 F.3d at 538.

This test generally comes into play in those cases in

which a party seeks to challenge agency action that

affects another party. See, e.g., id. at 539 (holding that

plaintiff “fails to satisfy the prudential requirements for

standing because she improperly is seeking to vindicate

the rights of a third-party, the United States”).

In this case, as we have noted, the Postal Service has

granted UPS and other delivery companies the right to

compete in the delivery of international mail. See 39

C.F.R. §§ 320.6, 320.8 (1994); see also supra part II. If the

ICM service is permitted, UPS alleges it would be injured

in the exercise of its right to deliver such mail, a point the

Postal Service has not contested on appeal. Therefore, we

believe UPS is properly asserting its “own legal inter-

ests.” Wheeler, 22 F.3d at 538.

15a

The second prudential standing consideration

admonishes courts to “refrain from adjudicating ‘abstract

questions of wide public significance’ which amount to

‘generalized grievances.’ ” Id. For example, the Supreme

Court has denied standing, inter alia, in cases in which

plaintiffs sued to protest the Vietnam War, see Schlesinger

v. Reservists Comm. to Stop the War, 418 U.S. 208, 220, 94

S.Ct. 2925, 2932, 41 L.Ed.2d 706 (1974) (“[S]tanding to sue

may not be predicated upon an interest of the kind

alleged here which is held in common by all members of

the public. ... ”); or to challenge the legality of the

Central Intelligence Agency, see United States v. Rich-

ardson, 418 U.S. 166, 175, 94 S.Ct. 2940, 2945, 41 L.Ed.2d

678 (1974) (citation omitted) (rejecting plaintiff's attempt

to “employ a federal court as a forum in which to air his

generalized grievances about the conduct of govern-

ment”). We hold that this dispute is not the type of

“generalized grievance” that poses a barrier to standing.

Finally, litigants must demonstrate their interests fall

“arguably within the ‘zone of interests to be protected or

regulated by the statute’ in question.” See Newport News

Shipbuilding, __ U.S. at __, 115 S.Ct. at 1283 (citations

omitted); see also Wheeler, 22 F.3d at 538. This element

represents the primary focus of the parties’ dispute over

standing.

In Association of Data Processing Service Organizations,

Inc. v. Camp., 397 U.S. 150, 153, 90 S.Ct. 827, 829-30, 25

L.Ed.2d 184 (1970), the Supreme Court formulated the

l6a

“zone of interests” element of standing. In Data Process-

ing, sellers of data processing services challenged a

Comptroller of the Currency ruling that permitted

national banks to offer data processing services to their

customers. Plaintiffs contested the ruling as contrary to a

statute barring bank service corporations from engaging

in “any activity other than the performance of bank ser-

vices for banks.” Id. at 155, 90 S.Ct. at 831 (citation

omitted). The Supreme Court found plaintiffs had stand-

ing because their interests were within the “zone of inter-

ests to be protected or regulated by the statute or

constitutional guarantee in question.” Id. at 153, 90 S.Ct.

at 830.” Similarly, in Clarke v. Securities Industry Ass'n, 479

U.S. 388, 107 S.Ct. 750, 93 L.Ed.2d 757 (1987), the Court

held a trade association of securities brokers had stand-

ing to challenge a decision by the Comptroller that

national banks could operate discount brokerage services

in locations outside of their home states. Id. at 394-403,

107 S.Ct. at 754-759. The Comptroller claimed the trade

association did not have standing because it was not

within the “zone of interests” of the McFadden Act,

which limited national banks to conducting general busi-

ness in their home states. But the Court held it was

essential to consider the “zone of interests” of both the

7 See also Investment Co. Inst. v. Camp, 401 U.S. 617, 621, 91

S.Ct. 1091, 1094, 28 L.Ed.2d 367 (1971) (holding that association

of investment companies had standing to challenge regulation

authorizing banks to operate collective investment funds);

Arnold Tours, Inc. v. Camp, 400 U.S. 45, 46, 91 S.Ct. 158, 159, 27

L.Ed.2d 179 (1970) (holding that travel agents had standing to

challenge decision to allow banks to provide travel services to

their customers).

