b requires that the commission shall consider shall consider the degree to which any costs are uniquely or disproportionately associated with any competitive products but the p expressly declined to follow that statutory mandate and that's that's why we say this order has to be vacated and remanded as contrary to law and arbitrary capricious and you don't have to r ninety f rd at in in this court's prior decision on the two docket the docket pertaining to order number thirty five or six which interpreted the age to sort of answer your question your honor if you look at the graph that's at page and sixty of your prior opinion and for easier others it's reprinted in the brief at page thirty and i think we can answer your entire question judge edwards if we look at the three and the agent who says that costs that are reliably identifiable it caused by competitive products are attributed to competitive products under the age of analysis that's the blue triangle and then at the that's the that's correct your honor but eighty three require eighty requires that you attribute to competitive drug products you know all those that have a reliably identifiable causal relationship and that's a very narrow category rather than the form of course the remainder of the ground that the area of the weight triangle here was not not that that the p r c has decided in the current docket that you are reviewing that nothing in the way triangle is uniquely were disproportionately associated with packages that cannot be true and one can't that be trickier because remember we're in the age of eight hours canned goods traffic is rising while mail is dropping and thirty percent of the revenues of the post office now come from yes your honor because the language congress gave was uniquely or disproportionately associated there may be some costs that are associated but not uniquely or disproportionately with packages there are lots of dry costs that may be associated with both send letters if you the post office is in the process of buying billions of dollars worth of larger trucks why do you need larger trucks consuming more fuel unlettered traffic is going way down because of email because packages take up a lot of space so when it buys these larger trucks you can still carry letters and packages on the trucks your honor but that cost is disproportionately associated with the package delivery why because the larger trucks and the additional expense to getting the heat of the case judge edwards why doesn't the aide to the analysis of soon be a free analysis and the answer is because the age of analysis did not take into account as approval to packages the larger projects that were involved in delivering packages it didn't take into account other neatly associated costs and uniquely associated with packages when the post office goes out and it makes a contract with an e commerce distributor those transaction costs are all about packages and yet none of those costs none of those costs are attributed under age to what is tribute to and where the post office goes postal regulatory commission prevailed in the last case with the extremely institutional costs as would just be costs in the statues terms that it's cost the competitive products cost but we just can't reliably compute them that would be different from things that are not it's cost institutional cost or definition institutional costs it isn't all institutional costs and everything's defined exceedingly narrowly by the p r c accrued by this were held decision as just the incremental cost the blue rectangle which represents the cheapest marginal cost of the project and the green rectangle which represents  do nothing else in his case listen to the prior oral argument at min and thirty nine nd eleven where the p r c very articulately stated don't worry if we're undercounting because that packages cause the post office under age think they agree with that and the government may say oh we took into account some uniquely or disproportionately associated costs over in the eight to analysis because we did account a little bit for trucks over and what it will be attributed as  any unique or just proportional cost whether they're in the blue last three months or the white box and you have to factor those in to determine appropriations that's going to do that that's exactly correct or are one hundred percent they didn't do that any cost mean can't just finish the job i say oh we captured a little itty bitty bit of trucks over in our blue rectangle in our green triangle they've got to look at the proportion of truck purchases big truck purchases or new contracts with congress again on this statutory language is that i don't care if you're he counted under eighteen when you read this it says when you're deciding appropriate share stop and go ok is there any cost associated with determining appropriate share that's exactly right your honor and that's why we win because that's what they didn't do ok i think then when you said you are going about the black box you're good and you should be arguing about they didn't get i don't their argument that we've already got unique or just proportion under a two is a so what you have to count it's a double counting when you look again here it's actually not a double counting your honor because remember these are the whites the white space and the blue and green space are residuals of one another and they are mutually buying you're capturing some of that under attributed but we're going to stand back and go even if you're capturing a little bit of it you're an eight hundred pound gorilla here and so asked to do things that you should carry a little one plate in some sense under institutional class and i'm trying because you can't we share is not so much a mechanical calculation it's a judgment about you bring factors in but as they stand back they make a judgment about what's appropriate for them to do and small amount and that was right he would still say fine the fact that they have all these things that are you know well let's assume some percentage of this is unique or just proportion that we're going to look at the big picture how unique or disproportionate your costs are in deciding when your appropriate share of institutional causes absolutely your honor and i think we're in agreement and the p r c failed to do that and