U.S. POSTAL SERVICE

Electronic Commerce

Activities and Legal

Matters

Statement of Bernard L. Ungar

Director, Government Business Operations Issues

General Government Division

United States General Accounting Office

GAO Testimony

Before the Subcommittee on International Security,

Proliferation, and Federal Services

Senate Committee on Governmental Affairs

For Release on Delivery

Expected at

10:00 a.m., EDT

on Thursday

September 7, 2000

GAO/T-GGD-00-195

Summary

U.S. Postal Service: Electronic Commerce

Activities and Legal Matters

Page 1 GAO/T-GGD-00-195

USPS is in the early stages of implementing its electronic commerce

(e-commerce) program. USPS has taken steps this year to develop and

implement its e-commerce activities, including developing a definition of

its e-commerce initiatives, identifying e-commerce and related initiatives,

and establishing a process for approving these initiatives. USPS identified

seven e-commerce initiatives involving products and services meant to

facilitate the movement of messages, merchandise, and money in ways

that require the use of the Internet and generate revenues for USPS. USPS

also outlined overall e-commerce goals and strategies and developed some

performance targets for its e-commerce initiatives. However, GAO

identified three problem areas relating to USPS management of its

e-commerce area:

• inconsistencies in identifying e-commerce and related initiatives and in

reporting the status of these activities, which made it difficult to obtain a

complete and accurate picture of USPS’ e-commerce activities;

• inconsistencies in following the required process for reviewing and

approving its e-commerce initiatives, which raised questions as to whether

the initiatives were appropriately planned and reviewed; and

• deficiencies in the financial information USPS provided for its e-commerce

activities, which raised concerns about the accuracy and completeness of

the financial reporting for e-commerce activities.

To help ensure more effective management and oversight of USPS’

e-commerce activities, GAO recommended that the Postmaster General

(1) take appropriate actions to help ensure that e-commerce and related

initiatives are appropriately identified and maintain accurate and complete

information related to the status of these initiatives; (2) follow processes

and controls that have been established for developing and approving

e-commerce initiatives; and (3) provide complete and accurate information

on costs and revenues for the financial data on e-commerce initiatives.

In the legal area, USPS provided its views on how various laws and

regulations apply to its e-commerce activities. USPS said its unique status

as an independent establishment of the executive branch gives it broad

legal authority and discretion to offer e-commerce products and services

in ways that USPS finds appropriate to its assigned functions and in the

public interest. USPS, some competitors, and others have conflicting views

on the extent of USPS’ legal authority to offer e-commerce products and

services and under what circumstances it should offer such services.
Statement

U.S. Postal Service: Electronic Commerce

Activities and Legal Matters

Page 2 GAO/T-GGD-00-195

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to participate in the Subcommittee’s

hearing on the electronic commerce (e-commerce) initiatives of the U.S.

Postal Service (USPS). In my testimony, I will summarize the main findings

and recommendations of our report on USPS e-commerce initiatives and

related legal matters, which is based on the review we conducted from

January through August 2000.1

Members of Congress and postal stakeholders have raised issues related to

the merits of USPS’ development of nonpostal products and services,

including those that are e-commerce related. As USPS has recently

developed and implemented a number of e-commerce initiatives, you

requested us to provide information on the status of USPS’ e-commerce

activities and related legal and regulatory matters.

In my testimony today, I will describe USPS’ (1) e-commerce initiatives

that have been implemented or are being developed, (2) goals and

strategies for the e-commerce area, (3) processes for approving these

initiatives, and (4) expected performance and results to date related to ecommerce initiatives. I will also discuss areas we identified during the

course of our review where USPS can improve its management of its ecommerce activities. In addition, I will describe USPS’ views on how major

federal laws and regulations apply to its e-commerce initiatives and

identify some legal issues that have been raised concerning its e-commerce

activities. Our report on USPS’ e-commerce initiatives provides more detail

on each of these areas.2

USPS is in the early stages of developing its current e-commerce program.