17a

McFadden Act and the National Bank Act, which the

McFadden Act had amended. The Court stated, “As Data

Processing demonstrates, we are not limited to consider-

ing the statute under which respondents sued, but may

consider any provision that helps us to understand Con-

gress’ overall purposes in the National Bank Act.” Id. at

401, 107 S.Ct. at 758. Furthermore, as in prior cases, the

Court held that “competitors who allege an injury that

implicates the policies of the National Bank Act are very

reasonable candidates to seek review of the Comptroller’s

rulings.” Id. at 403, 107 S.Ct. at 759.

Although Clarke noted the zone of interests “test is

not meant to be especially demanding; in particular, there

need be no indication of congressional purpose to benefit

the would-be plaintiff,” id. at 399-400, 107 S.Ct. at 757

(footnote omitted), recent Supreme Court jurisprudence

suggests a somewhat stricter test. See, e.g., Chem Serv., Inc.

v. Environmental Monitoring Sys. Lab., 12 F.3d 1256, 1262

(3d Cir.1993) (“Most recently, the Court has taken a stric-

ter view of what statute or statutes should be considered

as ‘relevant’ for the purpose of applying the zone of

interest test.”). The prominent example of this stricter

approach is Air Courier Conference of America v. American

Postal Workers Union, 498 U.S. 517, 111 S.Ct. 913, 112

L.Ed.2d 1125 (1991).

In Air Courier Conference, unions representing postal

workers challenged a Postal Service regulation that sus-

pended the postal monopoly to permit “international

remailing,” the practice of “bypassing the Postal Service

and using private courier systems to deposit with foreign

postal systems letters destined for foreign addresses.” Id.

at 520, 111 S.Ct. at 915-916. The Court of Appeals for the

18a

District of Columbia Circuit had found standing because

the PRA, the statute also at issue in this case, provided

protections for workers while recodifying the Private

Express Statutes (“PES”), which governed the postal

monopoly over mail delivery. Thus, the D.C. Circuit con-

cluded, the employees’ interests were within the “zone of

interests” of the PRA. Id. at 521-22, 111 S.Ct. at 916-17.

The Supreme Court reversed, holding that the Court

of Appeals had erred in looking at the entire PRA in

applying the “zone of interests” test. The Court stated:

The only relationship between the PES, upon

which the Unions rely for their claim on the

merits, and the labor-management provisions of

the PRA, upon which the Unions rely for their

standing, is that both were included in the gen-

eral codification of postal statutes embraced in

the PRA. The statutory provisions enacted and

reenacted in the PRA are spread over some 65

pages in the United States Code and take up an

entire title of that volume. We said in Lujan that

“the relevant statute [under the APA] of course,

is the statute whose violation is the gravamen of

the complaint.” To adopt the unions’ contention

would require us to hold that the “relevant stat-

ute” in this case is the PRA, with all of its

various provisions united only by the fact that

they deal with the Postal Service. But to accept

this level of generality in defining the “relevant

statute” could deprive the zone-of-interests test

of virtually all meaning.

Unlike the two sections of the National

Bank Act discussed in Clarke, supra, none of the

19a

provisions of the PES have any integral relation-

ship with the labor-management provisions of

the PRA.

Id. at 529-30, 111 S.Ct. at 921 (quoting Lujan v. National

Wildlife Fed’n, 497 U.S. 871, 886, 110 S.Ct. 3177, 3187-88,

111 L.Ed.2d 695 (1990) (citation omitted)). Accordingly,

the Supreme Court held the unions lacked standing to

bring their claim.®

The Postal Service contends that Air Courier Confer-

ence dictates that UPS be denied standing in this case.° It

alleges the purposes behind the PRA sections involved

here, 39 U.S.C. §§ 101(d), 403(b)-(c), and 407(a),'° were

not to protect competitors of the Postal Service. Instead,

8 Under 39 U.S.C. § 410(a), the Postal Service is not covered

by chapters 5 and 7 of Title 5, the provisions of the Administra-

tive Procedure Act that involve “Administrative Procedure”

and “Judicial Review.” In Air Courier Conference, the Supreme

Court declined to determine whether § 410(a) exempts the

Postal Service from judicial review under the APA, holding that

the Postal Service had waived the issue. 498 U.S. at 522-23 & 523

n. 3, 111 S.Ct. at 916-18, 917 n. 3. But see id. at 531-32, 111 S.Ct. at

921-22 (Stevens, J., dissenting). Similarly, although the Postal

Service briefly mentions the issue in a footnote, see Appellant's

Brf. at 11 n. 3, it states it is “content” to have this case judged

under the “zone of interests” test. See Appellant’s Reply Brf. at 3

n. 1. Thus, we consider the matter waived.

