[Federal Register Volume 88, Number 71 (Thursday, April 13, 2023)]
[Notices]
[Pages 22489-22492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07722]


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POSTAL REGULATORY COMMISSION

[Docket No. PI2023-3; Order No. 6479]


Classification of First-Class Package Service Product

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is initiating a proceeding to explore 
commenters' claims that the First-Class Package Service product may not 
be correctly classified as a Competitive product. This notice informs 
the public of the filing, invites public comment, and takes other 
administrative steps.

DATES: Comments are due: July 26, 2023; Reply Comments are due: August 
23, 2023.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by

[[Page 22490]]

telephone for advice on filing alternatives.

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

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Background
III. Invitation for Comments
IV. Ordering Paragraphs

I. Introduction

    In Order No. 6384, the Commission stated it would initiate a 
proceeding to explore commenters' claims that the First-Class Package 
Service (FCPS) product \1\ may not be correctly classified as a 
Competitive product.\2\ The Commission establishes this docket to 
examine those claims.
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    \1\ As defined in section 2125 of the Mail Classification 
Schedule (MCS), available at https://www.prc.gov/mail-classification-schedule.
    \2\ Docket No. CP2023-42, Order Approving Price Adjustments for 
Competitive Products, December 22, 2022, at 11 (Order No. 6384).
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II. Background

A. Statutory Framework

    Under the Postal Accountability and Enhancement Act (PAEA),\3\ 
postal products are separated into two distinct classifications: Market 
Dominant and Competitive. 39 U.S.C. 3621, 3631, 3642. Section 3642 of 
title 39 governs the addition of products to, removal of products from, 
or transfer of products (or components of a product) between the Market 
Dominant and Competitive product lists.\4\ The Commission may consider 
a change to a product's classification upon request of the Postal 
Service, upon request of users of the mail, or upon its own initiative. 
39 U.S.C. 3642(a). There is nothing to prevent transfer of only part of 
a product between product lists. 39 U.S.C. 3642(c).
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    \3\ Public Law 109-435, 120 Stat. 3198 (2006).
    \4\ 39 U.S.C. 3642. The implementing regulations for this 
section appear in 39 CFR part 3040.
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    The criteria for assigning a product to either the Market Dominant 
or Competitive product list are described in 39 U.S.C. 3642(b). These 
criteria include an assessment of the Postal Service's market power, 
whether or not the product is covered by the postal monopoly, the 
availability and nature of private sector competitors, the views of 
users of the product, and the likely impact on small businesses. Id. 
The market power criteria are specified in 39 U.S.C. 3642(b)(1), the 
postal monopoly criteria are specified in 39 U.S.C. 3642(b)(2), and the 
considerations related to private sector competitors, users of the 
product, and small businesses are specified in 39 U.S.C. 3642(b)(3).

