bell morning and your honest may please deport the issue before the court martial it boils down to whether the commission arbitrarily defined the market in which the mail delivery of d specifically is d v d by mail service market unto itself or is a part of a broader market that includes other delivery networks over which movies and other related content are distributed more box and the question is how do you get the box from from point a to point b and there it seems pretty clear that the competitive competitive alternatives are the u p s that here the issue is in the box i mean they're the product isn't a box the product is a movie the product is d by mail service is that a market unto itself or does it compete with other services that use other delivery channels and then the second question was even if it does even if the market is competitive in that sense that may put competitive pressure on netflix and game fly but it doesn't necessarily in turn constrain the price of the postal service can charge the direct customers what the commission did was address the first question whether d v d by mail is part of a broader market and answer that answer came the answer no and then didn't really reach the second question but isn't that really i mean this is different this standard is the same as under antitrust law but very fundamentally different is that the burden is different it's question about about the effect of what the effect of our prices on demand you first have to establish what is the market price and here we don't have a market price we have a our existing price which is subject to a price that our point there was no evidence to this to support the commission's determination the commission's determination we have it or were none the commission's determination was essentially hypothesis the hypothesis was although maybe d v d by now companies compete with other services streaming services to retail locations as a broad proposition that may be true but the remaining d v d by mail customers the ones who haven't left yet will not leave that they are essentially captive resolve that agreement but you know part of the argument that both dave lay netflix made was well look we're not going to switch because other distribution channels are far more expensive but i don't understand how that argument helps  that's the question again the commission needs to address that question but that then raises the question well then what is our it is there are the prices we charge for our distribution network a market price or they have below market price is ultimately the question isn't can we raise price the question is can we raise prices to suit can we charge super competitive exactly and it would seem that you haven't shown that you cannot and that the burden is on you because yes you've shown that there's market to stream and everybody knows that and to some extent i mean that is that dependent are independent on prices is it going to are more people more quickly going to go streaming and therefore discipline the price that the postal service pays if you're allowed to offer it as a competitor the millers a competitor product and i don't see where you've shown that in the record it seems to me just as likely if not more so that this is a battle over those rents and that you see that you know netflix has is getting some profit from its relatively i'm competitive position and of course the postal service would want a bigger piece of that but the notion that there's actually evidence showing that the streaming markets are substitutes for the mail or market in a way that would discipline the price you're charging for the mail or i don't see that you've you know kicked out the evidence that they have that it's that the relevant market is the who have multi and the problem is there is no evidence to support that proposition because it's premised on the idea that they are the reason they stay is because of the specific content with a specific inventory that d v d that netflix office well and technical problems and when doing i mean you know if you've been anywhere outside of urban america you know the technical terms are very substantial for people that don't have fiber optics and broadband and so there i mean there are a lot of different reasons frankly we have the burden over all but we there's no way for us to crew for example what what movies netflix d v d by mail customers are still breath because again the premise is that they that most i mean that is the fundamental premise of the not part of the commission's procedure we can't ask questions we can't conduct discovery this is something if the commission thought that was important that's a question the commission could have found out from netflix we don't know what titles were shipping we just know we're shipping but another one or two are not allowed to question may that the that question the question you're asking that part of the statute goes to the market power question which is the question the commission didn't and you don't even have to decide the they please the court the commission absolutely relied not only on the point about competition in the market for consuming d v d s by mail but also and most centrally on the proposition that there are no reasonable substitutes for a round trip d v d mailer which is the product at issue in this case and i would point your honour's to j five ninety as noted above quote has noted above however one must distinguish between direct consumers of roundtrip d v d mailers such as game fly and netflix and indirect consumers who consume the digital entertainment s drawing an explicit distinction between those two things and that discussion in turn refers to twelve pages a commission analysis in which the commission which was focused on supposing alternatives to evidence showed that on the contrary the postal service would likely be able to increase the price of ground troops d v d marker considerably without any significant risk of losing business to other firms because no other f no i'm not making an argument the commission did not make your honor the commission certainly relied centrally on the proposition that was undisputed postal service is the only firm in the country hold that and that was no your bro your brief should and should you have well i didn't intend that sentence to mean that your honor i think what i was trying to say is that that goes to the can the question the commission answered which is whether there are reasonably available interchangeable substitute for the roundtrip d v d mail in this proceeding it was not necessary for the commission to answer the broader statutory question but your honor i hate to disavow the arguments that are are in my favor but i think that i cannot in good faith make that argument on appeal because i do not understand the commission's decision to have reached that question and i did not  that may be outcome determinative in some future proceeding if the if the postal service were able to show that that there were sufficient competitive constraints on a so then we are move to leo limit consumer i regret to say you are obliged to answer that question i believe your honor yes and mr what i want to hear what's your response to mr bell on the you know his assertion that the only evidence before the commission is that there is a core group of of customers of d v d by mail and that other than that there's nothing showing a price elasticity or lack there of well there is evidence but there doesn't need to be since the postal service has the burden of proof in this case but there is plenty of that's a little challenging since if he's right that they aren't allowed to get information put it before the commission how are they supposed to be thought well i don't well first of all two points on that you're on a personal certainly there are a variety of cases in which the postal service presents very sophisticated evidence about elasticities and and provides estimates of what will happen to its profits if in the event of price market definition we don't have anything approaching that in this case but we do have i think it's fair to say suggest though that the commission's decision to hold the postal service to its burden of proof was reasonable i point to a couple things first of all is there's no question that d v d by mail service remains a highly profitable business that netflix and game fly provide to millions and millions of d v d by mail