9 In Air Courier Conference, the trade association ACCA

intervened on behalf of the Postal Service and argued the

unions lacked standing, leaving the Postal Service only a “nomi-

nal{ }” litigant. 498 U.S. at 520, 522, 111 S.Ct. at 915-16, 916-17.

Ironically, the Postal Service in this case is attempting to use that

decision against ACCA so as to deny it the right to intervene

and UPS the right to litigate.

10 For the text of these sections, see supra notes 1-3.

20a

the Postal Service claims that §§ 101(d) and 403(b)-(c),

which generally require fairness in establishing postal

rates, were intended to protect mailers. Furthermore, the

Postal Service argues that § 407(a) was meant to protect

the president’s foreign policy authority, not the interests

of private Postal Service competitors. Thus, the Postal

Service asserts, UPS should be denied standing here.

We believe the Postal Service misconstrues the les-

sons of Air Courier Conference and its predecessors. These

cases do not require that plaintiffs be among the intended

beneficiaries of the statute under which they are suing.

See, e.g., Clarke, 479 U.S. at 399-400, 107 S.Ct. at 757

(requiring “no indication of congressional purpose to

benefit the would-be plaintiff”); Schering Corp. v. FDA, 51

F.3d 390, 395 (3d Cir.1995) (“The [zone of interests] test,

however, is not so stringent that it requires the would-be

plaintiff to be specifically targeted by Congress as a bene-

ficiary of the statute.”). Even Air Courier Conference

merely required an “integral relationship” between the

statutory provisions plaintiffs claim have been violated

and the provisions under which plaintiffs claim standing.

Air Courier Conference, 498 U.S. at 530, 111 S.Ct. at 921

(noting that “none of the provisions of the PES have any

integral relationship with the labor-management provi-

sions of the PRA”);1!! see also Chem Serv., Inc., 12 F.3d at

11 In view of the “integral relationship” language, we do

not interpret Air Courier Conference as establishing a strict zone

of interests test contrary to previous Supreme Court precedent,

such as Clarke, where the Court stated that the zone of interests

“test is not meant to be especially demanding.” 479 U.S. at 399,

107 S.Ct. at 757. Air Courier Conference, we note, merely held that

a recodification of an entire title of the United States Code,

21a

1264-65 (upholding standing where statutes found to

have an “integral relationship” with each other (quoting

Air Courier Conference, 498 U.S. at 530, 111 S.Ct. at 921)).

In this case, we believe an “integral relationship”

exists among the relevant statutory provisions. Sections

101(d), 403(b)-(c), and 407(a) provide procedures for the

manner in which postal rates may be adopted and the

types of rates that will and will not be permitted. As we

noted supra in part II, the history of the Postal Service

demonstrates that Congress understood that statutes set-

ting postal rates were inextricably linked with those gov-

erning the postal monopoly. See Air Courier Conference,

498 U.S. at 526-27, 111 S.Ct. at 919-20 (citing Act of Mar. 3,

1845, 5 Stat. 732). Both types of statutes were intended to

affect competitors. See id.

In fact, in Air Courier Conference, the Supreme Court

recognized that competitors fall within the zone of inter-

ests of the postal monopoly statutes. See id. at 528 n. 5,

111 S.Ct. at 920 n. 5 (“The PES are competition statutes

that regulate the conduct of competitors of the Postal

Service. The postal employees for whose benefit the

Unions have brought suit here are not competitors of

either the Postal Service or remailers.”). Although the

covering hundreds of statutory provisions developed over the

course of two centuries, did not constitute one “statute,” within

the meaning of the zone of interests test. See Air Courier Confer-

ence, 498 U.S. at 529-30, 111 S.Ct. at 921 (“The statutory provi-

sions enacted and reenacted in the PRA are spread over some 65

pages in the United States Code and take up an entire title of

that volume. . . . [T]o accept this level of generality in defining

the ‘relevant statute’ could deprive the zone-of-interests test of

virtually all meaning.”).

