[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Notices]
[Pages 49824-49826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23674]


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POSTAL RATE COMMISSION

[Docket No. C99-4; Order No. 1260]


Complaint Concerning Bulk Parcel Return Service Fee

AGENCY: Postal Rate Commission.

ACTION: Notice of a new complaint docket.

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SUMMARY: The Commission is instituting a docket to consider a complaint 
regarding the consistency of the $1.75 fee for Bulk Parcel Return 
Service (BPRS) fee with postal law and policies. It is also authorizing 
settlement discussions and discovery. These steps will foster 
expeditious consideration of issues raised in the complaint.

DATES: Participants may explore the potential for settlement until 
September

[[Page 49825]]

17, 1999. If settlement discussions are not productive, complainant 
shall file, on or about September 17, 1999, an estimate of time needed 
to prepare its case. Discovery may be initiated through September 17, 
1999.

ADDRESSES: Send comments regarding this document to the attention of 
Margaret P. Crenshaw, Secretary, Postal Rate Commission, 1333 H Street 
NW., Suite 300, Washington, DC 20268-0001.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
Postal Rate Commission, 1333 H Street NW., Suite 300, Washington, DC 
20268-0001, 202-789-6824.

SUPPLEMENTARY INFORMATION: In order no. 1260, issued September 3, 1999, 
the Commission denied the motion of the United States Postal Service to 
dismiss a complaint and instituted formal proceedings. The complaint 
had been filed June 9, 1999, by the Continuity Shippers Association 
(CSA) against the Postal Service pursuant to 39 U.S.C. 3662. See 
Complaint Concerning Charges and Practices Applied to Ancillary 
Services for Standard (A) Merchandise Mail (Complaint). The complaint 
contends that the rate charged for undeliverable merchandise returned 
to the sender under Bulk Parcel Return Service (BPRS) is excessive and 
inconsistent with the cost and non-cost criteria of the Postal 
Reorganization Act (Act). Id. at 1. The complaint further maintains 
that BPRS offered to Standard (A) mailers does not conform to title 39 
policies. Ibid.
    In response, the Postal Service argues that the attributable costs 
and mark-up for BPRS accurately reflect both the underlying costs and 
the special service provided to mailers by BPRS. Answer of United 
States Postal Service (Answer), July 9, 1999, at 4-5. The Service 
suggests that the complainant has reached erroneous conclusions based 
in part on a misunderstanding of the cost methodology of a BPRS cost 
study. Id. at 4. Accordingly, the Postal Service requests that the 
Commission dismiss the complaint. Id. at 5. Although the Postal Service 
has not filed a formal motion to dismiss the complaint, it does request 
dismissal of the complaint in its answer, primarily based on the 
argument that complainant's allegations of discrimination and other 
violations of the Act are unsupported. Answer at 5. As such, the 
Commission construes the Postal Service's answer as effectively a 
motion to dismiss the complaint. For the reasons discussed herein, the 
Commission denies the Service's motion and initiates formal proceedings 
to consider the complaint.

Background

    Under the Domestic Mail Classification Schedule (DMCS), the Postal 
Service will return to the sender properly endorsed merchandise which 
has been ordered by consumers but is undeliverable as addressed. For 
merchandise mail pieces weighing less than one pound that are mailed at 
bulk Standard (A) rates, qualifying senders may choose to have the 
merchandise returned via Bulk Parcel Return Service (BPRS). Prior to 
institution of BPRS, senders could have Standard (A) merchandise 
returned at the Standard (A) single piece rate. BPRS was implemented on 
October 12, 1997, and charges the flat fee of $1.75 for each eligible 
Standard (A) parcel.

Substance of the Complaint

    This complaint concerns the Postal Service's return service for 
merchandise mailed at the bulk Standard (A) rates and electing to use 
BPRS at the rate of $1.75 per piece. Complainant CSA alleges that the 
BPRS rate is excessive and in contravention of the Act. Complaint at 1. 
(CSA states that it is an interested party representing Standard (A) 
mailers who use BPRS. Complaint at 2. In its answer, the Postal Service 
characterizes the complainant as ``one of a small subset of Standard 
(A) mailers with particular types of mail, mailing practices, business 
needs, and experience with the Postal Service, which may differ from 
those of other Standard (A) mailers.'' Answer at 2.) CSA bases its 
allegations in substantial part on a comparison of the BPRS rate (and 
cost coverage) with the generally lower Special Standard (B) rates. 
According to CSA, this comparison is valid as: (1) Special Standard (B) 
and Standard (A) parcels share several significant characteristics, 
including the manner in which the Postal Service processes, transports 
and delivers these mail pieces; (2) certain mail pieces which are 
eligible for the BPRS rate also are eligible to be returned to sender 
at the lower Special Standard (B) rates; and (3) the Special Standard 
(B) attributable cost was used by the Postal Service as a proxy for the 
BPRS attributable cost in setting the BPRS rate. Id. at 2-3. (Special 
Standard (B) mail need not weigh more than 16 ounces. CSA claims that 
many parcels that weigh less than one pound and are eligible for 
Special Standard (B) rates are mailed initially at bulk Standard (A) 
rates, but are returned to the sender under the lower, single-piece 
Special Standard (B) rates.) Complaint at 2.
    In support of its claim that the rates charged by BPRS are not 
``fair and equitable'' and therefore contravene 39 U.S.C. 3622(b)(1) 
and 3623(c)(1), CSA cites the October 1998 Postal Service cost study on 
BPRS. Id. at 4-5. That study, which was completed as a requirement of 
the original BPRS classification case (docket no. MC97-4) indicated a 
BPRS attributable cost of $0.93 per piece. Id. at 4. With a per piece 
rate of $1.75 and a per piece attributable cost of $0.93, the mark-up 
for BPRS would be $0.82 or 188 percent cost coverage, which CSA argues 
is unjustifiably higher than the current cost coverage of 106 percent 
for Special Standard (B) mail. Id. at 4-5.