that's why you must remember and how we know the p r c failed to do that your honor is the multiple times in carry over paragraph middle of this there are no costs uniquely were disproportionately associated with competitive products that are not already attributed to those products this is because all costs that are uniquely are disproportionately associated with competitive products exhibit that just gets you to the incremental cost at the right end of the graph the blue rectangle and the green triangle everything else is just to show and the post up the postal regulatory commission approved an approach that would not consider whether uniquely associated with competitive products right b things like the transaction costs of setting up new accounts with e commerce shippers they don't send letters they send packages those transaction costs are uniquely associated with packages but they are neither attributed in the incremental cost eight to analysis that you were the last time nor where they considered by the p r c under eighty three nd example better example your honor larger trucks i mean this is very intuitive to me i hope it's to your honor the post office is out there buying billions of dollars of larger trucks why are they doing this letters and postcards all cell mail has been decimated by e mail and new technology they should be buying smaller trucks and and using that fuel but instead out look probably always on the truck is going to have a bag or two of mail on it as well as all these boxes and so we've calculated what percentage of the cost of that truck its size its gas and fuel everything is its maintenance is  determine the x axis we know that if there are a certain number of cubic unit miles driven to deliver a certain package product like three day delivery of a three pound box the prostate is just tell you where on the cost curve you're going narrow the determination is one thousand and fifty seven the volume variable cost defined as the marginal cost of the last version best cost driver unit multiplied by the total number of units of crew so what goes into that analysis you be a portion of the truck that is reliably causally identified with that product and only that product but that by definition of design leaves out all of the incremental cost of the larger trucks that is a common variable cost the common variable cost of the structure over in the white space they weren't attributed under age two and they cannot be attributed under any physical p r c s an error can be they didn't do th variable cost that is it reflects the cause of the few letters that are in the truck and the big packages that are in the truck your honor that was not captured in the eighty two analysis by definition and design because as this court approve s offers no reason to doubt that the accountability act prohibition on process of asian nation and requirement the competitive products cover a share of institutional costs will adequately ameliorate any competitive deficit left by clued from eight to analysis many common variable called slike because of larger trucks that were need to be and sounds that are disproportionately associated with packages and yet were not considered in the analysis of the relief we ask for your honour's vacated so that institutional share which is the output can be calculated in accordance with the statutory requirement that would have the input of uniquely and disproportionately associated institutional  airplane my question were inserted before is even if let's just imagine in a different world they had captured all of the  reliable or institutional or both and whatever they missed all that has to get covered under institutional bias but imagine everything in that graph that actually for some great mechanical computation by them got put into age here the way i read associated maybe not all of them but some of them are uniquely or just proportionately associated with competitive products like your big trucks we just wouldn't be buying bigger trucks or we certainly when buying the volume of bigger trucks that we are and so we need to take that picture get that concerned about unique and just proportionate cost that you have you know you're already paying them into deciding what your fair share of purely institutional cost not the things we couldn't get  reliable here only you know the coastal commission or salary you still should all bigger share there too because you're doing more up here under age is that while it's correct your honor as long as there is any residual institutional c of i mean if we take your hypothetical to an extreme and every single cost that is reliable that every single cost right under a two dollars that is associated with drugs if reliably identifiably cars were wrongly interpreted as all can't reliably compute them and then look he would in a lane language called purely institutional costs that the commissioner salary to help benefits these types of things so your honor we believe that if there is any institutional cost remaining after the age  analysis even in the triangle the blue rectangle of green triangle got bigger and when space is from there still must be they must perform to be analysis here they refused to follow their statutory mandate to perform right to be in disproportionately and uniquely associated cost competitive product as an input the appropriate fair analysis still lives and other things and be still looks at other things market conditions but you rarely have such a clear statement by an agency that we simply refuse to follow their mandate and her be because we assumed that everything was covered under age two which it could not be as a matter of law given this court's prior decision because ada analysis never considers common variable cost like what drugs that might be  language even talk about they have the authority to modify this minimum contribution amount or eliminate it altogether so wouldn't that allow them to go look here's what we think really matters for  and that's the competition factors that we've looked at and they had a few other factors they looked at so here as well no it is not your honor so what it is true that the agency could have decided to eliminate the institutional cost minimum contribution requirement if this was an act of long time ago before package deliveries spiked in the role