[Federal Register Volume 72, Number 83 (Tuesday, May 1, 2007)]
[Notices]
[Pages 23820-23822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-8251]


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FEDERAL TRADE COMMISSION


United States Postal Service Study

AGENCY: Federal Trade Commission.

ACTION: Notice requesting information and comment.

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SUMMARY: On December 20, 2006, President Bush signed the Postal 
Accountability and Enhancement Act (``PAEA'' or the ``Act'') into law. 
Congress intended the PAEA to increase competition and efficiency in 
the provision of mail service. The Act requires the Federal Trade 
Commission (the ``Commission or ``FTC'') to prepare and submit to the 
President, Congress, and the Postal Regulatory Commission (``PRC'') a 
comprehensive report by December 20, 2007, identifying Federal and 
State laws that apply differently to the United States Postal Service 
(``USPS'') with respect to the competitive category of mail and to 
private companies providing similar products. To help prepare this 
report, the Commission is requesting public comment on several issues.

DATES: Public comments must be received on or before July 2, 2007.

ADDRESSES: Comments should refer to ``USPS Study, Project No. P071200'' 
to facilitate the organization of comments. A comment filed in paper 
form should include this reference both in the text and on the 
envelope, and the original and two copies should be delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room 135-H (Annex F), 600 Pennsylvania Avenue, NW., Washington, DC 
20580.
    Because paper mail in the Washington area and at the FTC is subject 
to delay, please consider submitting your comment in electronic form, 
as prescribed below. Comments containing any material for which 
confidential treatment is requested, however, must be filed in paper 
(rather than electronic) form, and the first page of the document must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    Comments filed in electronic form (except comments containing any 
confidential material) should be submitted to the FTC by clicking on 
the following Web link: https://secure.commentworks.com/FTC/USPSStudy 
and following the instructions on the Web-based form. You also may 
visit http://www.regulations.gov to read this request for public 
comment and may file an electronic comment through that Web site. The 
FTC will consider all comments that regulations.gov forwards to it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov/os/publiccomments.shtm. As a matter 
of discretion, the FTC makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC Web site. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to James Cooper, Federal Trade Commission, Office 
of Policy Planning, 600 Pennsylvania Avenue, NW., Washington, DC 20580. 
E-mail: [email protected]; Telephone: 202-326-3367.

SUPPLEMENTARY INFORMATION: 

The Postal Accountability and Enhancement Act

    On December 20, 2006, President Bush signed into law the PAEA, 
which is intended to increase competition and efficiency in the 
provision of mail service.\2\ Under the PAEA, USPS products are divided 
into ``market-dominant'' and ``competitive'' categories.\3\ The Act 
lists market-dominant and competitive products,\4\ but allows the newly 
formed PRC to change these lists ``by adding new products to the lists, 
removing products from the lists, or transferring products between the 
lists.'' \5\
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    \2\ PAEA, Pub. L. 109-435, 120 Stat. 3198 (2006).
    \3\ The Act defines the market-dominant category as ``each 
product in the sale of which the Postal Service exercises sufficient 
market power that it can effectively set the price of such product 
substantially above costs, raise prices significantly, decrease 
quality, or decrease output, without risk of losing a significant 
level of business to other firms offering similar products.'' 39 
U.S.C. 3642(b)(1). The competitive products category is defined as 
consisting of ``all other products.'' Id.
    \4\ The Act lists first-class mail letters and sealed parcels; 
first-class mail cards; periodicals; standard mail; single piece 
parcel post; media mail; bound printed matter; library mail; special 
services; and single-piece international mail, as market-dominant 
products. 39 U.S.C. 3621(a)(1)-(10). The Act lists priority mail, 
expedited mail, bulk parcel post, bulk international mail, and 
mailgrams as competitive products. 39 U.S.C. 3631(a)(1)-(5).
    \5\ 39 U.S.C. 3642(a). The PAEA, however, forbids the PRC from 
transferring a ``product covered by the postal monopoly'' to the 
competitive products list. 39 U.S.C. 3642(b)(2).
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    With respect to market-dominant products, the Act requires the PRC 
to establish ``a modern system for regulating rates and classes'' \6\ 
that satisfies a variety of objectives, including, inter alia, to 
maximize incentives to reduce costs and increase efficiency, to create 
predictability and stability of rates, and to maintain financial 
stability.\7\ Although the Act gives the USPS authority to set its own 
prices for competitive products (with a relatively brief public 
notification period),\8\ the PAEA requires the USPS to set these prices 
in accordance with regulations that the PRC will promulgate to: (1) 
Prohibit the subsidization of competitive products by market-dominant 
products; (2) ensure that each competitive product covers its 
attributable costs; and (3) ensure that all competitive products 
``collectively cover what the [PRC] determines to be an appropriate 
share of the institutional costs of the Postal Service.'' \9\ The Act 
creates a separate revolving fund--the Postal Service Competitive 
Products Fund--for revenues from the sale of competitive products; \10\ 
permits the USPS, subject to certain limitations, to borrow money and 
deposit the proceeds in the fund; \11\ and subjects income from the 
sale of competitive products to the equivalent of federal corporate 
income taxes, by requiring the USPS to transfer that amount each year 
from the Competitive Products Fund to the Postal Service Fund.\12\
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    \6\ 39 U.S.C. 3622(a).
    \7\ 39 U.S.C. 3622(b).
    \8\ 39 U.S.C. 3632.
    \9\ 39 U.S.C. 3633(a).
    \10\ 10 39 U.S.C. 2011.
    \11\ 11 Id.
    \12\ 39 U.S.C. 3634.
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    The Act further prohibits the USPS, and other Federal agencies 
acting in concert with it or on its behalf, from engaging in conduct--
with respect to any product not covered by the statutory postal 
monopoly provision--that