B. Historical Classification of First-Class Package Service

    Until April 2011, the First-Class Mail Parcels (FCMP) product 
appeared on the Market Dominant list and included four price 
categories: Commercial Plus, Commercial Base, Retail Single-Piece, and 
Keys and Identification Devices.\5\ On February 24, 2011, the Postal 
Service filed a request with the Commission to transfer the Commercial 
Plus and Commercial Base categories to the Competitive product list and 
to provisionally rename them ``Lightweight Commercial Parcels.'' \6\ 
The Lightweight Commercial Parcels product was proposed to be identical 
to the Commercial categories of FCMP, except that items classified as 
``letters'' would be prohibited. Docket No. MC2011-22, Notice at 2. The 
Postal Service did not request transfer of the Retail Single-Piece or 
Keys and Identification Devices subcategories at that time. The 
transfer was unopposed. Order No. 710 at 3-5. On April 6, 2011, the 
Commission granted the Postal Service's transfer request.
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    \5\ Docket No. MC2011-22, Order Adding Lightweight Commercial 
Parcels to the Competitive Product List, April 6, 2011, at 2 (Order 
No. 710).
    \6\ Docket No. MC2011-22, Request of the United States Postal 
Service Under Section 3642, February 24, 2011, at 1 (Docket No. 
MC2011-22, Notice).
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    On August 12, 2011, the Postal Service requested to change the 
provisional Lightweight Commercial Packages name to Commercial First-
Class Package Service.\7\ The Postal Service also requested to remove 
the letter prohibition from the Commercial Plus price category, as 
Commercial Plus prices were more than six times the price of a 1-ounce 
Single-Piece First-Class Mail Letter and thus not subject to the postal 
monopoly. Docket No. MC2011-28, Notice at 2. On August 31, 2011, the 
Commission granted the Postal Service's requests.\8\
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    \7\ Docket No. MC2011-28, Notice of Minor Classification Change, 
August 12, 2011, at 1 (Docket No. MC2011-28, Notice).
    \8\ Docket No. MC2011-28, Order Regarding Commercial First-Class 
Package Service, August 31, 2011, at 8 (Order No. 835).
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    On November 14, 2014, the Postal Service proposed to transfer the 
remaining two price categories of FCMP: Retail Single-Piece and Keys 
and Identification Devices to the Competitive product list.\9\ The 
Postal Service noted that some large commercial mailers used both 
Retail Single-Piece FCMP and Commercial FCPS, suggesting that the 
products served a single market. Docket No. MC2015-7, Notice, 
Attachment B at 3. The Postal Service further stated that the new 
combined FCPS product would compete in the 2-3-day air and ground 
parcel markets and would not have a dominant share of those markets. 
Id. at 4. On August 26, 2015, the Commission denied the Postal 
Service's transfer request on the grounds that the Postal Service had 
not presented sufficient evidence for the Commission to determine the 
market in which Retail Single-Piece FCMP operated.\10\ The Postal 
Service filed a petition for review of Order No. 2686 with the United 
States Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit). On December 6, 2016, the D.C. Circuit granted the petition 
for review and remanded Order No. 2686 to the Commission for further 
proceedings.\11\ The D.C. Circuit noted that the Postal Service had 
supplied the same type of market share data that the Commission 
previously relied upon when approving previous transfer requests. U.S. 
Postal Serv., 842 F.3d at 1273. The D.C. Circuit explained that by 
rejecting that data as insufficient, the Commission had changed the 
nature of proof required to demonstrate a lack of market power compared 
to the previous transfer dockets but had neither acknowledged nor 
explained its change in course. Id. The D.C. Circuit noted that the 
previous transfers were not materially different from the proposed 
transfer and concluded that the Commission was obliged to 
``forthrightly distinguish or outrightly reject'' its precedent 
established in the previous transfer orders when deciding to change 
course. Id. at 1274. As the Commission had not done so in Order No. 
2686, the D.C. Circuit remanded the case to the Commission for further 
proceedings. Id.
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    \9\ Docket No. MC2015-7, Request of the United States Postal 
Service to Transfer First-Class Mail Parcels to the Competitive 
Product List, November 14, 2014, at 1 (Docket No. MC2015-7, Notice).
    \10\ Docket No. MC2015-7, Order Denying Transfer of First-Class 
Mail Parcels to the Competitive Product Category, August 26, 2015, 
at 1 (Order No. 2686).
    \11\ U.S. Postal Serv. v. Postal Regul. Comm'n, 842 F.3d 1271 
(D.C. Cir. 2016) (per curiam).
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    Following the D.C. Circuit's remand, the Postal Service updated its 
original proposal and provided additional information in response to a 
Chairman's Information Request.\12\
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    \12\ Docket No. MC2015-7, Order Conditionally Approving 
Transfer, July 20, 2017, at 2-3 (Order No. 4009); see Docket No. 
MC2015-7, Response of the United States Postal Service to Chairman's 
Information Request No. 2, June 26, 2017 (Docket No. MC2015-7, 
Response to CHIR No. 2).
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    Based on this data and other updates occurring in the interim 
between the original proposed transfer and the

[[Page 22491]]

updated proposal, the Commission found that the Postal Service did not 
possess power over the market for Retail Single-Piece FCMP or the 
combined FCPS product and approved the transfer. Id. at 32-34, 40. The 
Commission observed that the market share of the combined FCPS product 
had decreased since FY 2013, and that price increases to the Retail 
Single-Piece FCMP product had coincided with decreased volume. Id. at 
31, 33. The Commission further determined that transfer of the product 
would not violate the postal monopoly. Id. at 34-35. Finally, the 
Commission concluded that the transfer was justified in consideration 
of the factors set forth in 39 U.S.C. 3642(b)(3). Id. at 37.