of e commerce change the mail as we know it and if it turned out that packages were a bust and nobody sent packages anything through through the postal service then maybe there would be under a tooth that cannot be right and the power to eliminate might if they'd said they were eliminating that maybe here saying that was arbitrary and capricious in the current world but they didn't they said oh yes we considered it and we assumed that we didn't have to  enough is simply not true but even he actually said is when figuring out what the appropriate share of institutional costs needs to be borne by competitive products the answer is not to raise the appropriate shere like that's not at all how this actually works the statute start to get that you have a lot of discretion and it's certainly not going to cost allocation approach here at all but what they're saying is like you just missed the boat under the because you said looking at the cost and then setting the appropriate shear to take a certain percentage of the casa let me just start with this example of trucks because i think it's actually very important so i don't think counsel for us can contend that the commission never thought about trucks because everybody knows as you know our cost labor example demonstrated that you know in order to deliver packages or mail you need trucks and so the cost attribution mechanism the price wars you need to already take that into account it's also taken under and i think i'm using that she'll only get into account in a little blue and green and you missed it here so i want to be precise about what i mean by taking it into account so the cost of the truck that can be reliably be said to be caused by a competitive product that product has already got to cover that price that's right it is true that under the commission's hostile attribut methodology you know we only do what is reliable and what is reliable is the cost that will disappear if we stop making that product right and so there are some portions of the truck that don't go to that particular competitor probably doesn't make sense to make a competitive product be set there is a price war right but it's not true that we completely ignore the stuff on the other side that cost not disappear from the commission's analysis that cost is an institutional particular competitive product has got to cover because they want you to believe you're right and that everything white goes away and that is simply not true everything that is white falls into the category of institutional cost and so the result of the answer is no because you know construing you can disproportion from st principles the commission define those terms in a way that just happens to match what is in between a blue but not the white book but the other more important piece of this commission has to attribute all of that to comparative product as a whole new program if you're going to be that get it it's not that mechanical but isn't the problem here if we assume there's something in that white area that  disproportionately associated with competitive products like bigger trucks you just wouldn't need for a no no you're going to just just assume there's something there you do in more big trucks than you would if you share in this case is that correct the commission's formula doesn't require the fact mission there's not we don't there's nothing because there's a there's many factors it's in including so there's more than what's even listed in the statute but it says let's look at things like the competitive environment and you've got to do at least be including things and things that are uniquely are just proportionally associated with competitive products you've got at least look at those and maybe there's some other things  mean i'm not at least suggesting in this question that there's any strict formulaic response it's simply did the agency do it congress said and said that your analysis has to include in deciding their appropriate environment is something they couldn't explain away and even end up in the same number it's that they just didn't talk about it that's not great ok it's not right because u b s wants to trade on the intuition that equal percent output and a commission still needs to think about those costs and it did and i want to turn back to that question because a very important but as to this question your honor it's very important to remember that nothing in section eighty three of proportional allocation that u p s believes is in the statute and the word consider simply doesn't need the appropriate share has got to be whatever costs are uniquely or disproportionately associated as a matter of the statute and the reason we know of that is because congress said that you can make the minimum contribution requirement zero even if there are a whole bunch of disproportionately associated or uniquely associated costs so that's why i want to push back against the idea that somehow there is this mandate of there in percent in thirty percent out there needs to be captured either through a two or a three we can be the way they do or both right that's the premise that i'm disagreeing with now i know that that doesn't get the commission all the way there because even if you accept that it is true that the commission has got to talk about all of this stuff and it's worker and the answer to your question josh well that is that the other side really wants to  down in the manner that i've just been describing so the only way you can fairly say that the commission never thought about this is if you accept that the commission simply pretended like you know some portion of you know truck costs don't go into institutional hospital and that's just not correct and now my questions again does the commission pause to address that some portion of the trucks uniquely disproportionately are associated with competitive products when it was trying to figure out what the appropriate share w explain this in more detail whatever those terms mean we think we've done a good enough job of accounting for it either because the costs that would fall under those categories are separately beaten the price was under eighty two dollars or critically or separately accounted for by the prohibited on cross subsidisation in one or book now maybe there might be some cost that way who are you you postal service