Notice2023-07722
Classification of First-Class Package Service Product
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 13, 2023
Issuing agencies
Postal Regulatory Commission
Abstract
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.
Full Text
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<title>Federal Register, Volume 88 Issue 71 (Thursday, April 13, 2023)</title>
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[Federal Register Volume 88, Number 71 (Thursday, April 13, 2023)]
[Notices]
[Pages 22489-22492]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <a href="http://www.prc.gov">http://www.prc.gov</a>. 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 <a href="https://www.prc.gov/mail-classification-schedule">https://www.prc.gov/mail-classification-schedule</a>.
\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 <a href="http://www.prc.gov">http://www.prc.gov</a>. 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.
[[Page 22492]]
By the Commission.
Mallory Richards,
Attorney-Advisor.
[FR Doc. 2023-07722 Filed 4-12-23; 8:45 am]
BILLING CODE 7710-FW-P
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