[Federal Register Volume 74, Number 58 (Friday, March 27, 2009)]
[Proposed Rules]
[Pages 13370-13386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6891]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3007

[Docket No. RM2008-1; Order No. 194]


Treatment of Non-Public Materials Submitted by the Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is proposing rules on the treatment of non-
public material submitted by the Postal Service. Issuance of this 
proposal will allow interested parties to comment on the Commission's 
approach to implementing a new statutory requirement.

DATES: Initial comments due April 27, 2009; reply comments due May 11, 
2009.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 and [email protected].

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 50532 (August 26, 
2008).

I. Introduction

    The Postal Regulatory Commission (Commission) proposes to implement 
39 U.S.C. 504(g) by adopting regulations applicable to confidentiality 
of materials submitted by the Postal Service to the Commission. A 
Notice of Proposed Rulemaking to Establish a Procedure for According 
Appropriate Confidentiality, issued August 13, 2008 (Order No. 96), 
requested public comments and reply comments. Based on comments 
received in this docket (RM2008-1) in response to the Commission's 
initial notice, the Commission issues this Second Notice of Proposed 
Rulemaking to Establish a Procedure for According Appropriate 
Confidentiality.
    39 U.S.C. 504(g)(3)(A) recognizes the need to balance the Postal 
Service's, its business partners', or its customers' legitimate 
expectations to keep commercially sensitive information confidential 
with the public's expectation for accountability and transparency of 
the business dealings of a governmental entity competing in commercial 
markets. The Postal Accountability and Enhancement Act (PAEA), Public 
Law 109-435, 120 Stat. 3218 (2006), relies on public transparency, in 
addition to regulation, to achieve its goal of Postal Service 
accountability. Therefore, as directed by the provisions of the PAEA 
and because the Commission considers it necessary and appropriate, the 
Commission proposes rules that could lead to public disclosure of 
materials that the Postal Service or a third party initially claims are 
non-public.
    In developing proposed rules, the Commission takes very seriously 
its responsibility to achieve a fair balance between the commercial 
interests of the Postal Service and its partners or customers and the 
public interest in disclosure of information concerning a public entity 
that competes in commercial markets, as well as the need for discovery 
and access for any persons who wish to participate in Commission 
proceedings.

II. Statutory Standards for According Confidentiality to Postal Service 
Materials

    The Postal Regulatory Commission is an independent establishment of 
the executive branch of the Government of the United States. See 39 
U.S.C. 501. Therefore, the presumption is that its records are 
available for public review. 5 U.S.C. 552. However, 39 U.S.C. 504(g)(1) 
provides that the Postal Service may determine ``that any document or 
other matter it provides to the Postal Regulatory Commission'' is 
exempt from public disclosure under 39 U.S.C. 410(c) or 5 U.S.C. 
552(b). The Postal Service must give reasons, in writing, for its 
claim. See 39 U.S.C. 504(g)(1).
    Unless the Commission has established rules for determining the 
appropriate degree of protection of materials claimed to be non-public 
by the Postal Service, the Commission may not (1) ``use such 
information for purposes other than the purposes for which it is 
supplied;'' or (2) ``permit anyone who is not an officer or employee of 
the Commission to have access to any such information.'' See 39 U.S.C. 
504(g)(2).
    These proposed rules outline the procedure for the Commission's 
treatment of non-public materials. Under these proposed rules, when 
materials are filed along with an application for non-public treatment, 
the Commission will initially treat those materials as non-public. 
However, the proposed rules allow persons to challenge non-public 
status or request access to the materials. The Commission, following 
such a motion or of its own accord, may balance the relevant interests 
to determine if disclosure or access is warranted.
    Under 39 U.S.C. 410(c), the Postal Service may claim as exempt from 
public disclosure the name and address of postal customers; certain 
commercial information, for example, trade secrets, and other 
information which would not be disclosed under good business practice; 
certain information related to the negotiation of collective bargaining 
agreements; information prepared for proceedings before the Commission 
or the Federal courts concerning postal rates, classes and services; 
reports and memoranda prepared by outside sources unless their 
disclosure would have been required if the Postal Service had prepared 
the reports or memoranda itself; and investigatory files compiled for 
law enforcement purposes, unless legally available to parties other 
than the Postal Service.
    Under 5 U.S.C. 552(b), records that may be withheld from public 
disclosure include, but are not limited to, matters concerning only 
internal personnel matters of an agency; matters specifically exempted 
from public disclosure by statute; trade secrets and privileged or 
confidential commercial or financial information; non-public

[[Page 13371]]

interagency or intra-agency memoranda or letters; privacy protected 
personnel, medical and other files; and certain law enforcement records 
or information. Section 552(b) provides that any portions of records 
subject to disclosure that can be segregated from records otherwise 
exempt from disclosure must be provided.
    Upon adopting appropriate regulations under 5 U.S.C. 553 that 
``establish a procedure for according appropriate confidentiality[,]'' 
the Commission may publicly disclose materials which the Postal Service 
asserts are exempt from disclosure under 39 U.S.C. 410(c) or 5 U.S.C. 
552(b). 39 U.S.C. 504(g)(3)(A). In determining the appropriate degree 
of confidentiality for non-public materials, the Commission is directed 
to ``balance the nature and extent of the likely commercial injury to 
the Postal Service against the public interest in maintaining the 
financial transparency of a government establishment competing in 
commercial markets.'' Id.
    During a proceeding, the Commission may authorize access to non-
public materials that the Postal Service has claimed are exempt from 
disclosure under 39 U.S.C. 410(c) or 5 U.S.C. 552(b). 39 U.S.C. 
504(g)(3)(B). However, before authorizing any person to access the non-
public materials, the Commission ``shall, by regulations based on rule 
26(c) of the Federal Rules of Civil Procedure, establish procedures for 
ensuring appropriate confidentiality for the information * * *.'' 
Federal Rule of Civil Procedure 26(c) allows a court to issue a 
protective order for ``good cause.'' \1\ Under rule 26(c) a protective 
order may range from a complete bar on disclosure to disclosure with 
conditions placed on time, manner, method, scope, or party allowed 
access.
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    \1\ Rule 26(c), which is entitled ``Protective Conditions,'' 
authorizes the court, for good cause, to issue a variety of orders 
to protect parties or witnesses in the discovery process. See 
Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal 
Practice and Procedure 2035, et seq. (2d ed. 1994).
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    The general parameters for disclosure and conversely protection of 
confidentiality of non-public materials during the discovery process 
under section 504(g)(3)(B) must be gleaned from the Federal case law 
pertaining to Federal Rule of Civil Procedure 26. Those parameters are 
a broader set than the specific parameters established by the balancing 
test laid out in section 504(g)(3)(A).\2\ Case law surrounding Federal 
Rule of Civil Procedure 26 identifies several non-exclusive factors to 
be applied under the rule 26(c) ``good cause balancing test.'' See 
Arnold at 108. In the 2007 Arnold decision, the Third Circuit reaffirms 
the balancing test factors it developed in its 1994 Pansy decision:
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    \2\ See, e.g., Arnold v. Penn. Dep't of Transp., 477 F.3d 105 
(3d Cir. 2007) at 109-110; Pansy v. Borough of Stroudsburg, 23 F.3d 
772 (3d Cir. 1994) at 788; Leucadia, Inc. v. Applied Extrusion 
Technologies, 998 F.2d 157 (3d Cir. 1993) at 167. See generally 
Arthur R. Miller, Confidentiality, Protective Orders, and Public 
Access to the Courts, 105 Harv. L. Rev. 427 (1991).

    (1) [T]he interest in privacy of the party seeking protection; 
(2) whether the information is being sought for a legitimate purpose 
or an improper purpose; (3) the prevention of embarrassment, and 
whether that embarrassment would be particularly serious; (4) 
whether the information sought is important to public health and 
safety; (5) whether sharing of the information among litigants would 
promote fairness and efficiency; (6) whether the party benefitting 
from the order of confidentiality is a public entity or official; 
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and (7) whether the case involves issues important to the public.