22a

Supreme Court noted that “[e]mployees have generally

been denied standing to enforce competition laws

because they lack competitive and direct injury,” id., it

reiterated that “competitors of regulated entities have

standing to challenge regulations.” Id. at 529, 111 S.Ct. at

920. In this case, it is undisputed that UPS is a competitor

of the Postal Service. Because the regulation at issue

involves Postal Service rate-making - a fundamental

means of affecting competition, as we noted supra in part

Il - UPS has standing to challenge it. Such standing is all

the more clear in cases, like this one, where the agency

that is promulgating the regulation is also the “competi-

tor” whose interests are being advanced.

These statutes, governing the postal monopoly and

postal rate-making, are on a different footing than the

labor-management provisions under which plaintiffs

claimed standing in Air Courier Conference. Those labor

provisions were a new feature of the 1970 Act, unrelated

to the postal monopoly provisions that had existed for

more than a century. See Air Courier Conference, 498 U.S. at

524-28, 111 S.Ct. at 918-20. But as we have noted, the

relationship between the postal monopoly and rate-mak-

ing rules — and their etfect on competitors - has existed

for most of the two-hundred year history of the postal

statutes. See supra part II.

Furthermore, while the Supreme Court has recog-

nized competitors have an interest in enforcing the postal

monopoly statutes, Congress has provided that competi-

tors are within the “zone of interests” of the postal rate-

making statutes. The PRA expressly requires that the

Postal Rate Commission, in recommending rates, con-

sider the effect of increases on, inter alia, “enterprises in

23a

the private sector of the economy engaged in the delivery

of mail matter other than letters.” 39 U.S.C. § 3622(b)(4).

The same section also requires the Commission to con-

sider the “policies of this title,” thereby incorporating the

statements of “[p]ostal policy” of § 101, which is one of

the provisions under which UPS has filed suit. Thus, we

believe competitors such as UPS fall within the “zone of

interests” of these rate-making statutes.

In fact, we believe the Postal Service has largely

conceded the issue. In its brief, the Postal Service admit-

ted that competitors would have standing to sue under

§§ 101 and 403 if they alleged that the rates set were a

“predatory attempt to destroy competition.” See Appel-

lant’s Brf. at 16. In conceding standing in this context, the

Postal Service necessarily admits that protecting competi-

tors from economic injury caused by illegal regulations

falls within the zone of interests of these statutory provi-

sions. We fail to see why competitors would be within the

zone of interests if §§ 101 and 403 were violated by the

Postal Service’s predatory rate pricing but not if the same

provisions were violated by the Postal « rvice’s establish-

ment of unfair or inequitable rates.

In evaluating the PRA’s rate-making provisions, it

appears that Congress was concerned with balancing cer-

tain societal interests: those of government, various cate-

gories of mailers, and private competitors. Recently we

faced a similar situation in Schering Corp. v. FDA, 51 F.3d

390 (3d Cir.1995), in which a drug manufacturer chal-

lenged the FDA’s approval of a regulation that permitted

its competitors, manufacturers of generic drugs, to use an

abbreviated application procedure. In affirming the drug

manufacturer’s standing, we recognized the relevant Act

24a

“reflect[ed] a statutory compromise of the competing con-

cerns” of the public and of various drug manufacturers.

Id. at 396 (citation omitted). Similarly, we view the sec-

tions of the PRA governing postal rates as striking a

balance between competing concerns. Although we

understand a fundamental purpose of the PRA was to

make the Postal Service more competitive, we note that

Congress also expressed some concern for private com-

petitors of the Postal Service. See, e.g., 39 U.S.C.

§ 3622(b)(4). Accordingly, we hold that UPS falls within

the “zone of interests” of these statutory provisions gen-

erally governing postal rates.'?

IV.

Turning to the merits, we address the district court’s

holding that the Postal Service’s promulgation of the

regulation establishing the ICM service violated several

provisions of the PRA. See UPS Worldwide Forwarding, Inc.

v. United States Postal Serv., 853 F.Supp. 800, 804-06

(D.Del.1994). To understand these provisions, it is neces-

sary to consider the framework of the rate-making sec-

tions of the PRA and how the ICM service fits within this

statutory scheme.

