D. C. Circuit rejects UPS case against PRC on USPS cost allocation

Steve HutkinsNews

Justia: The United States Court of Appeals for the District of Columbia Circuit was tasked with evaluating a previous decision by the Postal Regulatory Commission (PRC) regarding cost allocation between the United States Postal Service’s (USPS) market-dominant and competitive products. United Parcel Service (UPS), a competitor of the USPS, challenged the PRC’s formula for allocating institutional costs.

The USPS offers both market-dominant products, like standard mail (where it holds a near-monopoly), and competitive products, like package delivery (where it competes with private companies like UPS). The PRC’s task is to ensure that the USPS’s competitive products cover an “appropriate share” of institutional costs. In 2020, the court had remanded the PRC’s Order that adopted a formula for this “appropriate share”, and asked the PRC to better explain its reasoning.

On remand, the PRC revised its analysis but maintained the same formula. The court of appeals concluded that the PRC had adequately addressed the previous issues identified and reasonably exercised its statutory discretion in adopting the formula. Consequently, UPS’s petition for review was denied.

The court found that the PRC’s interpretation of the distinction between costs attributable to competitive products and costs uniquely or disproportionately associated with competitive products was reasonable. It also found the PRC’s decision to not include attributable costs directly in the appropriate share to be reasonable, to avoid double-counting. The court rejected UPS’s claim that the PRC was required to allocate all of the USPS’s institutional costs between market-dominant and competitive products, and it also found that the PRC had adequately considered competitive products’ market conditions. Lastly, the court upheld the PRC’s proposed formula for setting the appropriate share.

Read the full opinion here. There’s more about the case in this previous post.