[[Page 23821]]

constitutes an unfair method of competition, in violation of Section 5 
of the Federal Trade Commission Act, 15 U.S.C. 45(a), or otherwise 
violates the antitrust laws, as defined in the Clayton Act, 15 U.S.C. 
12(a).\13\ In addition, the Act expressly prohibits the USPS from 
engaging in conduct that constitutes an unfair or deceptive act or 
practice, in violation of Section 5 of the FTC Act.\14\
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    \13\ 39 U.S.C. 409(e)(1)(A)-(B).
    \14\ 39 U.S.C. 409(d)(2)(B).
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FTC Study

    The PAEA directs the Commission to prepare and submit to the 
President, Congress, and the PRC, a comprehensive report ``identifying 
Federal and State laws that apply differently to the [USPS] with 
respect to the competitive category of mail * * * and to private 
companies providing similar products.'' \15\ The report must include 
such recommendations as the FTC ``considers appropriate for bringing 
such legal differences to an end,'' and ``in the interim,'' to 
account--under the PRC's regulations that will prohibit subsidization 
of competitive products--``for the net economic effects provided by 
those laws.'' \16\ In preparing this report, the Act requires the 
Commission to consult with the USPS, the PRC, other Federal agencies, 
mailers, private companies that provide delivery services, and the 
general public.\17\
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    \15\ PAEA Sec.  703(a).
    \16\ PAEA Sec.  703(b). As noted above, 39 U.S.C. 3633 requires 
the PRC to promulgate regulations to prohibit the subsidization of 
competitive products by market-dominant products, and to ensure that 
prices charged for competitive products cover attributable costs and 
an appropriate share of ``institutional costs.''
    \17\ PAEA Sec.  703.
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    Accordingly, to assist with preparing this report, the Commission 
seeks relevant information concerning the questions that follow. These 
questions are designed to assist members of the public in focusing 
their comments, but should not be construed as a limitation on the 
issues on which public comment may be submitted. To facilitate the 
consideration of comments, responses to these questions should cite the 
numbers and subsection of the questions being addressed. All comments 
submitted should include any relevant data, statistics, or any other 
evidence upon which the comments are based.
    With regard to the following questions ``competitive products'' 
refers to (1) priority mail; (2) expedited mail; (3) bulk parcel post; 
(4) bulk international mail; and (5) mailgrams.\18\ ``Private 
competitors'' refers to companies that compete against the USPS in the 
provision of ``competitive products.''
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    \18\ 39 U.S.C. 3631(a)(1)-(5).
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Questions