Id. (citing Pansy, 23 F.3d at 787-88). In this order, the Commission 
refers to these factors as ``evidentiary privileges.''
    The general parameters for protection of confidentiality of 
materials under section 504(g)(3)(B) differ from the test under 
504(g)(3)(A) which entails balancing the ``nature and extent of the 
likely commercial injury to the Postal Service against the public 
interest in maintaining the financial transparency of a government 
establishment competing in commercial markets.'' Access entails a 
specific request for materials during a Commission proceeding which may 
or may not trigger a ``public interest.'' \3\ The procedure for 
ensuring confidentiality under section 504(g)(3)(B) must balance a 
private interest, the party's need for the materials to participate 
effectively in a proceeding, as well as the public's interest in 
transparent Commission proceedings, against the Postal Service's or 
third party with a proprietary interest's evidentiary privileges 
derived from the Federal Rule of Civil Procedure 26(c) ``good cause 
balancing test.''
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    \3\ For example, in a complaint filed by a mailer against the 
Postal Service, the mailer may ask for discovery of documents 
relevant to the complaint but which do not fall under the purview of 
the public's interest in financial transparency. See, e.g., 
Washington Post v. U.S. Dept. of Health and Human Services, 690 F.2d 
252 (D.C. App. 1982); see also Assoc. for Women in Science v. 
Califano, 566 F.2d 339 (D.C. App. 1982). Both cases address the 
different applications of the Freedom of Information Act (FOIA) and 
the Federal Rules of Civil Procedure as they pertain to 
discoverability and privilege from discovery.
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    The Commission may require the Postal Service to submit materials 
in furtherance of the Commission's duties to determine compliance under 
chapter 36 of title 39 of the U.S. Code. The public must be provided an 
opportunity to participate effectively in the Annual Compliance 
Determination (ACD) proceeding.\4\ For the public to participate 
effectively and comment in an ongoing or upcoming annual determination 
of compliance, the Commission anticipates that persons may require 
access to non-public materials outside a Commission proceeding. To 
determine if access to these materials is appropriate, the Commission 
must determine that the materials are relevant to an ongoing or 
upcoming ACD, and balance the Postal Service's (or third party with a 
proprietary interest) evidentiary privilege interest against the need 
of the requesting party to participate effectively. This process is 
akin to a request for access under section 504(g)(3)(B); therefore, it 
is appropriate for the Commission to utilize protective conditions when 
necessary to protect the interests of the Postal Service or third party 
with a proprietary interest in the materials.
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    \4\ See, e.g., 39 U.S.C. 3653(a) (directing the Commission to 
``promptly provide an opportunity for comment'' during the ACD 
proceeding).
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III. Order No. 96

    In Order No. 96, the Commission proposed rules which would govern 
handling and access to materials submitted to the Commission, but 
deemed ``exempt from disclosure'' by the Postal Service. See Order No. 
96. The Commission proposed rules 3007.10 to 3007.21, which would 
require the Postal Service to make an application for non-public 
treatment of all materials it submits and deems ``exempt from 
disclosure'' under 39 U.S.C. 504(g)(1). Id. at 17-19. The Commission 
also proposed rules 3007.24 through 3007.32, which govern the types of 
persons who can access the materials, the method by which a person can 
obtain access to materials, the restrictions on use of materials for 
persons signing protective conditions, and the procedure to remove the 
``non-public'' status from the materials. Id. at 20-23.
    The Commission proposed that one balancing test, governing the 
degree of confidentiality or assurance of appropriate confidentiality 
under 39 U.S.C. 504(g)(3)(A) and 39 U.S.C. 504(g)(3)(B), respectively, 
would be adequate and appropriate. Id. at 5. Consequently, the 
Commission proposed rule 3007.25, as a single standard for decision for 
requests made to access non-public Postal Service materials, and 
requests to remove

[[Page 13372]]

protective conditions and publicly disclose those materials. Id. at 21. 
That standard for decision included two subparts:

    (a) The Commission or its authorized representative shall 
balance the nature and extent of the likely commercial or other 
injury identified by the Postal Service against the public interest 
in maintaining the financial transparency of a government entity 
operating in commercial markets in determining whether to issue an 
order requiring disclosure of the information or materials filed 
under 39 U.S.C. 504(g)(1).
    (b) The Commission or its authorized representative shall 
balance the nature and extent of the likelihood that [disclosure of] 
non-public materials would invade a specific evidentiary privilege 
that is recognized in federal civil courts, or would constitute an 
undue burden that the Postal Service has quantified to the best of 
its ability against the public interest that would be served by 
providing access to the non-public materials in determining whether 
to issue an order requiring disclosure of non-public materials.

Id.

    Order No. 96 summarizes ways the Postal Service and third-party 
non-public materials come before the Commission and the proposed 
treatment of such materials. Order No. 96 also proposed procedures to 
ensure confidentiality, or provide public dissemination, as may be 
appropriate.

IV. Comments on Order No. 96

    Multiple parties commented on Order No. 96. The Commission 
acknowledges the comments and appreciates the thoughtful discourse they 
provide concerning the proposed confidentiality rules. Several issues 
raised by the comments, and further discussions by the Commission, have 
led to modifications in the initially proposed regulations and 
necessitate this order and a second opportunity for interested parties 
to comment.
    The comments filed in response to Order No. 96 cover multiple 
issues. However, two issues were common to multiple commenters and 
provide the impetus for this order.
    Language and function of the balancing test to determine the 
appropriate degree of confidentiality. Valpak Direct Marketing Systems, 
Inc., and Valpak Dealers' Association, Inc. (Valpak); American Postal 
Workers Union, AFL-CIO (APWU); and the Newspaper Association of America 
(NAA) comment that the ``evidentiary privileges'' recognized by the 
Federal courts under Federal Rule of Civil Procedure 26(c) and the 
open-ended ``other injury'' term should not be imputed into the 
balancing test to determine the appropriate degree of confidentiality 
under 39 U.S.C. 504(g)(3)(A).\5\ The comments advise the Commission to 
use the balancing test articulated in 39 U.S.C. 504(g)(3)(A) to 
determine the appropriate degree of confidentiality under the rules, 
rather than considering ``other injury'' or evidentiary privileges. See 
Valpak Comments at 11; APWU Comments at 2; and NAA Reply Comments at 2-
8.
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    \5\ Valpak Direct Marketing Systems, Inc. and Valpak Dealers' 
Association, Inc. Comments Regarding Regulations to Establish a 
Procedure for According Appropriate Confidentiality, September 25, 
2008 (Valpak Comments); Initial Comments of American Postal Workers 
Union, AFL-CIO, September 25, 2008 (APWU Comments); and Reply 
Comments of the Newspaper Association of America, October 10, 2008 
(NAA Reply Comments).
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    Valpak specifically asserts:

    [D]espite its regulations, the Commission's actual decision-
making on confidentiality could be infected by inappropriate 
references to rule 26(c)'s `good cause balancing test' in derogation 
of the `commercial injury/financial transparency' test established 
by section 504(g)(3)(A). Indeed, the Commission has suggested that, 
under the influence of the rule 26(c) balancing test, it could 
`decid[e] whether the need for transparency outweighs the need for 
protecting the commercial or other interests of the Postal Service,' 
whereas section 504(g)(3)(A) limits the balancing process to one 
Postal Service interest -- `likely commercial injury'--without 
reference to any `other interest,' including [rule 26(c) factors] * 
* *. Such factors may be relevant to judicially-crafted protective 
orders in private litigation, but which are wholly inapposite to 
such orders in the discharge of the executive and administrative 
functions of the Commission, especially in light of statutory 
requirements for transparency.

Valpak Comments at 11-12 (internal citations omitted, footnote omitted, 
emphasis omitted). NAA agrees with Valpak:

    Val-Pak correctly points out that the Rule 26(c) judge-created 
balancing test used in civil litigation is incompatible with the 
substantive balancing test adopted by Congress in Section 
504(g)(3)(A).

NAA Reply Comments at 4.

These comments find conflict in the Commission's single rule balancing 
test which encompasses ``other injury'' in addition to ``likely 
commercial injury.''

    Greeting Card Association (GCA), however, disagrees with limiting 
the test to the language of section 504(g)(3)(A).\6\ GCA argues that 
the Commission should take into account ``other injury'' because the 
statutory language does not limit the balancing test to only the 
factors set forth in the statute. Id. at 2. GCA comments that under 
504(g)(3)(A), loss of volume resulting from potential disclosure of 
third-party sensitive information should also be included as 
``commercial injury.'' Id. at 2-3.
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    \6\ See Reply Comments of the Greeting Card Association, October 
10, 2008 (GCA Reply Comments).
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    The Postal Service is also opposed to the balancing test 
encompassing only ``likely commercial injury.'' \7\ It believes that 
interests it has in law enforcement, audit activities, collective 
bargaining, privacy, deliberative process, testing and examination of 
employees, and other interests are not implicated in such a test. Id. 
The Commission does not read ``likely commercial injury'' in such a 
narrow fashion as to exclude harm associated with the categories 
mentioned by the Postal Service in its comments. Most materials filed 
by the Postal Service with the Commission are commercial in nature, and 
for the Commission to demand information from the Postal Service, that 
information must be in furtherance of the Commission's duties under 
title 39 of the U.S. Code.
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    \7\ Initial Comments of the United States Postal Service, 
September 25, 2008, at 5-6 (Postal Service Comments).
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    The Postal Service also comments that the Commission should not 
conduct ``appellate review'' of the Postal Service's FOIA 
determinations under these proposed rules. Id. at 3. The operation of 
these rules, however, by clear mandate from 39 U.S.C. 504(g), allows 
the Commission either to publicly disclose, or to grant access subject 
to protective conditions, materials it collects from the Postal Service 
in furtherance of the its duties under title 39 of the U.S. Code. 39 
U.S.C. 504(g) does not operate to make the Commission an appellate body 
for FOIA; rather, without regard to FOIA, it operates to provide a 
mechanism for the Commission to create greater transparency (and hence 
less protection than FOIA provides), for matters relevant to the 
financial transparency and the regulatory responsibilities of the 
Postal Regulatory Commission.
    Protection for non-public materials in which a third party has a 
proprietary interest. Parcel Shippers Association (PSA, et al.); the 
Association for Postal Commerce (PostCom); Direct Marketing 
Association, Inc. (DMA); Mail Order Association of America (MOAA); Time 
Warner, Inc. (Time Warner); National Postal Policy Council (NPPC); 
Magazine Publishers of America, Inc. (MPA); Alliance of Nonprofit 
Mailers (ANM); Pitney Bowes Inc.; GCA; and the Postal Service all 
reference the lack of protection for third-party materials held by the 
Postal Service but belonging to a third party.\8\ As articulated by 
Pitney

