[Federal Register Volume 85, Number 35 (Friday, February 21, 2020)]
[Proposed Rules]
[Pages 10120-10121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03428]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2020-5; Order No. 5433]


Market Dominant Postal Products

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is proposing revisions to its rules concerning 
rate incentives for market dominant products to clarify the definition 
of ``rate of general applicability'' within the context of a market 
dominant price adjustment proceeding; to add an additional criterion 
for a rate incentive to be included in a percentage change in rates 
calculation at discounted prices; and to state clearly what information 
the Postal Service must file to support a claim that a rate incentive 
meets the necessary criteria to be included in a percentage change in 
rates calculation at discounted prices. The Commission invites public 
comment on the propose rules.

DATES: Comments are due: March 23, 2020.

ADDRESSES: For additional information, Order No. 5433 can be accessed 
electronically through the Commission's website at https://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Basis for Proposed Rule Change
III. Proposed Rule

I. Background

    The Commission's rules permit the Postal Service, when adjusting 
market dominant rates as part of a market dominant rate adjustment 
proceeding, to include discounted prices for rate incentives that the 
Postal Service plans to offer in the percentage change in rates 
calculation, as long as the rate incentive meets certain criteria. 39 
CFR 3010.23(e). These criteria are: (1) That the rate incentive is in 
the form of a discount or can be easily translated into a discount; (2) 
that sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rates calculation; 
and (3) that the rate incentive is a rate of general applicability. 39 
CFR 3010.23(e)(2). The Commission's rules also require the Postal 
Service to provide ``sufficient information to demonstrate that the 
rate incentive is a rate of general applicability.'' 39 CFR 
3010.12(b)(9)(i).
    When the Commission promulgated rules with regard to the treatment 
of market dominant rate incentives, it included a specific definition 
of ``rate of general applicability'' in the context of market dominant 
rate adjustments which provided, inter alia, that ``[a] rate is not a 
rate of general applicability if eligibility for the rate is dependent 
on factors other than the characteristics of the mail to which the rate 
applies.'' 39 CFR 3010.1(g). The Commission explained that mail volume 
sent by a mailer in a previous year is not a characteristic of the mail 
to which rates under an incentive program apply.\1\
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    \1\ See Docket No. RM2014-3, Order Adopting Final Rules on the 
Treatment of Rate Incentives and De Minimis Rate Increases for Price 
Cap Purposes, June 3, 2014, at 15-16 (Order No. 2086).
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    In the most recent market dominant rate adjustment proceeding, the 
Postal Service sought to include a rate incentive in the percentage 
change in rates calculation that featured the following terms. First, a 
2-cent ``base'' credit per qualifying mailpiece was offered to mailers 
who sent out Business Reply Mail, Courtesy Reply Mail, and/or Share 
Mail enclosures which were subsequently returned or forwarded by the 
recipients.\2\ For new participants, there was no required volume 
threshold in order to be eligible to participate in the incentive 
program. Id. For repeat participants, they had to meet or exceed 93 
percent of their returns from the prior year in order to remain 
eligible. Id. In addition, repeat participants whose returns exceeded 
100 percent of their returns from the prior year were eligible for an 
additional 2-cent ``bonus'' credit (for a total of 4 cents per 
qualifying mailpiece). Id. A question arose as to whether the ``base'' 
tier of the incentive program, the ``bonus'' tier, both, or neither 
constituted ``rates of general applicability'' appropriate for 
inclusion in the percentage change in rates calculation at discounted 
prices. Id. at 17, 19-24.
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    \2\ Docket No. R2020-1, Order on Price Adjustments for USPS 
Marketing Mail, Periodicals, Package Services, and Special Services 
Products and Related Mail Classification Changes, November 22, 2019, 
at 16-17 (Order No. 5321).
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    The Commission found that the Postal Service had failed to provide 
sufficient information to demonstrate that the rate incentive in 
question was a rate of general applicability, as required by Sec.  
3010.12(b)(9)(i). Id. at 22. Nevertheless, upon considering the matter, 
the Commission determined that a potential ambiguity existed in the 
Commission's rules concerning whether a rate incentive featuring a 
mailer-specific volume threshold based on historical volume data could 
constitute a ``rate of general applicability.'' Id. at 23-24. The 
Commission permitted both tiers of the promotion to be included in the 
percentage change in rates calculation in Docket No. R2020-1, but 
indicated that it would initiate a rulemaking to clarify this issue. 
Id.