C. Recent Developments Regarding First-Class Package Service

    On June 17, 2021, the Postal Service filed a request for an 
advisory opinion on its proposal to revise the service standards for 
FCPS, effective October 1, 2021.\13\ Specifically, the Postal Service 
sought to lengthen the service standards by 1 to 2 additional days for 
approximately 31.2 percent of FCPS volume and to shorten the service 
standards by 1 day for approximately 4.8 percent of FCPS volume.\14\ 
The Commission concluded, among other things, that the Postal Service's 
stated goals appeared reasonable and that the proposed changes should 
have a positive impact on the Postal Service's ability to meet its 
performance targets. Docket No. N2021-2, Advisory Opinion at 3. 
However, the Commission also noted certain concerns with the Postal 
Service's modeling of cost savings, transportation efficiencies, and 
network operations. Id. at 3-4.
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    \13\ Docket No. N2021-2, United States Postal Service Request 
for an Advisory Opinion on Changes in the Nature of Postal Services, 
June 17, 2021, at 1 (Docket No. N2021-2, Request).
    \14\ Docket No. N2021-2, Advisory Opinion on the Service 
Standard Changes Associated with First-Class Package Service, 
September 29, 2021, at 1-2 (Docket No. N2021-2, Advisory Opinion).
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    On July 13, 2022, the Postal Service filed with the Commission a 
request to expand the FCPS product up to 70 pounds, with corresponding 
changes to the size (dimension) limitations and pricing tiers.\15\ 
However, the Postal Service later informed the Commission that the 
changes would be postponed to such time in calendar year 2023 as 
management deemed appropriate.\16\
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    \15\ Docket No. MC2022-82, USPS Notice of Changes in 
Classifications of General Applicability for Competitive Products, 
July 13, 2022, at 1-2 (Docket No. MC2022-82, Notice).
    \16\ Docket Nos. MC2022-81 and MC2022-82, USPS Notice of Revised 
Effective Date, Pursuant to Governors' Decision 22-4, August 16, 
2022, at 1-2.
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    On October 28, 2022, the Commission approved the Postal Service's 
proposed classification changes.\17\ The Commission determined that the 
Postal Service's request to remove USPS Retail Ground from the 
Competitive product list satisfied the requirements of 39 U.S.C. 3642 
and the Commission's regulations. Order No. 6318 at 13. The Commission 
determined that the proposed changes would likely have a positive 
effect on users of FCPS and small businesses and would not likely have 
a material effect on competitors. Id. at 18.
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    \17\ Docket Nos. MC2022-81 and MC 2022-82, Order Removing USPS 
Retail Ground from the Competitive Product List and Approving 
Competitive Classification Changes to First-Class Package Service 
and Parcel Select, October 28, 2022, at 1 (Order No. 6318).
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    On November 14, 2022, the Commission established Docket No. CP2023-
42 to consider the Postal Service's notice concerning changes in rates 
and classifications of general applicability for Competitive products, 
which were scheduled to take effect on January 22, 2023.\18\ In its 
notice, the Postal Service proposed a 6.9 percent average price 
increase for Retail FCPS and an 8.0 percent average price increase for 
Commercial FCPS. Order No. 6327 at 3.
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    \18\ Docket No. CP2023-42, Notice and Order Concerning Changes 
in Rates and Classifications of General Applicability for 
Competitive Products, November 14, 2022, at 1 (Order No. 6327).
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    On December 22, 2022, the Commission approved the Postal Service's 
proposed rate changes. Order No. 6384 at 1. In so doing, the Commission 
concluded that the commenters' claims that the Commission erred in 
transferring FCPS to the Competitive product list were beyond the scope 
of the proceeding. Id. at 10. The Commission further noted that the 
increase in FCPS prices and recent changes to FCPS service standards 
cited by the commenters did not, on their own, establish that the 
Postal Service took such actions without risk of losing significant 
business to competitors. Id. (citing 39 U.S.C. 3642(b)(1)). The 
Commission stated that it would ``explore commenters' claims that FCPS 
may not be correctly classified as a Competitive product'' in a 
separate proceeding. Id. at 11.
    On February 10, 2023, the Postal Service filed a notice of rate 
adjustment for Competitive products in which it proposed rates of 
general applicability for the expanded FCPS product, up to 70 pounds, 
effective July 9, 2023.\19\ In addition, the Postal Service proposed 
renaming the enhanced and expanded product ``USPS Ground Advantage.'' 
Docket No. CP2023-113, Notice at 1. The Postal Service also stated that 
Certificate of Mailing and Certified Mail would be removed from the 
list of optional features for USPS Ground Advantage, and that it was 
submitting two additional minor corrections to the MCS. Id. at 4. Those 
proposed changes are currently pending before the Commission in Docket 
Nos. CP2023-113 and CP2023-114.
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    \19\ Docket No. CP2023-113, USPS Notice of Changes in Rates and 
Classifications of General Applicability for First-Class Package 
Service, February 10, 2023, at 2-3 (Docket No. CP2023-113, Notice).
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III. Invitation for Comments

    The Commission invites interested persons to comment on whether 
FCPS, as currently defined, is properly classified as a Competitive 
product. Specifically, the Commission invites comments, as well as 
supporting evidence and analysis, regarding the relevant market(s) in 
which FCPS operates and the Postal Service's market power in such 
market(s), that could either call into question or support the 
Commission's previous determination that the Postal Service could not 
effectively set the price of FCPS substantially above costs, raise 
prices significantly, decrease quality, or decrease output, without 
risk of losing a significant level of business to other firms offering 
similar products.\20\ In addition, in light of the Postal Service's 
proposed expansion and enhancement of FCPS and its proposed renaming to 
USPS Ground Advantage, commenters questioning the Competitive 
classification of FCPS should also discuss whether any portion of the 
proposed USPS Ground Advantage product should be classified as Market 
Dominant and provide supporting analysis addressing the criteria set 
out in 39 U.S.C. 3642(b) and prior Commission decisions applying 
section 3642(b).
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    \20\ Order No. 4009 at 33 (citing 39 U.S.C. 3642(b)(1)).
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    Comments are due on July 26, 2023. Any reply comments are due on 
August 23, 2023. Materials filed in this docket will be available for 
review on the Commission's website at http://www.prc.gov. Pursuant to 
39 U.S.C. 505, Kenneth R. Moeller will serve as an officer of the 
Commission (Public Representative) to represent the interests of the 
general public in this docket.


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    By the Commission.
Mallory Richards,
Attorney-Advisor.
[FR Doc. 2023-07722 Filed 4-12-23; 8:45 am]
BILLING CODE 7710-FW-P