[[Page 13373]]

Bowes, there should be an obligation to provide notice and an 
opportunity to be heard for parties whose commercially sensitive 
materials could be subject to disclosure in a Commission proceeding 
under these rules. See Pitney Bowes Comments at 6-7. This need is 
acute, according to Pitney Bowes, since the interests of the third 
party may not align perfectly with the Postal Service's reasons for 
claiming the materials exempt from disclosure. Id. at 5. The balancing 
test set out in section 504(g)(3)(A) must not be used for materials in 
which a third party has a proprietary interest because as PSA comments, 
``[i]t is manifest * * * that the same balancing requirements in the 
public interest are not implicated in the disclosure of the sensitive 
information of a third-party * * *.'' PSA Comments at 4.
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    \8\ Initial Comments of Parcel Shippers Association, the 
Association for Postal Commerce, Direct Marketing Association, Inc., 
Mail Order Association of America, Time Warner Inc., National Postal 
Policy Council, Magazine Publishers of America, Inc., and Alliance 
of Nonprofit Mailers on Order No. 96, September 25, 2008 (PSA, et 
al. Comments); Comments of Pitney Bowes Inc., September 25, 2008, 
(Pitney Bowes Comments); and Initial Comments of the Greeting Card 
Association, September 25, 2008 (GCA Comments). See also Postal 
Service Comments.
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    NAA, however, does not believe any additional protection of non-
public materials with a third-party proprietary interest is necessary. 
See NAA Reply Comments at 8-10. Specifically, NAA comments:

    [A] third party that has provided documents to the Postal 
Service should [not] have an absolute right to prevent disclosure of 
that document. Disclosure of one's potentially sensitive documents, 
when in the possession of another entity, is always a risk in the 
business world. There is no reason why third parties dealing with 
the Postal Service should have any greater rights than in other 
business relationships.

Id. at 8-9.

    The Public Representative's comments provide useful critique for 
the structure, wording, and application of the proposed rules.\9\ 
United Parcel Service (UPS) comments that the Commission should not 
apply protective conditions as a prophylactic remedy.\10\ UPS argues 
that protective conditions should not be used for ``key Postal Service 
information that should be available to the public at-large.'' Id. at 
2-3.
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    \9\ Public Representative Comments on Proposed Regulations to 
Establish Procedure for According Appropriate Confidentiality, 
September 25, 2008 (Public Representative Comments).
    \10\ Comments of United Parcel Service on Notice of Proposed 
Rulemaking to Establish a Procedure for According Appropriate 
Confidentiality, September 25, 2008 (UPS Comments).
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    The Postal Service requests that it be able to submit redacted, 
public versions of word processing documents in Adobe Portable Document 
format (PDF) rather than in native format. Postal Service Comments at 
15. The Postal Service also requests that persons seeking access under 
the rules identify relevant affiliations to accurately assess whether 
to object within an abbreviated timeframe. Id. at 12-13.

V. Other Developments

    In Docket No. ACR2008, the Public Representative raised an issue of 
``continuity of analysis,'' which occurs when materials are accessed 
under protective conditions and are subject to the requirement that 
they be ``returned or destroyed'' when the Commission issues a final 
order in a case, or another event brings a matter before the Commission 
to a conclusion.\11\ The Public Representative points out that this may 
effectively foreclose the opportunity to review trends in data over 
time, or compare data to determine anomalies. Id. Proposed rule 3007.50 
will allow a person who has obtained access to non-public materials 
either during discovery in a Commission proceeding or in a previous 
rule 3007.50 request, to make a motion to continue access and 
protective conditions. If such a motion is granted, access subject to 
protective conditions will continue through the conclusion of the 
Commission's next ACD proceeding.
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    \11\ Docket No. ACR2008, Motion to Make Core Cost, Volume, and 
Revenue Materials Public, January 27, 2009, at 13.
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    Also in Docket No. ACR2008, Valpak asked the Commission to issue an 
information request.\12\ Valpak ``believes that participants should be 
permitted to request information directly from the Postal Service on 
the record * * *.'' Id. at 1. Since participants' requests may be 
burdensome, duplicative, irrelevant, or involve objections or 
confidentiality concerns for the Postal Service, the Commission 
formalizes the process by which a person may request the Commission to 
issue an information request by changing proposed rule 3007.3. Under 
proposed rule 3007.3(b), any person may make a motion requesting that 
the Commission issue an information request to the Postal Service. Such 
a motion must include a detailed statement of support explaining how 
the materials sought will be relevant and material to the Commission's 
duties under title 39 of the U.S. Code.
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    \12\ Docket No. ACR2008, Valpak Direct Marketing Systems, Inc. 
and Valpak Dealers' Association, Inc. Motion for Issuance of 
Commission Information Request Concerning Core Costing Data on 
Detached Address Labels, January 13, 2009.
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    In Docket No. MC2009-11, the Public Representative stated that the 
Postal Service should redact using the ``black box'' method as it is 
preferable to using the ``ellipses'' (deletion) method since it allows 
the reader ``to view the scope and extent of material that has been 
removed.'' \13\ Subsequently, in Docket No. MC2009-13, the Postal 
Service justified use of the ``ellipses'' method by making a claim that 
the ``black box'' method provides ``information or clues regarding the 
name of the customer, the length and breadth of price charts, the 
complexity of annual adjustment mechanisms, or other similar sensitive 
information.'' \14\ Most recently, in Docket No. MC2009-15, the Public 
Representative suggested that the Commission may wish to address the 
appropriate method by which the Postal Service should redact non-public 
materials.\15\
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    \13\ Docket No. MC2009-11, Public Representative Comments in 
Response to Order No. 142, December 10, 2008, at 4.
    \14\ Docket No. MC2009-13, Request of the United States Postal 
Service to Add Express Mail & Priority Mail Contract 3 to 
Competitive Product List and Notice of Establishment of Rates and 
Class Not of General Applicability, December 19, 2008, at 3.
    \15\ Docket No. MC2009-15, Public Representative Comments in 
Response to United States Postal Service Request to Add Express Mail 
Contract 3 to Competitive Product List, January 15, 2009, at 3-4.
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VI. Review of Changes to Proposed Rules

    The Commission adds several new proposed rules and modifies 
previously proposed rules to accurately identify and balance all 
relevant interests.
    The Commission will obtain information, and must manage access to 
that information, in two basic contexts. In the first context, the 
Postal Service will file information pursuant to a specific statutory 
requirement or Commission rule. In these instances, with respect to 
some reports, the PAEA explicitly authorizes the Postal Service to 
designate portions as non-public annexes or to otherwise avail itself 
of the protections afforded Postal Service documents or other matters 
under the procedures of section 504(g). See 39 U.S.C. 3642(d), 3652(f), 
and 3654(f). Under proposed rule 3007.20, the Postal Service would 
notify any third party which the Postal Service has reason to believe 
may have a proprietary interest in the materials of the filing.
    Under proposed rule 3007.20, the Postal Service must apply to the 
Commission, at the time that it files materials, for specifically 
identified portions of these materials to be non-public and to qualify 
for a degree of protection from public disclosure. Similarly, under 
proposed rule 3007.20, a third party with a proprietary interest in 
non-public materials may file an

