[Federal Register: September 14, 1999 (Volume 64, Number 177)]
[Notices]
[Page 49824-49826]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14se99-145]

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POSTAL RATE COMMISSION

[Docket No. C99-4; Order No. 1260]


Complaint Concerning Bulk Parcel Return Service Fee

AGENCY: Postal Rate Commission.

ACTION: Notice of a new complaint docket.

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SUMMARY: The Commission is instituting a docket to consider a complaint
regarding the consistency of the $1.75 fee for Bulk Parcel Return
Service (BPRS) fee with postal law and policies. It is also authorizing
settlement discussions and discovery. These steps will foster
expeditious consideration of issues raised in the complaint.

DATES: Participants may explore the potential for settlement until
September

[[Page 49825]]

17, 1999. If settlement discussions are not productive, complainant
shall file, on or about September 17, 1999, an estimate of time needed
to prepare its case. Discovery may be initiated through September 17,
1999.

ADDRESSES: Send comments regarding this document to the attention of
Margaret P. Crenshaw, Secretary, Postal Rate Commission, 1333 H Street
NW., Suite 300, Washington, DC 20268-0001.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
Postal Rate Commission, 1333 H Street NW., Suite 300, Washington, DC
20268-0001, 202-789-6824.

SUPPLEMENTARY INFORMATION: In order no. 1260, issued September 3, 1999,
the Commission denied the motion of the United States Postal Service to
dismiss a complaint and instituted formal proceedings. The complaint
had been filed June 9, 1999, by the Continuity Shippers Association
(CSA) against the Postal Service pursuant to 39 U.S.C. 3662. See
Complaint Concerning Charges and Practices Applied to Ancillary
Services for Standard (A) Merchandise Mail (Complaint). The complaint
contends that the rate charged for undeliverable merchandise returned
to the sender under Bulk Parcel Return Service (BPRS) is excessive and
inconsistent with the cost and non-cost criteria of the Postal
Reorganization Act (Act). Id. at 1. The complaint further maintains
that BPRS offered to Standard (A) mailers does not conform to title 39
policies. Ibid.
    In response, the Postal Service argues that the attributable costs
and mark-up for BPRS accurately reflect both the underlying costs and
the special service provided to mailers by BPRS. Answer of United
States Postal Service (Answer), July 9, 1999, at 4-5. The Service
suggests that the complainant has reached erroneous conclusions based
in part on a misunderstanding of the cost methodology of a BPRS cost
study. Id. at 4. Accordingly, the Postal Service requests that the
Commission dismiss the complaint. Id. at 5. Although the Postal Service
has not filed a formal motion to dismiss the complaint, it does request
dismissal of the complaint in its answer, primarily based on the
argument that complainant's allegations of discrimination and other
violations of the Act are unsupported. Answer at 5. As such, the
Commission construes the Postal Service's answer as effectively a
motion to dismiss the complaint. For the reasons discussed herein, the
Commission denies the Service's motion and initiates formal proceedings
to consider the complaint.

Background

    Under the Domestic Mail Classification Schedule (DMCS), the Postal
Service will return to the sender properly endorsed merchandise which
has been ordered by consumers but is undeliverable as addressed. For
merchandise mail pieces weighing less than one pound that are mailed at
bulk Standard (A) rates, qualifying senders may choose to have the
merchandise returned via Bulk Parcel Return Service (BPRS). Prior to
institution of BPRS, senders could have Standard (A) merchandise
returned at the Standard (A) single piece rate. BPRS was implemented on
October 12, 1997, and charges the flat fee of $1.75 for each eligible
Standard (A) parcel.

Substance of the Complaint

    This complaint concerns the Postal Service's return service for
merchandise mailed at the bulk Standard (A) rates and electing to use
BPRS at the rate of $1.75 per piece. Complainant CSA alleges that the
BPRS rate is excessive and in contravention of the Act. Complaint at 1.
(CSA states that it is an interested party representing Standard (A)
mailers who use BPRS. Complaint at 2. In its answer, the Postal Service
characterizes the complainant as ``one of a small subset of Standard
(A) mailers with particular types of mail, mailing practices, business
needs, and experience with the Postal Service, which may differ from
those of other Standard (A) mailers.'' Answer at 2.) CSA bases its
allegations in substantial part on a comparison of the BPRS rate (and
cost coverage) with the generally lower Special Standard (B) rates.
According to CSA, this comparison is valid as: (1) Special Standard (B)
and Standard (A) parcels share several significant characteristics,
including the manner in which the Postal Service processes, transports
and delivers these mail pieces; (2) certain mail pieces which are
eligible for the BPRS rate also are eligible to be returned to sender
at the lower Special Standard (B) rates; and (3) the Special Standard
(B) attributable cost was used by the Postal Service as a proxy for the
BPRS attributable cost in setting the BPRS rate. Id. at 2-3. (Special
Standard (B) mail need not weigh more than 16 ounces. CSA claims that
many parcels that weigh less than one pound and are eligible for
Special Standard (B) rates are mailed initially at bulk Standard (A)
rates, but are returned to the sender under the lower, single-piece
Special Standard (B) rates.) Complaint at 2.
    In support of its claim that the rates charged by BPRS are not
``fair and equitable'' and therefore contravene 39 U.S.C. 3622(b)(1)
and 3623(c)(1), CSA cites the October 1998 Postal Service cost study on
BPRS. Id. at 4-5. That study, which was completed as a requirement of
the original BPRS classification case (docket no. MC97-4) indicated a
BPRS attributable cost of $0.93 per piece. Id. at 4. With a per piece
rate of $1.75 and a per piece attributable cost of $0.93, the mark-up
for BPRS would be $0.82 or 188 percent cost coverage, which CSA argues
is unjustifiably higher than the current cost coverage of 106 percent
for Special Standard (B) mail. Id. at 4-5.