customers  significant risk of losing business to other firms offering products and they're not you're back to the subscribe to the streaming service and then i'd even though they have to pay at least double the cost and sometimes much more for both services i mean that's and that's because netflix hasn't pushed in new mining have been paying more for the titles that they can use streaming well i mean that and i think that's why i was so if you were to raise the price that would be a good idea then we would push netflix and into more shame well i think first of all that's not really what the question is i'm teasing tyler but actually i mean i think what that shows though is that it's not clear that raising the price on the d v d mailer level of the round trip matter which is really the question here is going to is going to push at least enough customers to the other because that would mean that it would likely that might they might well have market power under within the meaning of the statute because what they would be able to do potentially insert with the postal service presented no evidence rebutting this fact is they would be right raise the price on netflix significantly in this court considered a similar kind of situation in the coal exports case where there was a similar argument made by the interstate commerce commission that there was an all encompassing competitive market in the co export market and that would somehow indirectly constrain the market power of shipper you're absolutely your honor i mean i think that if if the postal service can jack up the price of the mailer on netflix and by the way imply that that is certainly a matter of concern under the statute and again the only direct interesting in the trench question if you have the capacity to extract greater amounts from netflix profit on mailing but it did not affect the only price would then be potentially would because i mean there are presumably would be some comparison of what relationship that price or to the postal service costs because it also talks about increasing price about cost so if there were and that's a very difficult period question to figure out so yes the theoretical matter that still might be a concern you also have to look at whether there's any quality decrease in them in the product to do so those are all matters of theoretical and i trust concern of which there is absolutely no kompany evidence in this proceeding of that very complex other evidence we don't have much in this case admittedly but one one data point we do have is what happened is the experience of gainful and so again fly used to have to pay double the cost for this very same service and there's no indication that there was some dramatic shift in gain in game five volumes once that happened in the beginning of f y two thousand and fourteen as a result of the discrimination complain did take seriously the postal services argument that about competition in the content market and reasonably concluded that look there are substantial differences between the between the d v d by mail product and other kinds of digitized entertainment many of which are available for free on the internet and if they were to come up with better evidence they could come to the commission with it certainly your honor and they could they could file a new request tomorrow with with that with better information that they're not able to question that plucks in your procedure yes or are in this kind of proceeding that would not there are kinds of certain kind of commission proceedings where you do have discovery this is not one of them however they certainly could ask the commission to do information asked the postal service and what we asked them was look all right you want to treat this as a competitive market have you done any studies about like what's going to happen with your volumes like whether you're going to your volumes are going to be cannibalized by alternatives and they came up with nothing they site that big they took they had no examples of that one would it i mean one might have expected that what do you mean cannibal some of view well i mean whether they might the extent to which if any they might have they might a this is a complicated economic question it surely is and i wouldn't i wouldn't and i certainly wouldn't they to say that we have conclusively resolved it but i think that it was reasonable for the commission to say at a bare minimum that look this is complicated we don't have enough evidence to address very briefly the industry perceptions aspect of it the commish is applied it relies on four factor is and i'm not sure if you know one of those factors this is not really supported by substantial evidence of three enough to enough if you could console games but that flick certainly did and it treated it has treated d v d s by mail and streaming as two separate businesses operated differently with different characteristics on their ten k s there's like different continue to supply a substantial source of profit or its business for the foreseeable future and that's really what we want to worry about whether netflix is profitable or are enough that's really our major concern well i think the major you two more minutes consumers and meeting and put gameplay netflix and the ultimate consumers of the product and then the commission said the two are related the demand of the direct buyers will be derived from the demand of the indirect buyers and we're going to focus d by mail and in so the reason a significant is that's the issue the commission decided the commission decided this d v d by mail service in the same market as other services using other distribution channels the other question is you're at your honor answer mail customer base has gone from eleven million to five million just in the last four years and there's it's not that they stop watching movies one of the relevant market is limited to direct to the primary level rather than the secondary level when you would migrate away accelerate their migration away from d v d by mail service toward other distribution channels if that happens we'll make money right so that means there will be a limit on our ability to raise prices that are a direct customer would accelerate their departure from the thing that they're buying from us now as for how we calculate that's not a question of well moving somebody moving to an alternative method of delivery this it's the opposite i think i think that if we can't raise prices without the risk of driving netflix away not alternatives necessarily but not selling not offering d v d by mail and since the only way we make money is if they're in that market then i occasion to reach that i'm aware of no evidence in the record what i'm putting your brief you specifically on the commission's concern was that the service would capture part of netflix problem which implicitly  complaint proceeding or some offhand statement about what will happen also on its own role netflix in this proceeding never stating as counsel has argued that if the service raises the price they would be moved out of the market i'm aware of  address what i think he's talking about i think he's talking about the discrimination evidence in the discrimination complaint and not his case right not in this case of a bet as some statement by netflix to this effect and i think that most that what that statement would say is that yeah th might be netflix in some sense there might be some level of competition who doesn't certainly is not competent evidence to say that they would like the of the market and that seems very quite unlikely on these facts given that netflix is apparently still reaping substantial profits they get a one just keep in mind too it doesn't have to be that big of a price increase for there to be market power the merger guidelines talk about a small but significant increase in price which is typically five percent or more we're talking about a product that costs a dollar  evidence to really intelligently answer that question one way or the other and on that just on with regard to the discrimination plain on that evidence i mean that the postal service makes a lot of the discrimination complaint with regard to the monopsony power relying on the discrimination between netflix and game fly and moreover remember that the postal service also discriminated against it was giving blockbuster some manual process in your blockbuster certainly wasn't