right from subsidizing the costs of its competitive products with money from market dominant right away that the way that the commission test that is they figure out how much is going to how much cost is going to go away if the postal service just stopped producing every single competitive product that it makes i think it makes upwards of one thousand dollars competitive products or something like that so suppose the postal service gets out of that business entirely how many costs will go away and then the postal service must then show that all of its competitive products are recovering at least that amount so if you know they're getting back all of the money going to cost to make the competitive products then the competitive products are definition we price in a way that you know doesn't have this incredibly subsidization because otherwise they will be getting back less money does that make sense to you great so the way that again the question goes back to trucks and you know obviously trucks don't just do the delivery parcels they also deliver letters all right but what about the salary of the talk about this in terms of that's that's not out of the commission's decision and that seems to me texturally difficult i understand why if that's what you wanted and a commission to have said there would be a difficulty but i don't think that that's the very st reading of what the commission if you agree any terms are totally different but interpretation needs to be totally different the textual interpretation of those terms that you know as explained in the brief and as cited and in good order you know it's not that we look at theirs and we say that you know these must be equivalent for some sort of purpose you know it's a statutory interpretation we look at whether we're mean whether we're just proportionately means and we say well it turns out these concepts may have on admitting this delta will help to explain why the commission hasn't just equated it to suppose that u b s were able to identify you know cost that use you know uniquely associated or disproportionately associated that isn't adequately accounted for by the that there is that gap because they want to need to just cannot capture that particular cost of that were true right the commission would of course consider that cost and nothing in the commission's interpretation of the statute would prevent the commission from considering  but then if the statute says i don't care of b says i don't care if you already counted it under a one or a two i'm telling you when you compute the minimum contribution the appropriate  for purposes of a three you've got to look again and say you've got disproportionally and you need cost yeah we already capture that out there but in deciding what your propre sharing is we're is getting quotations from the conclusion right but there are competitors in the st question is you know what are these costs and the nd question is what do we do about these and the commission and with respect to the appropriate and the st question to get that commission agree that there are some unique or disproportionate costs associated with competitive products period yes of course it did ok and did it agree and it didn't agree where did it where did it say we're fact we're we're proportional publication right but that's not much my argument isn't think you have to do it you know it's not percent big percentage matching here it's simply that something i'm sorry somewhere they look at them and say we looked at them and it is factored no that is i don't care whether it's there or not because mike my understand this engine is whether it's near or not doesn't matter the fact that you counted it once doesn't mean you ignore it and driving etc so where does it say where we're factoring in the perpetration this seems to be you know the commission describes all the other factors that get to be looked at by the commission of commission has to look at in figuring out what it would be appropriate for the commission explains for example the carry over paragraph at the bottom of sixty two dollars when the beginning of six dollars that there is considerable discretion given to become vision about what to do even you know assuming that there are such costs in the next paragraph one hundred and sixty three says a higher degree of flexibility is inherent in the appropriate care provisions the relevant factors are set forth and you know as noted there are more than one of each relevant factor uses flexible in which of the commission to interpret and knows of the civic finding related to a relevant factor would mandate east pacific your question is that the commission fail to even talk about this alleged missing category but that's to be clear before you go on talk about factor it in talk about it could be it doesn't apply i'm saying it does apply and where if you do anything in particular with that cost when it comes to setting the appropriate share requirement and i guess this is why i think we have to explain why i think that doesn't affect the preparation or causes congressionally identified right and they didn't say we're not doing it here understand the question to be you know where does the commission say inserting what here is appropriate we're going to set it at this particular number regardless of whether there might be unique or just before  that's what the answer is no are you starting promises that into happens when i will be required no the starting premise is that according to the commission's definition of the language and be right interpretation of  language right either it on hurrying to captures it right rather than therefore it shouldn't affect their appropriate share correct and so i try to explain that they're for peace and in provisions they're for peace as many different parts and you know with some of your honor i would like to just go through it so st the commission meeting a lot of very expressive endings about the relative health of the pointed out that the postal service has a huge incentive right now to maximize the prices of its competitive products regardless of what the price wars are because it's hemorrhaging money on the market dominant side and its ability to raise the prices of market dominant product is as  honor knows quite kept this is that by seventy nine to five hundred and eighty and you