November 21, 2017
    Deja vu in the D.C. Circuit: Why is the Postal Service bothering?

    'Most observers have believed for some time that the Postal Service’s case is weak, if not frivolous.'

    Readers of the brief that the U.S. Postal Service filed in the exigency case in the D.C. Circuit of the U.S. Court of Appeals on Jan. 4 might wonder why the USPS bothered.

    The brief is the latest sally in the Postal Service’s five-year campaign to use the 2007-09 recession to extract more money from captive mailers. In July 2010, the USPS asked the Postal Regulatory Commission to approve a surcharge of 5.6 percent on all market-dominant rates to cover the losses supposedly caused by the recession. The PRC denied the request three months later because the USPS had failed to show that the losses were caused by the recession, rather than electronic diversion or other long-term structural problems. The USPS, after challenging the decision in the D.C. Circuit, ultimately abandoned its request in late 2011.

    Between then and late 2013, the economy recovered, but USPS mail volume and revenue continued to decline. The USPS nonetheless returned to the PRC with another exigent rate case in September 2013. This time the USPS sought approval of a rate surcharge of 4.3 percent on all market dominant products. The added cost to mailers was $2.2 billion per year. The USPS proposed that the increase be made permanent, giving it a total present value of about $60 billion.

    In December 2013, the commission approved the increase, but ordered the USPS to rescind it once it generated $3.2 billion in extra revenue. The PRC imposed the cutoff date after finding that the USPS had again largely failed to prove that most of its losses were due to the 2007-09 recession, not electronic diversion or other circumstances not recognized by the law as exigent.

    USPS again challenged the commission decision in the D.C. Circuit. In June 2015, the court ruled that one of the adjustments relied on by the PRC to calculate the share of USPS losses that could be attributed to the recession - the so-called “count once” restriction - was reasoned inadequately. The court upheld the PRC’s action in all other respects. 

    On July 29, the commission responded to the court’s decision by eliminating the “count once” constraint on the losses that the USPS could recover through the exigent surcharge, but leaving the commission’s calculation of the surcharge otherwise unchanged. The result of the PRC’s action was to increase by $1.191 billion the contribution that the USPS is entitled to recover from the surcharge before it must expire. Based on present trends, the new contribution limit is likely to be reached, and the surcharge canceled, around April 2016.

    The USPS sought judicial review a month later. The court set a briefing schedule in November. This week’s brief from the USPS is the first in the sequence.

    Most observers have believed for some time that the Postal Service’s case is weak, if not frivolous. Monday’s brief confirms this. The brief creates the impression that the June 2015 D.C. Circuit decision remanded both the “new normal” and “count once” constraints. The Postal Service then argues that the PRC got the “new normal” constraint wrong on remand. But the June 2015 D.C. Circuit decision upheld the “new normal” constraint in its entirety, and remanded the case only for reconsideration of the “count once” constraint. On remand, the commission completely jettisoned the latter constraint, thus giving the Postal Service everything it was entitled to ask for.

    A senior USPS official conceded privately to mailers that the Postal Service does not expect to win in court. The USPS appears to be pursuing the litigation mainly for political purposes - to keep the exigency case on life support so that the USPS can offer to pull the plug as part of a comprehensive legislative deal.

    The brief of the U.S. Justice Department and PRC lawyers defending the July 2015 commission decision is due on Feb. 3. The Alliance, three other trade associations and a major mailer have intervened in support of the commission. The intervenors are entitled to file their own brief on Feb. 10.

    Contact Kearney at steve@nonprofitmailers.org. This commentary appeared originally in the Jan. 6, 2016 ANM Alliance Report.


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