[[Page 13374]]

application for non-public treatment. Proposed rules 3007.21 and 
3007.22 provide guidance on the content for an application for non-
public treatment. Proposed rule 3007.21 specifically instructs the 
Postal Service to thoroughly justify its application with statutory 
authority.
    In the second major context, the Commission may request information 
or materials from the Postal Service by way of a data or information 
request, or, if necessary, by issuance of a subpoena.\16\ The 
Commission may also receive information or materials from other parties 
during the exercise of its duties under title 39 of the U.S. Code. When 
the Commission identifies information that it needs for the preparation 
of reports, for the conduct of ``proceedings,'' or other functions 
under the PAEA, the normal procedure contemplated for obtaining that 
information will be the issuance of data or information requests under 
proposed rule 3007.3. Data or information requests in the proposed 
rules are similar to requests that were issued in the former Postal 
Rate Commission's international mail dockets as part of its preparation 
of its reports to Congress on international mail. The proposed rules 
contemplate that, where it perceives it to be necessary, the Postal 
Service or third party with a proprietary interest in the materials 
would file an application for non-public treatment under proposed rule 
3007.20 with regard to data or information provided in response to a 
request issued by the Commission. In its application for non-public 
treatment, the Postal Service or third party with a proprietary 
interest in the materials would ask for a necessary degree of 
protection from public disclosure; for example, by requesting limiting 
the scope of the information to be produced, or restricting the 
dissemination of the information provided, as is commonly done in the 
application of rule 26(c) of the Federal Rules of Civil Procedure in 
Federal civil litigation.
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    \16\ Information and materials required to be provided to the 
Commission in response to a subpoena that the Postal Service 
determines to be exempt are subject to the same rules under proposed 
part 3007 as information or materials provided in response to a data 
or information request. See 39 U.S.C. 504(f), (g).
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    In both instances, the non-public materials would initially be 
protected from disclosure until the Commission decides to disclose or 
grant access to the non-public materials, following a request for 
termination of non-public status, a request for access during a 
proceeding, or a request for access to materials relevant to compliance 
under proposed rules 3007.31, 3007.40, or 3007.50, respectively. Before 
acting on its own initiative, or in response to a request to require 
disclosure of or access to non-public materials, the Commission will 
give interested parties an opportunity to respond.
    Valpak, APWU, and NAA's comments about the appropriate balancing 
test for determining the degree of confidentiality to be afforded 
Postal Service non-public materials result in several changes to the 
proposed rules. While a single balancing test has simplicity, it is 
neither equitable nor consistent with section 504(g) to use a single 
balancing test to determine public disclosure, discoverability in a 
Commission proceeding, and access to materials outside a proceeding but 
relevant to compliance. The Commission, therefore, proposes separate 
balancing tests depending on the nature of the request. The Commission 
also bifurcates the standard for decision for termination of non-public 
status in proposed rule 3007.33 to account for situations where only 
Postal Service non-public materials are at issue, and situations where 
non-public materials in which a third party has a proprietary interest 
are at issue. While more complex, the Commission believes these new 
proposed rules will allow the public to identify more easily the 
competing interests at issue in each determination, and to channel 
requests to the appropriate rule.
    The Commission incorporates the statutory test from 39 U.S.C. 
504(g)(3)(A) in proposed rule 3007.33(a), which sets forth the standard 
for decision when a person requests public disclosure and removal of 
non-public status. This proposed rule allows a person to challenge the 
Postal Service's classification of materials as non-public and exempt 
from disclosure under 39 U.S.C. 504(g)(1). This test balances the 
Postal Service's interest in avoiding commercial injury against the 
public's interest in financial transparency. If the likely commercial 
injury does outweigh the public interest, the Commission may deny the 
request to remove non-public status from the materials, or order the 
Postal Service to redact sensitive portions of the materials so that 
some portion may be released to the public.
    In cases where non-public materials in which a third party has a 
proprietary interest are at stake, subsection (b) of this rule sets out 
the balancing of the parties' interests under Federal Rule of Civil 
Procedure 26(c) as the test for disclosure.
    There are different rights at issue, interests to be balanced, and 
a stronger need for disclosure in the context of discovery, so the 
Commission creates a separate test applicable to access to materials 
during a Commission proceeding in proposed rule 3007.42. Under this 
proposed rule, the Commission would balance the need of the requesting 
party to access the non-public materials to participate effectively in 
a Commission proceeding against the Postal Service's or third party 
with a proprietary interest's evidentiary privileges under Federal Rule 
of Civil Procedure 26(c).
    In discovery under the Commission's rules, see 39 CFR 3001.25 et 
seq., there is a private right balanced against a private right, 
similar to the balancing routinely undertaken by Federal courts in 
civil litigation during discovery. Due to the need for disclosure for 
efficient operation of discovery (both in civil litigation and in 

Commission proceedings), the scales are tipped in favor of 
disclosure.\17\ To offset the possible harm visited by this greater 
need for disclosure, the Commission may issue a protective order 
similar to those employed under Federal Rule of Civil Procedure 26(c) 
during Federal civil litigation.\18\ Under Federal Rule of Civil 
Procedure 26(c), a party or person may, during the discovery process, 
request a protective order. Federal Rule of Civil Procedure 26(c) lists 
several possible procedures to limit discovery and ensure 
confidentially of information, including (1) completely forbidding the 
disclosure; (2) specifying terms for disclosure; for example, 
specifying the time and/or place of discovery; (3) ordering a specific 
method of discovery; (4) limiting the scope of discovery as it relates 
to certain matters; (5) limiting who may be present during discovery; 
(6) sealing a deposition; and (7) requiring that a trade secret or 
other confidential information be revealed only in a specific and 
limited manner.
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    \17\ See e.g., Washington Post v. U.S. Dept. of Health and Human 
Services, 690 F.2d 252 at 258 (discussing the difference between 
discoverability in litigation and disclosure under FOIA: ``[i]t is 
well established that information that is exempt from disclosure to 
the general public under FOIA may nevertheless be subject to 
discovery.''
    \18\ In application of the proposed disclosure rule, the 
decision-maker will also take into account relevant factors such as 
the procedural stage a matter is in (for example, discovery versus a 
formal hearing before the Commission) when deciding whether 
protection or non-disclosure of materials sought by the Postal 
Service is appropriate. Another factor to be considered is whether 
the information at issue relates to market dominant or competitive 
products.
---------------------------------------------------------------------------

    Finally, there are different rights at issue and interests to be 
balanced in the context of the Commission's ACD proceeding under 
chapter 36 of title 39

[[Page 13375]]

of the U.S. Code. The Commission proposes another distinct test, 
applicable when there is not an active proceeding, for requests for 
access to non-public materials that are relevant to developing comments 
for use in a current or future ACD proceeding. This avenue will allow 
persons, outside of a Commission proceeding, to receive access to non-
public materials relevant to an understanding or review of a past ACD 
proceeding or participation in an ongoing or upcoming ACD proceeding.
    Proposed rule 3007.52 announces the standard for decision for 
requests made for ACD relevant materials, outside of a Commission 
proceeding. This rule balances the Postal Service's or any third party 
with a proprietary interest in the materials' evidentiary privileges 
against the requesting party's need for the materials to participate 
effectively in a compliance determination or understand the intricacies 
of a completed ACD, and the public interest in transparency of 
Commission proceedings. Public participation in the ACD is directly 
called for by the PAEA. See 39 U.S.C. 3653(a). The Commission finds as 
a result of recent experience that a publicly published method to 
access materials relevant to compliance, outside of discovery in a 
proceeding, is necessary for effective public participation and 
transparency in the ACD process.
    PSA, PostCom, DMA, MOAA, Time Warner, NPPC, MPA, ANM, Pitney Bowes, 
and GCA comment about the need for protection of third party non-public 
materials submitted to the Postal Service. These comments result in the 
change and reformatting of several proposed rules. Under the 
Commission's new proposed rules, the Postal Service would have a duty 
to notify a third party with a proprietary interest in materials filed 
with the Commission at the time of filing. The notice requirement 
should not unduly burden the Postal Service as it maintains a record of 
contacts for third parties with proprietary interests in materials it 
holds for FOIA purposes. See Postal Service Comments at 10-11. The 
third party with a proprietary interest in non-public materials would 
be afforded the same opportunity to respond to requests for access or 
early termination of non-public status as the Postal Service.
    The Commission also adopted other additions, clarifications, and 
improvements based on public comments and other developments. The 
Commission adds proposed rule 3007.10(c) to clarify that the Postal 
Service should use the ``black box'' or ``graphical'' method of 
redaction as the preferred method of redaction. In an instance where 
the Postal Service can show likely competitive harm from the use of the 
``black box'' method, it must indicate at the site of each redaction 
the amount of materials redacted (in number of lines or pages).\19\ 
Proposed rule 3007.3(b) allows a person to request that the Commission 
issue a data or information request to the Postal Service. Proposed 
rule 3007.10(b) allows the Postal Service to submit redacted word 
processing documents in PDF format. Proposed rules 3007.40 and 3007.50 
require submitters to identify relevant affiliations (such as 
employment, consultant, or contractual relationships).
---------------------------------------------------------------------------

    \19\ As a means of comparison, when processing FOIA requests, 
the Department of Defense utilizes the ``black box'' and other 
redaction methods which do not involve disguising the amount of 
material redacted. See ``Sanitization Procedures'' http://www.dod.mil/pubs/foi/dfoipo/docs/NewRedactionPolicy.pdf.
---------------------------------------------------------------------------

    Initial comments are due within 30 days of the publication of this 
notice in the Federal Register. Reply comments are due within 45 days 
of the publication of this notice in the Federal Register.