    1. With respect to competitive products, please identify specific 
Federal laws, State laws, and local laws, regulations, ordinances, etc. 
(collectively, ``legal requirements'') with which private competitors 
must comply, but with which the USPS is not required to comply. Please 
identify the specific source of the USPS exemption from each such legal 
requirement. Please provide estimates of both actual expenses, and 
administrative costs associated with compliance, that such legal 
requirements impose on private competitors.
    2. Please discuss any benefits the USPS derives, in providing 
competitive services, from its legal monopolies over letter delivery 
and mailboxes. Specifically, discuss any economies of scope (i.e., cost 
advantages or other efficiencies that arise due to the provision of 
multiple products) that exist between the supply of market-dominant 
products and the supply of competitive products. In what ways, if any, 
do private suppliers of competitive products interconnect with the USPS 
system? Do any federal or state laws prevent greater interconnection 
with the USPS system? If so, please cite these laws and explain the 
ways in which they prevent greater interconnection.
    3. Please identify any additional legal requirements that confer 
benefits upon the USPS that are not available to its private 
competitors.
    4. With respect to competitive products, please identify specific 
legal requirements with which the USPS must comply, but with which 
private competitors are not required to comply, or any other legal 
constraints on the USPS' operations that affect its costs. Please 
provide estimates of both actual expenses, and administrative costs 
associated with compliance, that such legal requirements and 
constraints impose on the USPS. Can any of these requirements or 
constraints be addressed apart from changes that would apply to the 
entire USPS? If so, please identify any requirements or constraints 
that might be removed only to the extent that they apply to competitive 
products. What laws would need to be changed to remove these 
requirements or constraints?
    5. Please provide an estimate of how the requirements identified in 
responses to Question 4 affect the costs that the USPS incurs to 
provide competitive products, and the prices that the USPS charges for 
competitive products.
    6. Please comment on the costs, benefits, and feasibility of 
requiring the USPS to account for the cost of complying with the legal 
requirements identified in responses to Question 1 in the cost of 
competitive products and in setting prices for competitive products. 
How should these costs be calculated and allocated between competitive 
and market-dominant products? Should the USPS be required actually to 
pay these costs or merely account for them when setting prices? If the 
USPS actually pays the costs associated with legal requirements, should 
it be required actually to comply with these legal requirements with 
respect to competitive products (e.g., pay local property taxes on 
buildings and vehicles to local governments)? Alternatively, should the 
USPS be required to pay the costs associated with these legal 
requirements to the U.S. Treasury or the U.S. Postal Fund?
    7. Please describe how the USPS not being required to pay a return 
on the capital that the federal government contributed toward its 
competitive operations affects the USPS' costs and prices of 
competitive products. Should the USPS be required actually to pay a 
return on the capital that the federal government contributed toward 
its competitive operations or merely account for such a cost when 
setting prices for competitive products? How should this return be 
calculated? How would this cost be allocated between competitive and 
market-dominant products? Should the USPS be required to pay this 
return to the U.S. Treasury or to pay this return to the Postal Service 
Fund?
    8. Please describe how the USPS' ability to borrow from the U.S. 
Treasury at preferential rates as compared with private sector 
companies affects the USPS' costs and prices of competitive products. 
How should these borrowing costs be calculated and allocated between 
competitive and market-dominant products? Should the USPS be required 
to borrow at commercial rates or should there be another mechanism to 
equalize this cost differential? If so, how should it be calculated and 
should it be paid to the U.S. Treasury or the Postal Service Fund?
    9. Please discuss the costs, benefits, and feasibility of requiring 
the USPS explicitly to pay state and local taxes on its competitive 
operations. How should these costs be calculated and allocated between 
competitive and market-dominant products? For private sector 
competitors, please describe and provide the costs associated with 
filing and paying state and local income,

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sales, and property taxes and the magnitude of these taxes. What laws 
if any would need to be changed to require the USPS to explicitly pay 
such taxes?
    10. Please discuss the costs, benefits, and feasibility associated 
with requiring the USPS to establish a separate private entity to 
provide competitive products. What, if any, scope economies between its 
market-dominant products and its competitive products would be lost 
under this scenario? Please cite any relevant examples involving 
foreign countries in which a state-owned postal service established a 
separate private entity to provide competitive products.
    11. Please discuss any other possible ways of ending the 
differences in legal requirements between the USPS and its private 
competitors with respect to the competitive category of mail, including 
the costs, benefits, and feasibility associated with these other 
possible approaches.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E7-8251 Filed 4-30-07; 10:40 am]
BILLING CODE 6750-01-P