    Note: CSA alleges that, on or around January 1999, the Postal 
Service announced that the BPRS cost study was flawed, as the 
attributable cost had been determined using an incorrect 
methodology. Complaint at 4, n. 1. The Service further stated that 
application of the correct methodology yields an attributable cost 
of $1.07 for BPRS mail pieces. Ibid. CSA maintains that this revised 
attributable cost figure, which remains undocumented despite 
requests, is the same as that calculated for Special Standard (B) in 
the Docket No. R97-1 rate case, and results in a BPRS cost coverage 
of 164 percent. Ibid. CSA argues that the widely divergent rates 
imposed for the BPRS and Special Standard (B) when the costs are the 
same are in contravention of 39 U.S.C. 3622(b)(3), which requires 
that each mail type bear only its direct and indirect attributable 
costs, plus a reasonable allocation of institutional costs. 
Complaint at 5.

    As relief, CSA requests that the Commission institute proceedings 
to review the adequacy and accuracy of the cost studies underlying the 
BPRS rate and to consider whether the BPRS rate properly reflects the 
service's costs and its value to the sender and recipient. Id. at 5-6; 
CSA's Request for Permission to File a Response Opposing the Postal 
Service's Suggestion Not to Hold Hearings on the Complaint Regarding 
the Charges for the BPRS (CSA Opposition), August 18, 1999, at 2.

Postal Service Answer and Motion To Dismiss

    The Postal Service's answer denies complainant's allegations that 
the BPRS rate violates the Act, and also disputes the legitimacy of 
CSA's comparison of BPRS and Special Standard (B) services. Answer of 
United States Postal Service (Answer) at 1-4. The answer further 
asserts that the complaint should be dismissed as complainant: (1) 
Misunderstands the original BPRS cost study's methodology, which 
ultimately results in the erroneous conclusion that the costs of the 
two subclasses are the same; (2) makes the incorrect assumption that 
BPRS and Special Standard (B) cost coverages should be

[[Page 49826]]

equivalent, which ignores the differences between the two mail types 
and the correct application of the non-cost factors of the Act; and (3) 
fails to consider ``the import of differences between the Postal 
Service's volume variable analysis and the Commission's attributable 
cost methodology with respect to the BPRS fee,'' where a recalculation 
of the October cost study using Commission R97-1 methodology results in 
a cost coverage very close to the Commission's original recommended 
figure (163.5 versus 156 percent). Id. at 4-5.
    The answer presents arguments against the validity of complainant's 
claim, and requests that the Commission dismiss the complaint. The 
Commission construes the answer to include a Postal Service motion to 
dismiss the Complaint, and accepts the responsive CSA Opposition.

Statutory Authority To Consider Complaint and Procedural Process

    Section 3662 of title 39 of the United States Code provides in 
relevant part:

    Interested parties who believe the Postal Service is charging 
rates which do not conform to the policies set out in this title * * 
* may lodge a complaint with the Postal Rate Commission in such form 
and in such manner as it may prescribe. The Commission may in its 
discretion hold hearings on such complaint.

Section 3001.82 of the Commission's regulations, which addresses the 
scope and nature of complaints, indicates that the Commission shall 
entertain complaints which clearly raise an issue concerning whether or 
not rates or services contravene the policies of the Postal 
Reorganization Act.
    In the instant docket, CSA has filed a complaint alleging that the 
current BPRS rate contravenes title 39 policies. While the Postal 
Service offers varying explanations for why complainant is mistaken in 
its assertion, the Service has failed to provide adequate justification 
for dismissal of the complaint without hearings. Accordingly, the 
Commission will consider the complaint, although it notes that the 
recent establishment of the BPRS rate through a settlement agreed to by 
CSA, and the expectation that an omnibus rate request will be submitted 
in the near future, would seem to provide a situation where it may be 
possible for the parties to pursue resolution and settlement of the 
complaint through informal procedures, as provided for in rule 85 of 
the Commission's rules of practice.
    The Commission will allow until September 17, 1999 for participants 
to explore the potential for settlement. Discovery may be initiated 
during this period. If settlement discussions are not productive, 
complainant is directed to provide a statement, on or about September 
17, 1999, estimating the amount of time it will require to develop and 
file a case-in-chief. A procedural schedule and special rules of 
practice, if any, will be considered after this estimate has been 
submitted.

Directives

    Accordingly, the Commission orders that proceedings in conformity 
with 39 U.S.C. 3624 shall be held in this matter. It also denies the 
Service's suggestion (included within the answer of United States 
Postal Service, filed on July 9, 1999) that the complaint should be 
dismissed. The Commission will sit en banc in this proceeding. Ted P. 
Gerarden, director of the Commission's office of the consumer advocate, 
is designated to represent the interests of the general public in 
docket no. C99-4. Mr. Gerarden is also charged with acting as 
settlement coordinator, and in this capacity shall encourage parties to 
reach settlement on this complaint, as provided for under rule 85 of 
the Commission's rules of practice and procedure. Complainant shall 
provide a statement, on or about September 17, 1999, estimating the 
amount of time it will require to develop and file a direct case in 
this proceeding. The Commission also directs the Secretary of the 
Commission to arrange for publication of this notice and order in the 
Federal Register in a manner consistent with applicable requirements.
Margaret P. Crenshaw,
Secretary.
[FR Doc. 99-23674 Filed 9-13-99; 8:45 am]
BILLING CODE 7710-FW-P