VII. Analysis of Proposed Rules

    Below, the Commission provides a concise description of each rule, 
designed to assist commenters in understanding the scope and nature of 
the proposed rules and changes.
    Rule 3007.1 Definitions. This provision sets forth definitions of 
terms used in part 3007. The term ``non-public materials'' is defined 
as any information, documents, and things filed by the Postal Service 
which, pursuant to 39 U.S.C. 504(g), it determines to be exempt from 
disclosure. The term is also used to describe materials submitted by 
the Postal Service in which a third party has a proprietary interest, 
i.e., the third party believes is protectable under Federal Rule of 
Civil Procedure 26(c). As used in the rules, the phrase ``materials 
claimed to be non-public'' has the same meaning as non-public 
materials.
    Rule 3007.2 Scope. This provision sets forth the scope of 
information, documents, and things that the Commission (or its 
authorized representative) may require the Postal Service to provide in 
connection with the Commission's responsibilities under title 39 of the 
U.S. Code. It is intended to encompass information, documents, and 
things in whatever form likely to materially assist the Commission in 
fulfilling its statutory responsibilities.
    Rule 3007.3 Data or information requests. This proposed rule 
provides that the Commission, or its authorized representative, may 
issue data or information requests to the Postal Service concerning 
materials covered by proposed rule 3007.2. The rule has changed since 
Order No. 96 in that it also allows persons to request that the 
Commission issue a data or information request. These proposed rules 
only allow for persons to request access to materials or disclosure of 
materials after the materials have been filed with the Commission. This 
rule provides a mechanism for relevant materials to be filed with the 
Commission concurrent or prior to a request for access (under proposed 
rules 3007.40 or 50) or early termination of non-public status (under 
proposed rule 3007.31). In justifying a request made pursuant to this 
rule, the movant should indicate whether it expects a request under 
proposed rule 3007.31, 3007.40, or 3007.50 will be made and a detailed 
statement of support explaining how the materials sought will be 
relevant and material to the Commission's duties under title 39 of the 
U.S. Code.
    Rule 3007.10 Submission of non-public materials under seal. This 
proposed rule sets forth the manner in which non-public materials are 
to be filed with the Commission. More specifically, it provides that 
non-public materials are not to be filed electronically pursuant to 
rule 3001.9, but are to be filed in sealed envelopes clearly marked as 
confidential. The proposed rule requires non-public materials to be 
filed in hard copy as well as electronic form (compact discs), with the 
latter subject to certain conditions to ensure their utility. In 
addition, the proposed rule requires that a redacted copy of the non-
public materials be filed electronically pursuant to rule 3001.9. 
Changes to the rule since Order No. 96 require that when the Postal 
Service files redacted copies of non-public materials in electronic 
form, they must be in a searchable format (such as searchable Adobe PDF 
format), but spreadsheets, data files, or programs must be in native 
format. The method of redaction for hard copy submissions under this 
rule shall be the ``black box'' or ``graphical'' redaction method 
unless the Postal Service identifies particular, likely commercial 
injury which may result from the use of such a method. If any other 
method is used, the Postal Service must indicate, at the site of each 
redaction, in lines or pages, the amount of material removed.
    Rule 3007.20 Application for non-public treatment. This provision 
directs

[[Page 13376]]

the Postal Service to file an application for non-public treatment 
whenever it files non-public materials. It also instructs the Postal 
Service to contact any third party which may have a proprietary 
interest in the information being filed with the Commission to give 
that party an opportunity to file an application for non-public 
treatment, and address its confidentiality concerns directly with the 
Commission.
    Rule 3007.21 Content of the Postal Service application for non-
public treatment. This proposed rule requires the Postal Service to 
identify the materials it asserts are non-public and to provide a 
detailed statement in support thereof, addressing, among other things, 
the rationale for the claim, including the statutory authority, the 
nature and extent of any commercial harm, a hypothetical example of 
such harm, the extent of public protection from public disclosure 
deemed necessary, and any other factors relevant to the application for 
non-public treatment.
    Rule 3007.22 Content of third-party applications for non-public 
treatment. This proposed rule gives guidance to a third party with a 
proprietary interest in non-public materials on the content of an 
application for non-public treatment. The proposed rule directs the 
third party to provide justification for non-public treatment of 
materials it believes should not be publicly disclosed or accessed.
    Rule 3007.23 Treatment of non-public materials. This proposed rule 
provides that the Commission will not disclose non-public materials 
except as pursuant to the rules in part 3007.
    Rule 3007.24 Commission access to non-public materials. This 
proposed rule permits Commissioners, Commission employees, including 
the public representative, other persons assisting the Commission in 
carrying out its statutory duties, and reviewing court personnel access 
to non-public materials subject to the limitations in 39 U.S.C. 
504(g)(2)(A) and (B). Access to non-public materials for all persons 
not covered by this rule is by motion under proposed rules 3007.40 and 
3007.50.
    Rule 3007.25 Use of non-public materials. This proposed rule states 
that persons with access to non-public materials under proposed rule 
3007.24, except as pursuant to this part, may not use non-public 
materials for purposes other than for which they were supplied or allow 
any other person to have access to the non-public materials.
    Rule 3007.30 Termination of non-public status. This proposed rule 
states that non-public status shall expire 10 years after filing, 
unless otherwise provided by the Commission or its authorized 
representative.
    In the context of FOIA requests under rule 3004.8, the Commission 
provides that information submitted to the Commission and claimed to be 
exempt from disclosure under 5 U.S.C. 552(b) (namely, trade secrets or 
commercially or financially sensitive materials) will lose any such 
exemption 10 years after its submission. The Commission believes that a 
10-year sunset provision in this instance will also serve 
administrative convenience and sound records management practices while 
adequately protecting the commercial interest of the Postal Service.
    Rule 3007.31 Request for early termination of non-public status. 
This proposed rule states that any person may request that the 
Commission remove non-public status from materials filed by the Postal 
Service. This proposed rule gives details of the form and procedure of 
such a request. The request for early termination of non-public status 
must specifically address the Postal Service claims in its application 
for non-public treatment.
    If a request for early termination of non-public status is made, 
the Postal Service or any third party with a proprietary interest may 
submit an answer within 7 days (or such longer period as specified in 
the notice). Given the expedited timetables under which the Commission 
ordinarily operates, this proposed rule does not allow any filings 
after the initial answers. Thus, requests and answers should address 
all issues relevant to whether the non-public materials should be 
publicly disclosed. Following the receipt of the answers, if any, the 
Commission will issue an order concerning the appropriate status of the 
non-public materials.
    Rule 3007.32 Preliminary determination of non-public status. This 
proposed rule recognizes that as a matter of course, the Commission 
will review Postal Service materials designated as non-public for 
substance, and in the course of such review may have cause to question 
the claim that part or all of the materials should not be disclosed. 
Thus, the proposed rule provides that the Commission may issue a notice 
of preliminary determination concerning the appropriate degree of 
protection, if any, to be accorded non-public materials filed by the 
Postal Service.\20\
---------------------------------------------------------------------------

    \20\ This aspect of the rule is designed to enable the 
Commission to address claims of confidentiality by the Postal 
Service or a third party on its own initiative. It is not intended 
to imply that the Commission will necessarily make a preliminary 
determination with respect to each filing by the Postal Service of 
non-public materials.
---------------------------------------------------------------------------

    If a preliminary determination of non-public status is made, the 
Postal Service or any third party with a proprietary interest may 
submit an answer within 7 days (or such longer period as specified in 
the notice). Given the expedited timetables under which the Commission 
ordinarily operates, this proposed rule does not allow any filings 
after the initial answers. Thus, those answers should address all 
issues relevant to whether the non-public materials should be publicly 
disclosed. Following the receipt of the answers, if any, the Commission 
will issue an order concerning the appropriate status of the non-public 
materials.
    Rule 3007.33 Standard for decision for early termination of non-
public status. Subsection (a) of this proposed rule sets out the 
balancing test prescribed in 39 U.S.C. 504(g)(3)(A) for determining the 
appropriate degree of confidentiality to be accorded Postal Service 
non-public materials for which a request for early termination of non-
public status or a preliminary determination of non-public status has 
been made. Paragraph (b) of this section sets out the balancing test, 
adapted from 39 U.S.C. 504(g)(3)(A), applicable to a request for early 
termination of non-public status for materials in which the Commission 
determines that a third party has proprietary interest.
    Rule 3007.40 Request for access to non-public materials. Any 
person, during a Commission proceeding and pursuant to the Commission's 
rules of practice, may make a motion to request access to non-public 
materials filed by the Postal Service under 39 U.S.C. 504(g)(1). Any 
person requesting access must file a motion, which must include a 
detailed statement in support of granting access. The person requesting 
access must identify all relevant affiliations, including employer, 
organization, agency or contractual relationships, and ties to the 
delivery services, communications, or mailing industry.\21\
---------------------------------------------------------------------------

    \21\ Industry affiliations of the party requesting access to 
materials designated as protected by the Postal Service are 
disclosed to enable the Postal Service to determine whether to 
object in the context of an expedited matter.
---------------------------------------------------------------------------

    Given the expedited timetables under which the Commission generally 
operates, the proposed rules contemplate procedures that will expedite 
the process. Thus, the proposed rule provides that the person 
submitting the motion may agree in advance to execute and attach sample 
Commission protective conditions. In

