[Federal Register Volume 70, Number 19 (Monday, January 31, 2005)]
[Proposed Rules]
[Pages 4802-4803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1732]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2005-2; Order No. 1429]


Solicitation of Comments on First Use of Rules Applicable to 
Negotiated Service Agreements

AGENCY: Postal Rate Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document addresses the solicitation of comments in a 
proceeding to consider potential changes to the Commission rules for 
considering functionally equivalent Negotiated Service Agreements. 
These comments will be used to evaluate whether improvements should be 
made to the rules to facilitate the Commission's review of future 
requests predicated on functionally equivalent Negotiated Service 
Agreements.

DATES: Initial comments: February 28, 2005; reply comments: March 28, 
2005.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6818.

SUPPLEMENTARY INFORMATION:

Regulatory History

    68 FR 52552, September 4, 2003. 69 FR 7574, February 19, 2004.
    On February 11, 2004, the Commission promulgated rules applicable 
to the review of Postal Service requests predicated on baseline and 
functionally equivalent Negotiated Service Agreements.\1\ The Postal 
Service first invoked the rules applicable to functionally equivalent 
Negotiated Service Agreements (39 CFR 3001.196) in requests filed on 
June 21, 2004, for proposed Negotiated Service Agreements with Discover 
Financial Services, Inc. (Discover) and Bank One Corporation (Bank 
One).\2\ Both agreements were proffered as functionally equivalent to 
the recently recommended Negotiated Service Agreement with Capital One 
Services, Inc. (Capital One).\3\ The Postal Service has not submitted a 
request for a new baseline agreement. Thus, the rules for new baseline 
Negotiated Service Agreements (39 CFR 3001.195) remain untested.
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    \1\ Order Establishing Rules Applicable to Requests for Baseline 
and Functionally Equivalent Negotiated Service Agreements, PRC Order 
No. 1391, February 11, 2004. The rules applicable to Negotiated 
Service Agreements are incorporated into the Commission's rules at 
subpart L.
    \2\ Request of the United States Postal Service for a 
Recommended Decision on Classifications, Rates and Fees to Implement 
Functionally Equivalent Negotiated Service Agreement with Discover 
Financial Services, Inc., June 21, 2004; Request of the United 
States Postal Service for a Recommended Decision on Classifications, 
Rates and Fees to Implement Functionally Equivalent Negotiated 
Service Agreement with Bank One Corporation, June 21, 2004.
    \3\ PRC Op. MC2002-2, May 15, 2003.
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    PRC Order No. 1391 at 48 explains the purpose of the rules 
applicable to functionally equivalent Negotiated Service Agreements:

    The purpose of Sec.  3001.196 is to provide an opportunity to 
expedite the review of a request for a functionally equivalent 
Negotiated Service Agreement by allowing the proponents of the 
agreement to rely on relevant record testimony from a previous 
docket. This potentially could expedite the proceeding by avoiding 
the need to re-litigate issues that were recently litigated and 
resolved in a previous docket.

    Once the Commission determines that it is appropriate to proceed 
under rule 196, a procedural schedule is established to allow for 
issuing a decision within 60 days if no hearing is scheduled, or within 
120 days if a hearing is scheduled. In both the Discover and the Bank 
One dockets, the participants requested hearings, the hearings were 
scheduled, and schedules were initially established to allow for a 
decision to be issued within 120 days.\4\
    The Commission recommended that the Postal Service enter into the 
Negotiated Service Agreement with Discover 72 days after making the 
decision to hear the request under the rules for functionally 
equivalent Negotiated Service Agreements (101 days after the filing of 
the request).\5\ This was well within the 120 day time frame 
contemplated by the rules. The Commission found the Discover Negotiated 
Service Agreement functionally equivalent, albeit not identical, to the 
Capital One Negotiated Service Agreement, and recommended the request 
only with minor modification. Proceeding under the rules for 
functionally equivalent Negotiated Service Agreements successfully 
developed a sufficient record upon which to issue a decision and 
expedited the procedural schedule as envisioned when the rules were 
first developed.
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    \4\ In both instances, the requests for hearings were withdrawn 
before the hearings occurred.
    \5\ PRC Op. MC2004-4, September 30, 2004.
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    Application of the rules for a functionally equivalent Negotiated 
Service Agreement in the Bank One docket also was successful. A 
sufficient record upon which to base a decision was developed, and the 
docket was expedited through reliance on record testimony from the 
previous Capital One docket. However, due to the complexity of the 
specific issues involved, procedural issues that arose, and more 
extensive than anticipated litigation and negotiation, issuing the 
decision exceeded the 120 day procedural schedule by 27 days. The 
Commission recommended that the Postal Service enter into the 
Negotiated Service Agreement with Bank One 147 days after making the 
decision to hear the request under the rules for functionally 
equivalent Negotiated Service Agreements (179 days after the filing of 
the request).\6\
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    \6\ PRC Op. MC2004-3, December 17, 2004.
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    A large number of unusual issues delayed a decision on the Bank One 
Negotiated Service Agreement. The testimony of Bank One witness Buc was 
filed seven days late, with no indication in the initial request that 
additional testimony was forthcoming. Potential intervenors were not 
alerted to important differences between the baseline and the proffered 
functionally equivalent agreement by less than full compliance with 
rule 196(b)(2). Within two weeks of the filing of the request, Bank One 
merged with J. P. Morgan Chase, requiring additional discovery efforts, 
and creating uncertainty over how to analyze the initial request. The 
Bank One Negotiated Service Agreement as proposed was not functionally 
equivalent to the Capital One Negotiated Service Agreement.\7\ 
Participants