    Note: CSA alleges that, on or around January 1999, the Postal
Service announced that the BPRS cost study was flawed, as the
attributable cost had been determined using an incorrect
methodology. Complaint at 4, n. 1. The Service further stated that
application of the correct methodology yields an attributable cost
of $1.07 for BPRS mail pieces. Ibid. CSA maintains that this revised
attributable cost figure, which remains undocumented despite
requests, is the same as that calculated for Special Standard (B) in
the Docket No. R97-1 rate case, and results in a BPRS cost coverage
of 164 percent. Ibid. CSA argues that the widely divergent rates
imposed for the BPRS and Special Standard (B) when the costs are the
same are in contravention of 39 U.S.C. 3622(b)(3), which requires
that each mail type bear only its direct and indirect attributable
costs, plus a reasonable allocation of institutional costs.
Complaint at 5.

    As relief, CSA requests that the Commission institute proceedings
to review the adequacy and accuracy of the cost studies underlying the
BPRS rate and to consider whether the BPRS rate properly reflects the
service's costs and its value to the sender and recipient. Id. at 5-6;
CSA's Request for Permission to File a Response Opposing the Postal
Service's Suggestion Not to Hold Hearings on the Complaint Regarding
the Charges for the BPRS (CSA Opposition), August 18, 1999, at 2.

Postal Service Answer and Motion To Dismiss

    The Postal Service's answer denies complainant's allegations that
the BPRS rate violates the Act, and also disputes the legitimacy of
CSA's comparison of BPRS and Special Standard (B) services. Answer of
United States Postal Service (Answer) at 1-4. The answer further
asserts that the complaint should be dismissed as complainant: (1)
Misunderstands the original BPRS cost study's methodology, which
ultimately results in the erroneous conclusion that the costs of the
two subclasses are the same; (2) makes the incorrect assumption that
BPRS and Special Standard (B) cost coverages should be

[[Page 49826]]

equivalent, which ignores the differences between the two mail types
and the correct application of the non-cost factors of the Act; and (3)
fails to consider ``the import of differences between the Postal
Service's volume variable analysis and the Commission's attributable
cost methodology with respect to the BPRS fee,'' where a recalculation
of the October cost study using Commission R97-1 methodology results in
a cost coverage very close to the Commission's original recommended
figure (163.5 versus 156 percent). Id. at 4-5.
    The answer presents arguments against the validity of complainant's
claim, and requests that the Commission dismiss the complaint. The
Commission construes the answer to include a Postal Service motion to
dismiss the Complaint, and accepts the responsive CSA Opposition.

Statutory Authority To Consider Complaint and Procedural Process

    Section 3662 of title 39 of the United States Code provides in
relevant part:

    Interested parties who believe the Postal Service is charging
rates which do not conform to the policies set out in this title * *
* may lodge a complaint with the Postal Rate Commission in such form
and in such manner as it may prescribe. The Commission may in its
discretion hold hearings on such complaint.

Section 3001.82 of the Commission's regulations, which addresses the
scope and nature of complaints, indicates that the Commission shall
entertain complaints which clearly raise an issue concerning whether or
not rates or services contravene the policies of the Postal
Reorganization Act.
    In the instant docket, CSA has filed a complaint alleging that the
current BPRS rate contravenes title 39 policies. While the Postal
Service offers varying explanations for why complainant is mistaken in
its assertion, the Service has failed to provide adequate justification
for dismissal of the complaint without hearings. Accordingly, the
Commission will consider the complaint, although it notes that the
recent establishment of the BPRS rate through a settlement agreed to by
CSA, and the expectation that an omnibus rate request will be submitted
in the near future, would seem to provide a situation where it may be
possible for the parties to pursue resolution and settlement of the
complaint through informal procedures, as provided for in rule 85 of
the Commission's rules of practice.
    The Commission will allow until September 17, 1999 for participants
to explore the potential for settlement. Discovery may be initiated
during this period. If settlement discussions are not productive,
complainant is directed to provide a statement, on or about September
17, 1999, estimating the amount of time it will require to develop and
file a case-in-chief. A procedural schedule and special rules of
practice, if any, will be considered after this estimate has been
submitted.

Directives

    Accordingly, the Commission orders that proceedings in conformity
with 39 U.S.C. 3624 shall be held in this matter. It also denies the
Service's suggestion (included within the answer of United States
Postal Service, filed on July 9, 1999) that the complaint should be
dismissed. The Commission will sit en banc in this proceeding. Ted P.
Gerarden, director of the Commission's office of the consumer advocate,
is designated to represent the interests of the general public in
docket no. C99-4. Mr. Gerarden is also charged with acting as
settlement coordinator, and in this capacity shall encourage parties to
reach settlement on this complaint, as provided for under rule 85 of
the Commission's rules of practice and procedure. Complainant shall
provide a statement, on or about September 17, 1999, estimating the
amount of time it will require to develop and file a direct case in
this proceeding. The Commission also directs the Secretary of the
Commission to arrange for publication of this notice and order in the
Federal Register in a manner consistent with applicable requirements.
Margaret P. Crenshaw,
Secretary.
[FR Doc. 99-23674 Filed 9-13-99; 8:45 am]
BILLING CODE 7710-FW-P