[[Page 13377]]

that event, answers to the motion are due within 3 days.\22\
---------------------------------------------------------------------------

    \22\ Consistent with the Commission's rules, any prescribed time 
period of 5 days or less excludes Saturdays, Sundays, and legal 
holidays. See rule 3001.15.
---------------------------------------------------------------------------

    Recognizing that protective conditions may vary based on the nature 
of the non-public materials at issue, the Commission encourages any 
person attaching protective conditions to tailor the conditions to fit 
that situation, e.g., limiting access to competitive information to 
certain individuals. Persons attaching protective conditions should 
describe those conditions, particularly alterations to the standard 
form. If an executed copy of the sample Commission protective 
conditions is not attached, answers to the motion are due in 7 days. 
Following the filing of the answer, the Commission will issue an order 
concerning access to the non-public materials, or, if protective 
conditions are approved by the Postal Service or third party with a 
proprietary interest, the Commission or its authorized representative 
will grant access subject to the agreed protective conditions.
    Rule 3007.41 Termination of access to non-public materials. This 
proposed rule states that access terminates for all persons with access 
under proposed rule 3007.40 when the proceeding during which the 
materials were requested ends (by Commission order or report) or the 
person otherwise withdraws or ceases to be involved in the proceeding. 
This proposed rule also allows a person who has access under proposed 
rule 3007.40 to maintain access, subject to any applicable protective 
conditions, while that person waits for the Commission or its 
authorized representative to rule on a motion to continue access made 
under proposed rule 3007.50.
    Rule 3007.42 Standard for decision for request for access to non-
public materials. This proposed rule creates a balancing test to 
establish procedures to accord appropriate confidentiality as 
authorized by 39 U.S.C. 504(g)(3)(B). This test directs the Commission 
to balance the interests of the parties, similar to balancing done in 
Federal civil litigation under Federal Rule of Civil Procedure 26(c). 
The standard balances the need of the requesting party to have access 
to participate effectively in a Commission proceeding against the 
Postal Service's or third party with a proprietary interest in the 
materials' rights derived from rule 26 of the Federal Rules of Civil 
Procedure.
    Rule 3007.50 Request for access to non-public materials relevant to 
compliance. This proposed rule provides procedures for any interested 
person to request access to non-public materials, relevant to the ACD, 
when outside an ongoing Commission proceeding. This proposed rule also 
allows a person who has access subject to protective conditions (under 
proposed rules 3007.40 or 3007.50) to file a motion to continue access 
if the materials are relevant to compliance under 39 U.S.C. 3653. Any 
person requesting access must file a motion, which includes a statement 
justifying why access should be granted, and stating how the requested 
materials are relevant to the Commission's annual determination of 
compliance under 39 U.S.C. 3653. As with proposed rule 3007.40, the 
person requesting access must identify all relevant affiliations to 
assist the Postal Service in determining whether to object to access.
    Given the expedited timetables under which the Commission generally 
operates, the proposed rules contemplate procedures that will expedite 
the process. Thus, the proposed rule provides that the person 
submitting the motion may execute and attach to the motion the sample 
Commission protective conditions. In that event, answers to the motion 
are due within 3 days. Recognizing that protective conditions may vary 
based on the nature of the non-public materials at issue, the 
Commission encourages any person attaching protective conditions to 
tailor the conditions to fit that situation, e.g., limiting access to 
competitive information to certain individuals. Persons attaching 
protective conditions should describe those conditions, particularly 
alterations to the standard form. If a copy of the sample Commission 
protective conditions is not attached, answers to the motion are due in 
7 days. Following the filing of any answers, the Commission will issue 
an order concerning access to the non-public materials, or, if 
protective conditions are approved by the Postal Service or third party 
with a proprietary interest, the Commission or its authorized 
representative will grant access subject to the agreed protective 
conditions.
    Under this proposed rule, a person previously granted access to 
materials under this proposed rule could make renewed requests for 
access to non-public materials.
    Rule 3007.51 Termination of access to non-public materials relevant 
to compliance. This proposed rule states that access terminates for all 
persons with access under proposed rule 3007.50 when the Commission 
issues its next ACD or the person otherwise withdraws or ceases to be 
involved. This proposed rule also allows a person who has access under 
proposed rule 3007.50 to maintain access, subject to any applicable 
protective conditions, while that person waits for the Commission to 
rule on a motion to continue access made under proposed rule 3007.50.
    Rule 3007.52 Standard for decision for request for access to non-
public materials relevant to compliance. This proposed rule creates a 
balancing test to establish the procedures to accord appropriate 
confidentiality when determining restrictions on the amount or 
conditions of access to materials requested by a person which are 
relevant to the ACD. The standard instructs the Commission to balance 
the parties' interests, similar to balancing done by the Federal courts 
under Federal Rule of Civil Procedure 26(c). Such balancing may weigh 
the requesting party's need to access the materials to participate 
effectively in determining compliance against the Postal Service's 
interests derived from Federal Rule of Civil Procedure 26(c).
    Rule 3007.60 Limitations on access to non-public materials. This 
proposed rule identifies various limitations on access to non-public 
materials that may be ordered by the Commission pursuant to 39 U.S.C. 
504(g)(3)(B). These limitations, which are generally similar to relief 
provided by Federal civil courts in discovery disputes under rule 26(c) 
of the Federal Rules of Civil Procedure include, inter alia, not 
requiring the public disclosure of the materials, specifying the terms 
for public disclosure, ordering a specific method of disclosure, 
restricting to whom the information may be disclosed, specifying a time 
when access terminates, and such other relief as the Commission deems 
appropriate.
    Rule 3007.61 Continued effectiveness of protective conditions. This 
proposed rule specifies procedures to be followed if a court or other 
administrative agency subpoenas (or otherwise orders production of) 
non-public materials which a person has obtained pursuant to a 
protective order issued by the Commission. This proposed rule requires 
that any person seeking to disclose non-public materials to a reviewing 
court make a good faith effort to obtain protective conditions in 
accord with those prescribed by the Commission. The proposed rule also 
provides that unless overridden by the reviewing court, the protective 
conditions of the Commission (or its authorized representative) remain 
in effect. The procedures require notice to the Postal Service.

[[Page 13378]]

    Rule 3007.62 Sanctions for violations of protective conditions. 
This proposed rule reiterates the protective conditions, barring the 
dissemination of non-public materials by every person granted access to 
such materials to any person not authorized to access such materials. 
The sanctions include dismissing the proceeding in whole or part, 
issuing a default judgment against the violator of the protective 
conditions, and such other relief as the Commission (or its authorized 
representative) deems appropriate. In addition, the rule provides that 
the Postal Service may pursue whatever remedies may be available to it 
under law against the violator as well as the entity on whose behalf 
that person was acting.

VIII. Public Representative

    Pursuant to 39 U.S.C. 505, Kenneth E. Richardson remains the 
officer of the Commission (Public Representative) to represent the 
interests of the general public in the captioned docket.

IX. Ordering Paragraphs

    It is Ordered:
    1. Interested persons may submit initial comments no later than 30 
days from the date of publication of this notice in the Federal 
Register.
    2. Reply comments may be filed no later than 45 days from the date 
of publication of this notice in the Federal Register.
    3. The Secretary shall arrange for publication of this notice in 
the Federal Register.

List of Subjects in 39 CFR Part 3007

    Administrative practice and procedure, Confidential business 
information, Postal Service.

    By the Commission.
Steven W. Williams,
Secretary.

    For the reasons discussed above, the Commission proposes to amend 
39 CFR chapter III by adding part 3007 to read as follows:

PART 3007--TREATMENT OF NON-PUBLIC MATERIALS PROVIDED BY THE POSTAL 
SERVICE

Sec.
3007.1 Definitions.
3007.2 Scope.
3007.3 Data or information requests.
3007.10 Submission of non-public materials under seal.
3007.20 Application for non-public treatment.
3007.21 Content of the Postal Service application for non-public 
treatment.
3007.22 Content of third-party application for non-public treatment.
3007.23 Treatment of non-public materials.
3007.24 Commission access to non-public materials.
3007.25 Use of non-public materials.
3007.30 Termination of non-public status.
3007.31 Request for early termination of non-public status.
3007.32 Preliminary determination of non-public status.
3007.33 Standard for decision for early termination of non-public 
status.
3007.40 Request for access to non-public materials.
3007.41 Termination of access to non-public materials.
3007.42 Standard for decision for request for access to non-public 
materials.
3007.50 Request for access to non-public materials relevant to 
compliance.
3007.51 Termination of access to non-public materials relevant to 
compliance.
3007.52 Standard for decision for request for access to non-public 
materials relevant to compliance.
3007.60 Limitations on access to non-public materials.
3007.61 Continued effectiveness of protective conditions.
3007.62 Sanctions for violations of protective conditions.
Appendix A to Part 3007--Statement of Compliance with Protective 
Conditions

    Authority:  39 U.S.C. 504.


Sec.  3007.1  Definitions.