II. Basis for Proposed Rule Change

    The Commission proposes to clarify its rules by making three 
revisions. First, the Commission proposes to amend Sec.  3010.1(g) to 
clarify that in order to qualify as a rate of general

[[Page 10121]]

applicability, a rate cannot be based on mailer-specific data, such as 
historical mailer volume. Second, the Commission proposes to amend 
Sec.  3010.23(e)(2) to add an additional criterion for a rate incentive 
to be eligible for inclusion in a percentage change in rates 
calculation at discounted prices--the rate incentive must be made 
available to all mailers equally on the same terms and conditions.
    The Commission's basis for proposing these revisions is twofold. 
The Commission is concerned that interpreting ``rate of general 
applicability'' to permit volume thresholds based on historical volume 
data would contravene the policy reasons underlying the general 
applicability requirement, because, as the Commission has found before, 
``volume sent by a mailer in a previous year is not a characteristic of 
the mail to which rates under [an] incentive program apply[,]'' due to 
the fact that past behavior by mailers bears no relationship to mail 
being sent in the present. See Order No. 2086 at 15. The Commission is 
equally concerned about the fairness of permitting mailer-specific 
thresholds for determining eligibility for market dominant rate 
incentives. Where a rate incentive is not made available to all mailers 
on the same terms and conditions, the potential exists for non-
qualifying mailers to be forced to subsidize the rate incentives 
received by qualifying mailers.
    The third revision the Commission is proposing is to amend Sec.  
3010.12(b)(9) to add additional requirements intended to ensure that 
the Postal Service provides sufficient information at the outset of a 
market dominant rate adjustment proceeding to permit the Commission and 
stakeholders to verify that all rate incentives included in a 
percentage change in rates calculation comply with the definition of 
``rates of general applicability'' and are made available to all 
mailers equally on the same terms and conditions.

III. Proposed Rule

    Proposed Sec.  3010.1(g). Proposed Sec.  3010.1(g) is revised to 
state clearly that the definition of ``rate of general applicability'' 
within the context of a market dominant rate adjustment proceeding 
means a rate incentive that is not based on mailer-specific data, such 
as historical volume data.
    Proposed Sec.  3010.12(b)(9). Proposed Sec.  3010.12(b)(9) is 
revised to state clearly what information the Postal Service must file 
to support its claim that a rate incentive meets the necessary criteria 
to be included in a percentage change in rates calculation.
    Proposed Sec.  3010.23(e)(2)(iv). Proposed Sec.  3010.23(e)(2)(iv) 
is added to make it a criterion for a market dominant rate incentive to 
be included in a percentage change in rates calculation that the 
incentive be available to all mailers equally on the same terms and 
conditions.

List of Subjects in 39 CFR Part 3010

    Administrative practice and procedure, Postal Service.

    For the reasons stated in the preamble, the Commission proposes to 
amend chapter III of title 39 of the Code of the Federal Regulations as 
follows:

PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS

0
1. The authority citation for part 3010 continues to read as follows:

    Authority:  39 U.S.C. 503; 3622.

0
2. Amend Sec.  3010.1 by revising paragraph (g) to read as follows:


Sec.  3010.1   Definitions.

* * * * *
    (g) Rate of general applicability means a rate applicable to all 
mail meeting standards established by the Mail Classification Schedule, 
the Domestic Mail Manual, and the International Mail Manual. A rate is 
not a rate of general applicability if eligibility for the rate is 
dependent on factors other than the characteristics of the mail to 
which the rate applies, including the volume of mail sent by a mailer 
in a past year or years. A rate is not a rate of general applicability 
if it benefits a single mailer. A rate that is only available upon the 
written agreement of both the Postal Service and a mailer, a group of 
mailers, or a foreign postal operator is not a rate of general 
applicability.
* * * * *
0
3. Amend Sec.  3010.12 by revising paragraph (b)(9) to read as follows:


Sec.  3010.12   Contents of notice of rate adjustment.

* * * * *
    (b) * * *
    (9) For a notice that includes a rate incentive:
    (i) Whether the rate incentive is being treated under Sec.  
3010.23(e)(2) or under Sec.  3010.23(e)(1) and Sec.  3010.24.
    (ii) If the Postal Service seeks to include the rate incentive in 
the calculation of the percentage change in rates under Sec.  
3010.23(e)(2), whether the rate incentive is available to all mailers 
equally on the same terms and conditions.
    (iii) If the Postal Service seeks to include the rate incentive in 
the calculation of the percentage change in rates under Sec.  
3010.23(e)(2), sufficient information to demonstrate that the rate 
incentive is a rate of general applicability, which at a minimum 
includes: the terms and conditions of the rate incentive; the factors 
that determine eligibility for the rate incentive; a statement that 
affirms that the rate incentive will not benefit a single mailer; and a 
statement that affirms that the rate incentive is not only available 
upon the written agreement of both the Postal Service and a mailer, or 
group of mailers, or a foreign postal operator.
* * * * *
0
4. Amend Sec.  3010.23 by revising paragraph (e)(2) to read as follows:


Sec.  3010.23   Calculation of percentage change in rates.

* * * * *
    (e) * * *
    (2) A rate incentive may be included in a percentage change in 
rates calculation if it meets the following criteria:
    (i) The rate incentive is in the form of a discount or can easily 
be translated into a discount;
    (ii) Sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rate calculation 
for the class, which may be adjusted based on known mail 
characteristics or historical volume data (as opposed to forecasts of 
mailer behavior);
    (iii) The rate incentive is a rate of general applicability; and
    (iv) The rate incentive is made available to all mailers equally on 
the same terms and conditions.

    By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2020-03428 Filed 2-20-20; 8:45 am]
BILLING CODE 7710-FW-P