Newspaper Ass'n of Am. v. Postal Regulatory Comm'n

• Decision Date: 15 November 2013
• Docket Number: No. 12–1367.,12–1367.
• Citation: 734 F.3d 1208
• Parties: NEWSPAPER ASSOCIATION OF AMERICA, Petitioner v. POSTAL REGULATORY COMMISSION, Respondent National Newspaper Association, Inc., et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

734 F.3d 1208

NEWSPAPER ASSOCIATION OF AMERICA, Petitioner

v.POSTAL REGULATORY COMMISSION, Respondent

National Newspaper Association, Inc., et al., Intervenors.

No. 12–1367.

United States Court of Appeals,District of Columbia Circuit.

Argued Sept. 19, 2013.

Decided Nov. 15, 2013.

Robert A. Long Jr. argued the cause for petitioner Newspaper Association of America. With him on the briefs were Mark W. Mosier and Matthew J. Berns. Kurt A. Wimmer entered an appearance.

Steven C. Douse argued the cause for intervenors National Newspaper Association, Inc. et al. in support of petitioner. With him on the briefs were William J. Olson, Herbert W. Titus, John S. Miles, and Tonda F. Rush.

Barbara Camens was on the brief for amicus curiae Newspaper Guild–CWA in support of petitioner Newspaper Association of America.

Jefrey Clair, Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief were Stuart F. Delery, Acting Assistant Attorney General, Michael S. Raab, Attorney, Stephen L. Sharfman, General Counsel, Postal Regulatory Commission, and R. Brian Corcoran, Deputy General Counsel.

Morgan E. Rehrig, Attorney, United States Postal Service, argued the cause for intervenors United States Postal Service, et al. in support of respondent. With her on the brief were Stephan J. Boardman and Thomas W. McLaughlin.

Before: HENDERSON and GRIFFITH, Circuit Judges, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge RANDOLPH.

RANDOLPH, Senior Circuit Judge:

In August 2012, the Postal Regulatory Commission issued an order approving a negotiated service agreement for the sale of postage between the United States Postal Service and Valassis Direct Mail, Inc., a national marketing company. Under the agreement, Valassis receives discounted postage for some of its advertisement mailers once its mail volume hits a predetermined threshold. Petitioner Newspaper Association of America, with the support of three intervenors, challenges the Commission's order approving the deal.

I

The Postal Service is empowered to set “reasonable and equitable” postal “rates” subject to the approval of the Postal Regulatory Commission. See39 U.S.C. §§ 404(b), 3622(a), (d)(1). “Rates” include not only those for the familiar first-class and priority mail, but also “negotiated service agreements,” that is, contracts between the Postal Service and individual mailers for customized—and generally discounted—rates of postage. See39 C.F.R. §§ 3001.5(r), 3010.6.

The statutory system governing rates depends on whether the rate is for a “market-dominant” or a “competitive” service. 39 U.S.C. § 3642(b). A service is “market-dominant” if either (1) the Postal Service has achieved a level of market power in providing that service that would allow it to raise prices without losing “a significant level of business,” id. § 3642(b)(1), or (2) it is a service covered by the statutory postal monopoly, id. § 3642(b)(2). Because the negotiated service agreement in this case is for the purchase of standard mail products, it is subject to the postal monopoly, see18 U.S.C. § 1696(a); 39 C.F.R. § 310.2(a), and thus the rules governing rates for market-dominant products apply.

In reviewing rates for market-dominant products, the Commission must consider the statutory factors set out in 39 U.S.C. § 3622(c). That subsection establishes rate requirements for all market-dominant products, see id. § 3622(c)(1)-(9) & (11)-(14), as well as particular requirements for negotiated agreements, see id. § 3622(c)(10).

As relevant here, a negotiated service agreement must meet the following requirements: (1) it must improve the net financial position of the Postal Service, id. § 3622(c)(10)(A)(i); (2) it may not cause “unreasonable harm to the marketplace,” id. § 3622(c)(10)(B); (3) it must be “available on public and reasonable terms to similarly situated mailers,” id. § 3622(c)(10); (4) it must comport with “the policies of [Title 39],” id.; and (5) the Commission, before approving the agreement, must give “due regard” to its impact on “small business concerns,” id. § 3642(b)(3)(C). ¹

Once the Postal Service has negotiated terms with a particular mailer, it must notify the public and the Commission of its intention to implement a rate adjustment. 39 C.F.R. § 3010.41. The Commission then initiates proceedings to determine whether the agreement complies with the statutory requirements. Id. § 3010.44. Comments from the Postal Service, its partner in the deal, and the public are welcome. See id. If the agreement is lawful, the Commission issues an order and the agreement may take effect. Id.