[[Page 4803]]

litigated and negotiated issues that were not present in the baseline 
docket. This culminated in the submission of two proposed Stipulations 
and Agreements late in the proceeding addressing risks identified by 
the participants.\8\ Finally, the details of the Bank One agreement and 
the specific facts presented in this docket were more complex than what 
was presented in the baseline docket. The Commission believes it 
unlikely that this many complicating factors are likely to be present 
in future requests for functionally equivalent Negotiated Service 
Agreements. Thus, the anticipated time for the Commission to review a 
request and render a recommendation still appears to be realistic.
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    \7\ Significantly, the request did not provide for adequate 
protection of mailers not party to the agreement (for example, an 
equivalent to the stop-loss cap as recommended in the Capital One 
docket was not proposed even though similar risks were apparent). As 
recommended, after modification, the Bank One Negotiated Service 
Agreement is functionally equivalent to the Capital One Negotiated 
Service Agreement.
    \8\ The rules for functionally equivalent Negotiated Service 
Agreements should provide adequate expedition without the need to 
file Stipulations and Agreements. Stipulations and Agreements should 
not be used as a procedural mechanism to expeditiously conclude a 
docket. In this docket, the Stipulations and Agreements were 
properly used to resolve issues unique to the request.
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    The Presiding Officer decided to proceed under the rules for 
functionally equivalent Negotiated Service Agreements to lend structure 
to the Bank One proceeding. He recognized that future revelations might 
require a change in direction.\9\ Although there were unanticipated 
complications in the Bank One docket, the rules for functionally 
equivalent Negotiated Service Agreements proved flexible and sufficient 
to hear the request and render a recommended decision.
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    \9\ An alternative could have been to reject the request as 
submitted, with directions to supplement testimony where necessary 
and refile as a new baseline docket. This would have considerably 
added to the length of the procedural schedule.
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    The Commission indicated in the Discover and the Bank One 
recommendations that it would solicit comments on the first use of the 
new rules. The comments will be used to evaluate whether improvements 
should be made to the rules to facilitate the Commission's review of 
future requests predicated on functionally equivalent Negotiated 
Service Agreements. Comments are welcome of a general nature, or that 
address specific procedural or data requirement issues. By this order, 
the Commission hereby gives notice that comments from interested 
persons concerning the first use of the rules applicable to Negotiated 
Service Agreements are due February 28, 2005. Reply comments may also 
be filed and are due March 28, 2005.
    In conformance with section 3624(a) of title 39, the Commission 
designates Shelley S. Dreifuss, director of the Commission's Office of 
the Consumer Advocate, to represent the interests of the general public 
in this proceeding. Pursuant to this designation, Ms. Dreifuss will 
direct the activities of Commission personnel assigned to assist her 
and, upon request, will supply their names for the record. Neither Ms. 
Dreifuss nor any of the assigned personnel will participate in or 
provide advice on any Commission decision in this proceeding.

Ordering Paragraphs

    It is ordered:
    1. Docket No. RM2005-2 is established to solicit comments on 
possible improvements to the Commission's rules applicable to 
Negotiated Service Agreements.
    2. Interested persons may submit comments no later than February 
28, 2005.
    3. Reply comments also may be filed and are due March 28, 2005.
    4. Shelley S. Dreifuss, director of the Office of the Consumer 
Advocate, is designated to represent the interests of the general 
public in this docket.
    5. The Secretary shall arrange for publication of this Notice of 
Proposed Rulemaking in the Federal Register.

    Issued: January 25, 2005.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. 05-1732 Filed 1-28-05; 8:45 am]
BILLING CODE 7710-FW-P