United Parcel Serv., Inc. v. Postal Regulatory Comm'n
| Decision Date | 14 April 2020 |
| Docket Number | No. 19-1026,19-1026 |
| Citation | 955 F.3d 1038 |
| Parties | UNITED PARCEL SERVICE, INC., Petitioner v. POSTAL REGULATORY COMMISSION, Respondent Amazon.com Services, Inc., et al., Intervenors |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Kathleen M. Sullivan, argued the cause for petitioner. With her on the briefs was Steig D. Olson, New York, NY.
Michael Shih, Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief were Michael S. Raab, Attorney, David A. Trissell, General Counsel, Postal Regulatory Commission, Anne J. Siarnacki, Deputy General Counsel, and Reese T. Boone, Attorney.
Eric P. Koetting and Morgan E. Rehrig, Attorneys, U.S. Postal Service, Michael F. Scanlon, John Longstreth, Washington, DC, and James Pierce Myers were on the brief for intervenors Amazon.com Services, et al. in support of the Postal Regulatory Commission.
Before: Henderson and Millett, Circuit Judges, and Edwards, Senior Circuit Judge.
This case involves a petition for review filed by United Parcel Service, Inc. ("UPS"), challenging the Postal Regulatory Commission’s ("Commission") Order Adopting Final Rules Relating to the Institutional Cost Contribution Requirement for Competitive Products, No. 4963, Dkt. No. RM2017-1 (P.R.C. Jan. 3, 2019) ("Order"), reprinted in Joint Appendix ("J.A.") 515-712. The disputed Order modifies Commission regulations that are meant to "ensure that all [of the Postal Service’s] competitive products collectively cover what the Commission determines to be an appropriate share of the institutional costs of the Postal Service." 39 U.S.C. § 3633(a)(3). In making this "appropriate share" determination under § 3633(a)(3), the Commission is obligated to "consider," among other things, "the degree to which any costs are uniquely or disproportionately associated with any competitive products." Id. § 3633(b). However, the Commission concluded that "there are no costs uniquely or disproportionately associated with competitive products that are not already attributed to those products under the Commission’s current cost attribution methodology" under § 3633(a)(2). Order at 28, J.A. 547.
The problem is that § 3633(a)(2) only requires the Commission to "ensure that each competitive product covers its costs attributable." The term costs attributable is narrowly defined as "the direct and indirect postal costs attributable to [a particular competitive] product through reliably identified causal relationships." 39 U.S.C. § 3631(b). However, it is not at all clear that "uniquely or disproportionately associated" costs described under § 3633(b) include only those costs that are attributable "through reliably identified causal relationships." And § 3633(b) makes it clear that "the Commission shall consider ... the degree to which any costs are uniquely or disproportionately associated with any competitive products." Id. § 3633(b) (emphasis added). The Commission’s Order fails to explain why these seemingly distinct statutory phrases cover the same costs, and further elides the requirements of § 3633(a)(3) and (b) by suggesting that, to the extent these statutory phrases overlap, the Commission need not consider costs under § 3633(b) if it already accounted for them under § 3633(a)(2).
UPS argues that the Commission’s position is contrary to law because "the Order fails to consider ... costs ‘uniquely or disproportionately associated with any competitive products,’ as the Act requires in section 3633(b)." Br. for Petitioner at 3. UPS also contends that the Commission erred in simply assuming, without adequate explanation, that "there are no institutional costs uniquely or disproportionately associated with competitive products." Id. We agree.
Two aspects of the Commission’s Order require a remand. First, the Commission has not adequately explained how the statutory phrases "direct and indirect postal costs attributable to [a particular competitive] product through reliably identified causal relationships" and "costs ... uniquely or disproportionately associated with any competitive products" can coincide. It is far from clear that these phrases have the same meaning. And the Commission has not demonstrated that, although they have distinct meanings, the phrases nonetheless coincide in application. Second, in focusing on costs attributed to competitive products under § 3633(a)(2), the Commission failed to discharge its responsibility under § 3633(b) to "consider ... the degree to which any costs are uniquely or disproportionately associated with any competitive products." 39 U.S.C. § 3633(b) (emphasis added). The Commission must consider any costs made relevant by § 3633(b). It does not matter whether the Commission has arguably considered such costs in implementing its responsibilities under § 3633(a)(2). These two points are amplified in the opinion below.