know the postal service has increased prices every year at a rate for exceeding inflation it's voluntarily exceeded the existing appropriate share requirement every year there's are that you you know the postal service is this eight hundred dollars pound gorilla and so we have got to make them bear you know some greater portion then currently exists in you guess is view it's unfair that you know trucks bought to make some you know purchases are not you know put into the price or for those products right and the commission rejects that at every turn because mission says you know that there is will support for the idea that there is any sort of relationship between institutional costs on the one hand and you know the postal services focus on competitive products on the other hand and so you know for example they point out that you know most of the changes in institutional costs the increase in institutional costs are principally linked to factors that are unbelievable to competitive products such as postal service pensions interest not need to be set at a percentage but they don't realize it works ok whatever that number there is there's a there's a there are there's more to the world then don't consider it all yet and we're not adopting your percentage there's more they can everything that's going on here that they don't move the needle and it sounds like you're saying that implicit when they talk about all these other things like really institutional health care benefits these days  but i don't hear when i guess i hadn't seen when they said we've looked at them as a statute tells us to look at them and we just concluded that a lot so already captured and whatever isn't captured doesn't  proposals right and you know i want to make clear that big into those proposals is consideration of precisely those types of costs you know the white area under the graph you know the trucks and all that right so the commission has to think about those costs in the course of assessing u p s is alternative proposals for what the appropriate share ought to be because those alternative proposals are constantly cassella cation is rejecting methodology but that's not the same thing as sane we've done our job of looking at these things and it moves the needle on i don't know or it doesn't move the needle and that's what it is your honor because the reasons the commission gave for rejecting that sort of you know proposal was not just you know we don't think the statute brings three percent people three percent or whatever the commission meeting policy judgment and you know century matter the commission said that as a matter of economic policy we don't want to do that because we don't think that it makes sense to require products to bear costs like that instead it makes sense to require competitive products to collectively cover you know some other percentage set by this formula that reflects a whole bunch of other factors  held in the previous u p s piece is that for the purposes of the need to ask why you know the commission has captured all of the if a marginal cost or product has cost it's true that into there are other if are marginal costs that the products cannot be said to have cost but that might exist right and so the answer to your question here is the commission didn't say capturing or in from or dual core one hundred and eighty two that are there to be captured you are not doing it but we hear you and it will probably all work out i honestly thought that what the court probably might have meant was that you know all there is room on group b and some of those four and then you give me a very vague answer which i don't i don't want you to try to answer it now go back and look at the materials you so while my thunder is a one who had not kept you all into more of a court did not hold and this is the reason i don't want to push back you want to the court did not call that everything's going to get shaken up exclusively in that needed three slash be bucket but of course reference to the prohibition on cross subsidisation is exactly the answer that i was given with respect to one so that's just the st piece and they're going to say the nd and i guess you know more fundamental answer to your question is that your honest question assumes that what the commission will matter where we were count or they really your law yes you were not disagreeing at all with respect to the structure of the section where we are disagreeing is whether the commission has adequately accounted for them and you know as i've indicated in an interview there are two ways you might think about accounting for one of which is flatly wrong and that's you know you need to be big into the appropriate share like the other side share requirement at all because after all it's all captured in one or two things right but the point is not that it didn't go that it went away the commission created a formula that meet the appropriate share requirement go up but the real dispute in this case is that it just didn't go up as much as u p s wanted it to go on and you b s a statutory argument is that well the commission didn't explain itself and you know disagree is whether or not the commission did but you know fundamentally the commissions explanation is we hear you hears arguments about the existence of all these other costs but it doesn't matter because given our expert assessment of the prevailing market conditions and given our expert assessment of the economics underlying u p s s proposals conditions doesn't do it the formula doesn't do it either because the formula that the government's admission has nothing in it there isn't a single variable there that has anything to do with disproportionately or uniquely associated cost it's all about market conditions so if you have no input into the the table and considered by the commission nearly half the cost the post office two thirds of truck costs are not attributed to any product and you're right trajectories it does affect the price floor and the reason the price for matters is congress and we  enacted this statute to ensure a fair competition in the delivery of packages where there's finally a private competitor to the monopoly of the post office sell in other domains since benjamin franklin when the congress said consider fair competition and they think pete p r c by its own admission