The FedEx Corporation is requesting that PRC “blunt the advantages the Postal Service has as a government entity.”

It appears Fedex is not happy with proposals by the U.S. Postal Service (“USPS”), filed on July 1, 2014, to sharply reduce Priority Mail rates for middle-weight packages and increase prices for low-weight retail packages.”

FedEx claims the proposed price adjustments “represent a major thrust by USPS into the fiercely competitive market for e-commerce distribution services, an understandable commercial tactic. At the same time, it appears clear that the small retail mailer – really, John Q. Public – will bear a relatively greater share of the institutional costs of competitive products and, in the most commonly used weight steps, face absolute price increases. Indeed, these large discounts which are for this commercially-driven pivot may even result in higher prices for market-dominant mailers, the so called “captive mailers,” due to imperfect cost allocation and attribution. While we are unable to offer a detailed analysis given the lack of data transparency (to all except the Commission), FedEx has concluded that we must register our concerns relating to the competitive issues raised by this proposal.”

Let’s stop one minute…

Is this FedEx (who’s implying USPS has too much of an unfair advantage as a government entity which hurts private sector shippers) the same Fedex who enjoys receiving over $1 billion a year from its competitor USPS? The same FedEx who has been the TOP Supplier for USPS for the last THIRTEEN years. Is this the same Fedex who was recently granted 85% tax deduction by the City Council in North Carolina . The same company who along with UPS has been awarded many of the government contracts (one recent award is GSA) Do FedEx really want to discuss unfair advantages or leveling the  playing field.

Fedex’s history of attempting to ‘blunt’ USPS’ so-called unfair advantage is nothing new. Anyone recall Fedex suing USPS in the mid-1990s for false and misleading ad campaigns on Priority mail?

Also, over the years readers have asked PostalReporter the same question over and over again: How can FedEx, a competitor or rival  of USPS get a $billion or more a year. A $billion dollars a year on what started out as a no-bid contract for at least 14 years.  What other “private” business can claim this “advantage” from a “government entity.”

Update: Here is Deadtree Edition’s take on FedEx: FedEx Cries Foul Over Postal Service Price Cuts

Fedex continues …

At the outset, it should be emphasized that these proposed price changes do not reflect a minor cost-related adjustment in the postage that Grandma will have to pay to send a sweater to young Johnny. What USPS is proposing is an aggressive push to gain market share in the fast-growing business of e-commerce distribution services. To this end, USPS is proposing reductions of 30 to 55 percent in prices for commercial shippers in the weight categories most used by e-commerce. Price reductions of such magnitude will substantially affect competing service providers and the market as a whole. Since the beginning of postal reform efforts by Congress in the mid-1990s, FedEx has supported allowing USPS to become a more efficient, more flexible, more commercial participant in the national delivery services sector. That support, however, is conditioned on a regulatory system that ensures that USPS does not derive an unfair advantage from legal or governmental privileges when it competes with private sector companies. The Postal Enhancement and Accountability Act of 2006 (“PAEA”) embraced a balance between commercial flexibility and fair competition.

FedEx has concluded that we must register our concerns relating to the competitive issues raised by this proposal.

At the outset, it should be emphasized that these proposed price changes do not reflect a minor cost-related adjustment in the postage that Grandma will have to pay to send a sweater to young Johnny. What USPS is proposing is an aggressive push to gain market share in the fast-growing business of e-commerce distribution services. To this end, USPS is proposing reductions of 30 to 55 percent in prices for commercial shippers in the weight categories most used by e-commerce. Price reductions of such magnitude will substantially affect competing service providers and the market as a whole.

Since the beginning of postal reform efforts by Congress in the mid-1990s, FedEx has supported allowing USPS to become a more efficient, more flexible, more commercial participant in the national delivery services sector. That support, however, is conditioned on a regulatory system that ensures that USPS does not derive an unfair advantage from legal or governmental privileges when it competes with private sector companies. The Postal Enhancement and Accountability Act of 2006 (“PAEA”) embraced a balance between commercial flexibility and fair competition. As the House Postal Subcommittee declared:

Under the legislation, the Postal Service will compete on a level playing field, under many of the same terms and conditions as faced by its private sector competitors, albeit with stronger controls, oversight, and limitations in recognition of its governmental status.

Similarly, the Senate Governmental Affairs Committee declared forcefully:

The Committee strongly believes that the Postal Service should operate more like a private business but, when competing head to head with a private business, we believe just as strongly that the advantages the Postal Service has as a government entity should be blunted blunted Yet a continuing legal tilt in the playing field for e-commerce distribution services is apparent from a consideration of the wider regulatory framework, whose fairness and transparency also falls largely within the oversight responsibility of the Commission.

1. Packages delivered by USPS benefit from an exclusive right of access to mailboxes and clusterboxes, a postal operator privilege that does not exist anywhere else in the world. This statutory privilege is reinforced by excessive and apparently ultra vires provisions in the Domestic Mail Manual.3 A move by USPS to enlarge the boxes (which are mandatory for anyone that wants to receive mail) to better accommodate packages –and to market such boxes as a “security upgrade” – highlights the disadvantage imposed upon private companies by the mailbox monopoly. Couple this with our inability4 to deliver shipments marked for P.O. boxes, and it is clear that the tight statutory grip that USPS exerts over the letter mail market is substantially applicable to e-commerce parcels as well, with the burden of providing for the final collection borne by the addressee, not the delivery company (that is, USPS), as is the case for deliveries by private carriers.

2.The costs of package delivery are borne, in part, by economies of scope sustained by postal monopoly regulations which are wholly ultra vires after the reforms of the PAEA.5 While other nations are getting rid of their monopolies,6 our supposedly free-market economy continues to tolerate this legal anachronism even though, with the volume of letter mail declining, the economic benefits of that monopoly are increasingly passed on to the parcels market, where USPS is not supposed to have a statutory advantage.

3. Cost attribution that allocate shared assets and improvements to institutional costs, when such assets are clearly intended to benefit the growing parcels market, should be reevaluated. The Postmaster General has made it clear that, going forward, major investments will be aimed at improving the ability of the Postal Service to compete in the parcels markets. A bottom-up pricing review, such as that urged by a report to the Office of Inspector General, could “assign and allocate all or most costs, while recognizing that different allocation assumptions are used for different purposes.”7 It would enable “‘one system of truth’ for systematically identifying and allocating costs to activities, products, and customers.”

4. Most importantly, the Commission’s rules on allocating an “appropriate share” of institutional costs have failed to keep pace with the rising share of revenues contributed by competitive products.8 The volume of parcels has increased on an absolute basis, plus, with the Commission’s approval, USPS has shifted many of the market-dominant products to the competitive products side of regulation. Yet still the 5.5% share of institutional costs borne by competitive products has not been altered since 2007. We would ask that the Commission consider an interim review of this fixed share, preferably with an automatic adjustment procedure.

These separate but related regulatory threats need to be drawn together in a more coherent approach that ensures the fairness and lawfulness of the competitive package delivery services of USPS. The Commission has the right and responsibility to “blunt the advantages the Postal Service has as a government entity.”

Finally, a new approach must include a new level of transparency for USPS’s competitive product accounts that “balance[s] the nature and extent of the likely commercial injury to USPS against the public interest in maintaining the financial transparency of a government establishment competing in commercial markets.” 10 In implementing this standard, USPS’s speculative claims about the potential for commercial injury must not be accepted uncritically but considered carefully in light of the effects on other commercial enterprises system of truth’ for systematically identifying and allocating costs to activities, products, and customers.”

see complete file