    For purposes of this part:
    (a) Authorized representative means any Commissioner designated by 
the Chairman, any administrative law judge appointed by the Commission 
under 5 U.S.C. 3105, and any employee of the Commission designated by 
the Commission. The authorized representative may administer oaths, 
examine witnesses, take depositions, and receive evidence with respect 
to any proceeding before the Commission under title 39 of the U.S. Code 
or obtain information to assist the Commission in the preparation of a 
report or performance of a function under title 39 of the U.S. Code.
    (b) Non-public materials means any information, documents, and 
things filed with the Commission which are claimed to be exempt from 
disclosure by the Postal Service pursuant to 39 U.S.C. 504(g), 3652(f) 
or 3654(f), or claimed to be protectable under Federal Rule of Civil 
Procedure 26(c) by a third party with a proprietary interest in the 
materials.


Sec.  3007.2  Scope.

    The Commission or its authorized representative may require the 
Postal Service to provide any information, documents, and things in its 
possession or control, or any information, documents, and things that 
it can obtain through reasonable effort and expense, that are likely to 
materially assist the Commission in its conduct of proceedings, in its 
preparation of reports, or in performance of its functions under title 
39 of the U.S. Code. Information, documents, and things the Postal 
Service may be required to provide, include, but are not limited to, 
paper hard copy and electronically stored data and materials--including 
writings, notes, e-mails, drawings, graphs, charts, photographs, sound 
recordings, images, and other data or data compilations--stored in any 
medium from which information can be obtained either directly or, if 
necessary, after translation into a reasonably usable form; or any 
tangible things.


Sec.  3007.3  Data or information requests.

    (a) The Commission or its authorized representative may issue data 
or information requests to the Postal Service seeking information, 
documents, and things covered by Sec.  3007.2. A data or information 
request shall describe the documents, information, and things sought, 
briefly explain the reason for the request, and specify a timeframe for 
receiving the requested information and materials.
    (b) Any person may request that the Commission issue a data or 
information request for documents, information, and things covered by 
Sec.  3007.2 by filing a motion with the Commission, pursuant to Sec.  
3001.21 of this chapter, which describes the documents, information, 
and things sought, explains the reasons the Commission should make the 
request, and includes a statement of how the materials sought are 
relevant and material to the Commission's duties under title 39 of the 
U.S. Code.


Sec.  3007.10  Submission of non-public materials under seal.

    (a) Non-public materials shall not be filed electronically pursuant 
to Sec.  3001.9 of this chapter, but shall be filed in sealed envelopes 
clearly marked ``Confidential. Do Not Post on Web.'' The person filing 
the non-public materials shall submit two copies consisting, where 
practicable, of two paper hard copies as well as two copies in easily 
usable electronic form such as compact discs (CDs) or digital video 
discs (DVDs) of the non-public materials which shall also be clearly 
marked ``Confidential. Do Not Post on Web.'' Spreadsheets submitted in 
electronic form shall display the formulas used, their links to related 
spreadsheets, and shall not be password protected. All workpapers or 
data shall be submitted in a form, and be accompanied by sufficient 
explanation and documentation to allow them to be replicated using a 
publicly available PC

[[Page 13379]]

application. Each page of any paper hard copy non-public materials 
submitted shall be clearly marked as non-public.
    (b) The person submitting the non-public materials shall also file 
an electronic public (redacted) copy of the non-public materials 
pursuant to Sec.  3001.9 of this chapter. The electronic public 
(redacted) copy of the materials which are not spreadsheets, data 
files, or programs must be submitted in a searchable electronic format, 
but need not be submitted in its native format. As part of its publicly 
available electronic filing, the Postal Service must appropriately 
redact materials that contain both public and non-public information. 
For example, the Postal Service may not identify a whole page or a 
whole table as non-public materials if the page or table contains both 
public and non-public information, but must redact only the information 
it claims to be non-public. If practicable, the Postal Service shall 
sequentially number each page of the materials identified as non-
public.
    (c) The Postal Service shall use the graphical redaction (blackout) 
method for all redacted materials. Should the Postal Service wish to 
use any other method, it must state with particularity the competitive 
harm associated with use of the graphical redaction method to justify 
the use of any other method, and indicate the number of lines or pages 
removed at each redaction.
    (d) The Postal Service shall mark each page, item, and thing, or 
portion thereof, that it seeks to protect from disclosure in a manner 
reasonably calculated to alert custodians to the confidential nature of 
the information or materials.


Sec.  3007.20  Application for non-public treatment.

    (a) Whenever the Postal Service files non-public materials with the 
Commission, it shall at the same time file an application for non-
public treatment under Sec.  3007.21.
    (b) Before the Postal Service files non-public materials with the 
Commission which the Postal Service has reason to believe may implicate 
a third-party proprietary interest, the Postal Service shall inform 
each such third party:
    (1) Of the nature and scope of the filing with the Commission, 
including the pertinent docket, and
    (2) That it may address its confidentiality concerns directly with 
the Commission.
    (c) A third party with a proprietary interest in the materials may, 
if it deems necessary, independently seek non-public treatment under 
Sec.  3007.22.


Sec.  3007.21  Content of the Postal Service application for non-public 
treatment.

    (a) Whenever the Postal Service files non-public materials with the 
Commission, it must submit an application for non-public treatment that 
clearly identifies all non-public materials and describes the 
circumstances causing them to be submitted to the Commission.
    (b) An application for non-public treatment is to fulfill the 
burden of persuasion that the non-public materials should be withheld 
from the public.
    (c) The application for non-public treatment must include a 
specific and detailed statement setting forth:
    (1) The rationale for claiming that the materials are non-public, 
including the specific statutory basis for the claim, and a statement 
justifying application of the provision(s);
    (2) A description of the materials claimed to be non-public in a 
manner that, without revealing the materials at issue, would allow a 
person to thoroughly evaluate the basis for the claim that they are 
non-public;
    (3) Particular identification of the nature and extent of 
commercial harm alleged and the likelihood of such harm;
    (4) At least one specific hypothetical, illustrative example of 
each alleged harm;
    (5) The extent of protection from public disclosure deemed to be 
necessary;
    (6) The length of time deemed necessary for the non-public 
materials to be protected from public disclosure with justification 
thereof; and
    (7) Any other factors or reasons relevant to support the 
application.


Sec.  3007.22  Content of third-party application for non-public 
treatment.

    (a) The application for relief from public disclosure submitted by 
a party other than the Postal Service must clearly identify all 
materials believed to be protected from disclosure.
    (b) The application for non-public treatment must include a 
specific and detailed statement setting forth:
    (1) A description of the materials claimed to be non-public in a 
manner that, without revealing the materials at issue, would allow a 
person to thoroughly evaluate the basis for the claim that they are 
non-public;
    (2) Particular identification of the nature and extent of the harm 
alleged and the likelihood of such harm; and
    (3) Any other factors or reasons relevant to support the 
application.


Sec.  3007.23  Treatment of non-public materials.

    The Commission or its authorized representative will not publicly 
disclose or grant access to non-public materials except as provided in 
the rules of this part.


Sec.  3007.24  Commission access to non-public materials.

    (a) Non-public materials may be disclosed to the following persons:
    (1) Members of the Commission;
    (2) Commission employees including a public representative carrying 
out their appropriate responsibilities;
    (3) Contractors, attorneys, or other subject matter experts 
assisting the Commission in carrying out its statutory duties;
    (4) Reviewing courts and their staffs; or
    (5) Court reporters, stenographers, or persons operating audio or 
video recording equipment for such court reporters or stenographers at 
hearings or depositions.
    (b) Access to non-public materials for all persons not covered by 
this section is pursuant to Sec. Sec.  3007.40 and 3007.50.


Sec.  3007.25  Use of non-public materials.

    Except as pursuant to this part, persons with access to non-public 
materials under Sec.  3007.24 may not:
    (a) Use such materials for purposes other than the purposes for 
which they are supplied.
    (b) Permit anyone who is not allowed access under Sec.  3007.24 to 
have access to any such materials.


Sec.  3007.30  Termination of non-public status.

    Ten years after the date of filing with the Commission, non-public 
materials shall lose non-public status unless the Commission or its 
authorized representative enters an order extending the duration of 
that status.


Sec.  3007.31  Request for early termination of non-public status.

    (a) Any person may make a request to the Commission that non-public 
materials be publicly disclosed. Each such request shall provide a 
specific and detailed statement justifying why the non-public materials 
should be made public giving specific recognition to any pertinent 
rationale(s) provided in the application for relief submitted pursuant 
to Sec.  3007.21 or Sec.  3007.22. The request, however, shall not 
publicly disclose any of the non-public materials. If it is necessary 
to use the non-public materials to formulate the argument in favor of 
public disclosure, the argument utilizing the non-public materials 
shall be filed under seal.
    (b) Any interested person, including the Postal Service, may file a 
response to the request within 7 days after such

[[Page 13380]]

a request is filed, unless a longer period is specified by the 
Commission.
    (c) Unless the Commission otherwise provides, no reply to a 
response filed pursuant to paragraph (a) of this section shall be 
filed.
    (d) Following the filing of responses, if any, the Commission will 
issue an order determining the appropriate degree of protection, if 
any, to be accorded to the materials claimed to be non-public by the 
Postal Service or third party with a proprietary interest in the 
materials.