As we have noted, a fundamental change wrought by

the PRA was to transfer rate-making authority from Con-

gress to the Postal Service and related agencies. See supra

12 For the same reasons we hold UPS to have standing, we

find that ACCA has standing to intervene in this case.

Se ee eT eT Oe NE IE

ee Nr ee eT

25a

part II. For domestic rates, the PRA established a complex

process whereby the Postal Service proposes rates, the

Postal Rate Commission considers the proposals and

offers its recommendations, and the Governors of the

Postal Service act on the recommendations. See Air Cou-

rier Conference of America v. United States Postal Serv., 959

F.2d 1213, 1216 (3d Cir.1992) (citing various provisions of

the PRA). In making its recommendations, the Commis-

sion is instructed to consider numerous factors listed in

the PRA, 39 U.S.C. § 3622(b), and it must conduct a

hearing to allow the Postal Service and public to testify.

Id. § 3624. For certain types of mail, such as the different

classes of mail for letters, the Postal Service must estab-

lish a rate that is “uniform throughout the United States,

its territories, and possessions.” Id. § 3623(d); see also id.

§ 3683 (prescribing “[u]niform rates for books; films;

other materials”).

In contrast to the domestic rate-making procedure,

the PRA’s international rate-making rules are a model of

simplicity. The PRA provides:

The Postal Service, with the consent of the

President, may negotiate and conclude postal

treaties or conventions, and may establish the

rates of postage or other charges on mail matter

conveyed between the United States and other

countries.

39 U.S.C. § 407(a). No proposals need be made and con-

sidered by other bodies, no public hearings held, and no

specific criteria considered. Instead, the Postal Service

need only “establish” international rates, with the Presi-

dent’s consent. We believe the differences between the

26a

domestic and international rate-making procedures dem-

onstrate that Congress intended the Postal Service to

have significant authority and flexibility in establishing

the rates for mail sent abroad.

Pursuant to the PRA statutory scheme, the Postal

Service promulgated the ICM service for international

mailers. See 58 Fed.Reg. 29778 (1993). In publishing its

interim regulation, the Postal Service offered two primary

reasons for the ICM service. First, it explained that other

countries have adopted varying charges on mail sent

from the United States, with some based on weight and

others on volume. A uniform price for overseas mail,

particularly for large-volume customers, meant that

“some customers face[d] published rates disproportio-

nate to the costs that the Postal Service would incur in

providing those customers with the services in ques-

tion... . ” 57 Fed.Reg. 30651, 30652 (1992). The Postal

Service explained:

Until relatively recently, the most significant

components of the costs incurred by the Postal

Service in connection with its international

operations, namely transportation expenses and

the charges imposed by foreign postal adminis-

trations to deliver U.S.-origin mail (terminal

dues), were based exclusively on weight.

Although transportation expenses are still a

function of weight, the postal administrations of

countries to which much U.S. mail is sent have

implemented terminal dues arrangements that

recognize that mail processing costs vary by

volume as well as by weight. Moreover, the

27a

Postal Service currently is charged terminal

dues by foreign postal administrations using

four different methods of calculation. Conse-

quently, the Postal Service incurs substantially

different costs for delivering mail to different

countries. Due to uniform pricing, however, the

Postal Service’s rates do not reflect country-

specific costs to the extent possible. Similarly,

uniform rates do not generally take into account

differences in how mail is prepared or where it

is tendered, both of which can significantly

affect costs.

Id. (footnote omitted).

Second, because of the regulation permitting private

couriers to deliver international mail, the Postal Service

faced increasing competition from companies attempting

to lure mailers by “implementing flexible rate structures

and customer-specific service offerings.” Id. The Postal

Service noted:

This flexibility enables the Postal Service's

competitors to tailor service features to individ-

ual customers and to price those features on a

partially or completely disaggregated basis. In

contrast, traditional Postal Service pricing poli-

cies and practices, whereby the Postal Service

generally treats all current and potential cus-

tomers identically and uses averaged costs

when setting rates, are not designed to deal with

a competitive environment. The expanded alter-

natives available to customers and the improved

attractiveness of those alternatives have made it

increasingly difficult for the Postal Service to

sell its services to a varied group of customers

using a single published schedule of rates. To

the extent that uniform pricing prevents the

28a

Postal Service from attracting new customers

and keeping existing customers, all of the Postal

Service’s other users suffer by having to pay