The Postal Service proposed the negotiated service agreement in this case in April 2012, and the public proceeding commenced that May. The structure of the Agreement is fairly simple. For three years, Valassis agrees to maintain its current levels of “standard mail saturation flats”—that is, advertising circulars deliveredto at least 75 percent of potential addresses on a standard mail carrier route. In return, the Postal Service offers Valassis a discount on new mailing programs of that same type initiated in excess of current levels. The discount is limited in a few ways. It applies only to mailings carrying advertisements for retailers that deal in durable and semi-durable goods and that have a physical retail presence in 30 or more states. It also applies only to new mailing programs initiated in markets in which Valassis has an existing program. And the discount on that new program remains in force only if the corresponding existing program continues to operate at or above current levels.

The Commission received dozens of submissions from, among others, individual newspapers, two U.S. Senators, petitioner Newspaper Association of America, intervenor National Newspaper Association, and intervenors Valpak Direct Marketing Systems and Valpak Dealers Association (collectively, “Valpak”). The comments were overwhelmingly against the Agreement and, taken together, argued that the Agreement failed to satisfy any of the statutory criteria discussed above. The Commission disagreed and issued its final order approving the Agreement on August 23, 2012.² It denied a motion to stay the order one week later. This petition for judicial review followed.

II

Intervenors Valpak and the National Newspaper Association argue that the Agreement was not properly before the Commission because the Governors of the Postal System never approved it. This, they say, rendered the Commission's order void.

Establishing new rates, which includes proposing negotiated service agreements, is the job of the Governors of the Postal Service. 39 U.S.C. § 404(b). The Governors are appointed by the President, confirmed by the Senate, and constitute nine of the eleven members of the “Board of Governors.” Id. § 202. The Board of Governors comprises the nine Governors plus the Postmaster General and the Deputy Postmaster General.³ And the two bodies—the nine Governors as distinguished from the full Board—have independent statutory responsibilities. While the Board exercises the general “power of the Postal Service,” ⁴39 U.S.C. § 202(a)(1), only the Governors are specifically authorized to “establish ... equitable rates of postage.” Id. § 404(b).

“Except for those powers, duties, or obligations specifically vested in the Governors, as distinguished from the Board of Governors, the Board may delegate the authority vested in it....” Id. § 402. In other words, while the Board may delegate its duties, the Governors may not. And since “rates of postage” includes negotiated service agreements, § 402 means that the Governors cannot delegate the job of executing such agreements and bringing them before the Commission—which is what the intervenors claim the Governors did here.

The intervenors' claim rests on the Governors' Resolution 11–4, signed in March 2011. The Resolution authorizes Postal Service “management” to negotiate service agreements with postal customers and propose those agreements to the Postal Regulatory Commission. The Resolution declares all rates proposed under it “hereby established” in advance, provided the rates comply with the statutory requirements—and the Resolution instructs the Postal Service's chief financial officer to ensure that they do. Furthermore, it instructs management to provide the Governors with quarterly “report[s]” on new initiatives and to “furnish ... information ... regarding any significant, new program, policy, major modification, or initiative.” On its face the Resolution does not seem to require the Governors to approve each new rate.

In April 2012, citing Resolution 11–4, Postal Service management submitted the Agreement to the Postal Regulatory Commission. In response, Valpak submitted comments to the Commission arguing that the Agreement was the result of an unlawful delegation by the Governors. It claimed that Resolution 11–4, by allowing Postal Service management to negotiate service agreements, delegates the Governors' statutory responsibility to set rates in violation of 39 U.S.C. § 402. Thus, according to Valpak, the Agreement was not properly before the Commission. The Postal Service replied that, notwithstanding Resolution 11–4, the Governors had in fact approved the Agreement before it was submitted. In this court, the intervenors once again raised the argument challenging Resolution 11–4, and the Postal Service reasserted that the Agreement had been pre-approved.

There is no reason for us to decide whether Resolution 11–4 unlawfully delegates authority to the Postal Service. According to the Postal Service, the Governors in fact reviewed and approved the Agreement before it was submitted to the Commission. That assertion was not challenged in the administrative proceeding, and we understand the Commission to have accepted it as fact.⁵ The intervenors challenge it for the first time in their reply brief to this court, but we...