Sec.  3007.32  Preliminary determination of non-public status.

    (a) Whenever the Postal Service files non-public materials, the 
Commission may issue a notice of preliminary determination concerning 
the appropriate degree of protection, if any, to be accorded to such 
materials.
    (b) Any interested person, including the Postal Service, may file a 
response to the Commission's notice of preliminary determination within 
7 days after such a notice is filed, unless a longer period is 
specified.
    (c) Unless the Commission otherwise provides, no reply to a 
response filed pursuant to paragraph (b) of this section shall be 
filed.
    (d) Following the filing of responses, if any, the Commission will 
issue an order determining the appropriate degree of protection, if 
any, to be accorded to the materials claimed to be non-public by the 
Postal Service or third party with a proprietary interest in the 
materials.


Sec.  3007.33  Standard for decision for early termination of non-
public status.

    (a) In determining whether to publicly disclose non-public 
materials filed by the Postal Service, the Commission shall balance the 
nature and extent of the likely commercial injury identified by the 
Postal Service against the public interest in maintaining the financial 
transparency of a government entity competing in commercial markets.
    (b) In determining whether to publicly disclose non-public 
materials in which the Commission determines a third party has a 
proprietary interest, the Commission shall balance the interests of the 
parties based on Federal Rule of Civil Procedure 26(c).


Sec.  3007.40  Request for access to non-public materials.

    (a) During a Commission proceeding, any person may file a motion 
pursuant to Sec.  3001.21 of this chapter requesting access to non-
public materials. The motion shall include:
    (1) A detailed statement providing justification for access; and
    (2) A list of relevant affiliations, including employment or other 
relationship (including agent, consultant or contractor) with the party 
requesting access, and whether that party is affiliated with the 
delivery services, communications or mailing industries.
    (b) To expedite the process, each person seeking access to non-
public materials may attach to the motion an executed copy of the 
sample Commission protective conditions as provided in Appendix A of 
this part.
    (1) If an executed copy of the sample Commission protective 
conditions is attached, answers are due within 3 days after such a 
motion is filed.
    (2) If an executed copy of the sample Commission protective 
conditions is not attached, answers are due within 7 days after such a 
motion is filed.
    (c) Unless the Commission otherwise provides, no reply to an answer 
filed pursuant to paragraph (b)(1) or paragraph (b)(2) of this section 
shall be filed.
    (d) Following the filing of answers, if any:
    (1) The Commission will issue an order allowing or denying access 
and setting forth the appropriate protective conditions, if any, to be 
accorded non-public materials, or
    (2) If the Postal Service or third party with a proprietary 
interest does not contest a person's access subject to agreed 
protective conditions, the Commission or its authorized representative 
may issue an order allowing access subject to the agreed protective 
conditions.


Sec.  3007.41  Termination of access to non-public materials.

    (a) Except as provided in paragraph (b) of this section, access to 
non-public materials obtained under Sec.  3007.40 terminates either 
when the Commission issues a final order or report in the relevant 
proceeding or the person withdraws or is otherwise no longer involved 
in the proceeding, whichever occurs first. For purposes of this 
section, an order or report is not considered final until after the 
possibility of judicial review expires.
    (b) Access to non-public materials shall continue for persons 
seeking continued access under Sec.  3007.50.
    (c) Upon termination of access under paragraph (a) of this section, 
all non-public materials in a person's possession must be destroyed, 
and the form attached to the protective conditions certifying 
destruction must be executed and filed with the Commission.


Sec.  3007.42  Standard for decision for request for access to non-
public materials.

    In determining whether to grant a request for access to non-public 
materials, the Commission shall balance the interests of the parties 
based on Federal Rule of Civil Procedure 26(c).


Sec.  3007.50  Request for access to non-public materials relevant to 
compliance.

    (a) Any person may file a motion pursuant to Sec.  3001.21 of this 
chapter requesting access to, or continued access to, non-public 
materials relevant to compliance under 39 U.S.C. 3653. The motion shall 
include:
    (1) A detailed statement providing justification for access, 
including reference to the materials' relevance to compliance under 
chapter 36 of title 39 of the U.S. Code; and
    (2) A list of relevant affiliations, including employment or other 
relationship (including agent, consultant or contractor) with the party 
requesting access, and whether that party is affiliated with the 
delivery services, communications or mailing industries.
    (b) To expedite the process, each person seeking access to non-
public materials may attach to the motion an executed copy of the 
sample Commission protective conditions as provided in Appendix A of 
this part.
    (1) If an executed copy for the sample Commission protective 
conditions is attached, answers are due within 3 days after such a 
motion is filed.
    (2) If an executed copy of the sample Commission protective 
conditions is not attached, answers are due within 7 days after such a 
motion is filed.
    (c) Unless the Commission otherwise provides, no reply to an answer 
filed pursuant to paragraph (b)(1) or paragraph (b)(2) of this section 
shall be filed.
    (d) Following the filing of answers, if any:
    (1) The Commission will issue an order allowing or denying access 
and setting forth the appropriate protective conditions, if any, to be 
accorded the non-public materials, or
    (2) If the Postal Service or third party with a proprietary 
interest does not contest a person's access subject to agreed 
protective conditions, the Commission or its authorized representative 
may issue an order allowing access subject to the agreed protective 
conditions.


Sec.  3007.51  Termination of access to non-public materials relevant 
to compliance.

    (a) Access to non-public materials obtained under Sec.  3007.50 
terminates either when the Commission issues its

[[Page 13381]]

next Annual Compliance Determination (ACD) or the person withdraws or 
is otherwise no longer involved in the relevant proceeding, whichever 
occurs first.
    (b) Access to non-public materials shall continue for persons 
seeking continued access under Sec.  3007.50.
    (c) Upon termination of access under paragraph (a) of this section, 
all non-public materials in a person's possession must be destroyed, 
and the form attached to the protective conditions certifying 
destruction must be executed and filed with the Commission.


Sec.  3007.52  Standard for decision for request for access to non-
public materials relevant to compliance.

    In determining whether to grant a request for access to non-public 
materials relevant to compliance, the Commission shall balance the 
interests of the parties based on Federal Rule of Civil Procedure 

26(c).


Sec.  3007.60  Limitations on access to non-public materials.

    To afford appropriate confidentiality to non-public materials 
during any stage of a proceeding before the Commission, or in 
connection with any other purpose under title 39 of the U.S. Code, the 
Commission may, based on Federal Rule of Civil Procedure 26(c):
    (a) Prohibit the public disclosure of the non-public materials;
    (b) Specify terms for public disclosure of the non-public 
materials;
    (c) Order a specific method for disclosing the non-public 
materials;
    (d) Restrict the scope of the disclosure of the non-public 
materials as they relate to certain matters;
    (e) Restrict who may have access to non-public materials;
    (f) Require that a trade secret be revealed only in a specific and 
limited manner or to limited or specified persons; and
    (g) Order other relief as appropriate including, but not limited 
to, sealing a deposition or part of a proceeding.


Sec.  3007.61  Continued effectiveness of protective conditions.

    (a) If a court or other administrative agency subpoenas or orders 
production of non-public materials which a person has obtained under 
protective conditions ordered by the Commission, the target of the 
subpoena or order shall, within 2 days of receipt of the subpoena or 
order for production, notify the Postal Service of the pendency of the 
subpoena or order to allow the Postal Service time to object to the 
production or to seek a protective order or seek such other relief as 
it deems appropriate.
    (b) Any person seeking to disclose non-public materials to a 
reviewing court shall make a good faith effort to obtain protective 
conditions at least as effective as those set forth in the Commission 
order establishing the protective conditions.
    (c) Protective conditions ordered by the Commission or its 
authorized representative shall remain in effect throughout any 
subsequent review unless overridden by the action of the reviewing 
court.


Sec.  3007.62  Sanctions for violations of protective conditions.

    (a) No person who has been granted access to materials subject to 
protective conditions shall disseminate the materials in whole or in 
part to any person not authorized to obtain access under the protective 
conditions imposed by the Commission. If a person who has been granted 
access to such non-public materials under a protective order violates 
the terms of such order, the Commission or its authorized 
representative shall impose sanctions on the person who violated the 
protective order or the individuals or entities on whose behalf the 
person was acting, or both. The sanctions may include:
    (1) Dismissing the proceeding in whole or in part;
    (2) Ruling by default against the person who violated the 
protective order; and
    (3) Such other sanctions as the Commission or its authorized 
representative deems appropriate.
    (b) The Postal Service, in its discretion, may pursue any remedies 
available to it under the law against the individual who violated the 
protective order, or the individuals or entities on whose behalf the 
person was acting, or both.
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[FR Doc. E9-6891 Filed 3-26-09; 8:45 am]
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