The bottom line is that the Commission’s Order is arbitrary and capricious because it is "largely incomprehensible" with respect to the matters in issue. U.S. Postal Serv. v. PRC , 785 F.3d 740, 753 (D.C. Cir. 2015). Therefore, we are constrained to remand the case for further consideration. On remand, the Commission must adhere to the commands of the statute and address the costs specified in § 3633(b) in determining the "appropriate share" under § 3633(a)(3). Following reconsideration of this case, any Commission Order must be coherent and transparent, and it must satisfy the requirements of reasoned and reasonable decision-making. Id . at 744, 753. The present Order fails to meet these standards "because it fails to articulate a comprehensible standard," id . at 753, regarding the meaning and application of § 3633(a)(3) and (b).
The Postal Service offers both "market dominant" and "competitive" products. Market-dominant products, like first-class mail, are "those over which the ‘Postal Service exercises sufficient market power that it can effectively’ raise prices or decrease quality ‘without risk of losing a significant level of business to other firms offering similar products.’ " UPS v. PRC , 890 F.3d 1053, 1055 (D.C. Cir. 2018) (quoting 39 U.S.C. § 3642(b)(1) ); see also 39 U.S.C. § 3621 (listing market-dominant products). Competitive products, on the other hand, like priority mail or parcel post, are "products over which the Postal Service faces meaningful market competition" from companies like UPS. UPS v. PRC , 890 F.3d at 1056 (internal quotation marks and citation omitted); see also 39 U.S.C. § 3631 (listing competitive products).
In 2006, Congress enacted the Postal Accountability and Enhancement Act, Pub. L. No. 109-435, 120 Stat. 3198 (2006) ("Accountability Act"), to ensure (among other things) that the Postal Service offers its competitive products on fair terms. See S. REP. NO. 108-318, at 14-16 (2004). To that end, the Accountability Act requires the Commission to promulgate regulations that ensure that the Postal Service is not "using revenues from market-dominant products subject to its monopoly power to defray costs competitive products would otherwise have to be priced to cover." UPS v. PRC , 890 F.3d at 1055.
Specifically, § 3633(a) requires the Commission to issue three sets of regulations:
39 U.S.C. § 3633(a)(1)-(3). As may be seen, the foregoing provisions refer to "costs attributable" and "institutional costs." These terms are important in our consideration of the issues presented in this case.
As explained in the introduction to this opinion, the Accountability Act defines the term "costs attributable" as "the direct and indirect postal costs attributable to [a particular competitive] product through reliably identified causal relationships." Id. § 3631(b). The Commission, in turn, interprets the term "institutional costs" to mean "residual costs" – that is, the Postal Service’s total costs minus its costs attributable under § 3633(a)(2). See UPS v. PRC , 890 F.3d at 1055-56, 1061-63 ().
The Accountability Act calls for the Commission to periodically review its "appropriate share" determination under § 3633(a)(3). The statute also specifies that the Commission "shall consider" the following matters when it conducts that review:
(b) Review of minimum contribution.—Five years after the date of enactment of this section, and every 5 years thereafter, the Postal Regulatory Commission shall conduct a review to determine whether the institutional costs contribution requirement under subsection (a)(3) should be retained in its current form, modified, or eliminated. In making its determination, the Commission shall consider all relevant circumstances, including the prevailing competitive conditions in the market, and the degree to which any costs are uniquely or disproportionately associated with any competitive products.
In effect, then, the Accountability Act requires the Commission to establish a multi-part "price floor" for its competitive products. See UPS v. PRC , 890 F.3d at 1055-56. First, the Commission must issue regulations to prevent market-dominant products from subsidizing competitive products. Second, the price of "each competitive product" must be set high enough to cover the "direct and indirect postal costs attributable to such product through reliably identified causal relationships." Third, the...
To continue reading
Request your trial
-
Shatsky v. Palestine Liberation Org.
... ... 17-7168 United States Court of Appeals, District of Columbia ... Carefirst, Inc. , 865 F.3d 620, 624 (D.C. Cir. 2017). Here, the ... ...