We previously reported on USPS’ new products and services, including

several e-commerce activities piloted or implemented during fiscal years

1993 through 1997.3

Since then, USPS has discontinued its earlier

e-commerce activities, some of which have helped USPS develop new

e-commerce-related products and services.

Since the beginning of 2000, USPS has taken a number of steps to develop

and implement its e-commerce activities. Some key actions included

1

U.S. Postal Service: Postal Activities and Laws Related to Electronic Commerce (GAO/GGD-00-188,

Sept. 7, 2000).

2

GAO/GGD-00-188.

3 U.S. Postal Service: Development and Inventory of New Products (GAO/GGD-99-15, Nov. 24, 1998).

USPS Activities in the

E-Commerce Area
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 3 GAO/T-GGD-00-195

developing a definition of its e-commerce initiatives, identifying its

e-commerce and related initiatives, outlining its overall goals and

strategies, establishing expected performance, and providing some

information on results to date.

How USPS defines its e-commerce activities is fundamental when

determining what USPS is doing in the e-commerce area and what process

is to be followed in reviewing and approving e-commerce initiatives. The

development of goals and strategies is key to understanding what USPS

expects to achieve in this area. The review and approval processes are to

establish accountability for management and oversight of the e-commerce

initiatives. Information on performance targets and results is to provide a

basis for determining if the actual performance of the e-commerce

initiatives is meeting intended targets.

USPS’ definition of its e-commerce initiatives has two components—those

products or services that (1) require the Internet to do business and (2)

generate revenue to USPS through user charges or licensing fees. USPS

defined its e-commerce initiatives as a subset of its broader “eBusiness”

environment, which included other categories of related initiatives that

may involve use of new technology, such as “eService” initiatives that are

to be value-added services or enhancements to existing services. Other

related initiatives referred to as “gray area” initiatives did not meet the

requirements of the e-commerce definition. Another category called

“infrastructure” initiatives included information technology systems and

other technology initiatives that are required to support e-commerce

initiatives. USPS’ distinctions among these categories illustrate that USPS

activities involving the Internet include more than just its designated

e-commerce initiatives.

USPS identified seven e-commerce initiatives that were either planned or

implemented as of September 2000. These seven initiatives are generally

intended to facilitate the movement of messages, merchandise, and money.

To facilitate the movement of messages, USPS introduced the PosteCS

initiative, an Internet-based global document delivery system implemented

in May 2000. To facilitate the movement of merchandise, USPS introduced

the Stamps Online initiative in December 1998 that enables customers to

use the Internet to purchase stamps, philatelic products, and other USPS

products. USPS also plans to expand this initiative to include a Virtual

Store that would offer USPS merchandise and other stamp products for

sale via the Internet. To facilitate the movement of money, in April 2000

USPS introduced its eBillPay initiative, an electronic bill presentment and

payment service.

USPS Definition of its

E-Commerce Initiatives

USPS Identified Seven

Current E-Commerce

Initiatives
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 4 GAO/T-GGD-00-195

USPS also identified three initiatives that it refers to as gray area

initiatives. Gray area initiatives are related to e-commerce initiatives but

either would not generate revenue for USPS or would not require use of

the Internet.

Table 1 provides a list and descriptions of USPS’ e-commerce initiatives

and gray area initiatives.

Initiative Description of initiative Intended customers Status

E-Commerce initiatives

Electronic Postmark

(EPM)

Creates a secure electronic time and date stamp for electronic

communications and provides evidence of any tampering.

USPS is seeking business partners to integrate EPM into their

products, services, and systems. Revenue to date has been

generated from businesses that incorporated EPM with their

services. EPM also has been used with the PosteCS initiative.

Financial, legal, medical,

governmental, and

educational

organizations

Implemented 4/00.

ePayments Provides integrated ePayment solutions:

(1) eBillPay—consumers paying bills, (2) businesses sending

bills, (3) consumers paying each other, and (4) consumers

receiving financial statements. eBillPay services are currently

offered through a partnership with a private company.

The eBillPay service is to be offered to new customers at no

charge for the first 6 months. Revenue is to be generated by

user fees.

Consumers and

businesses

eBillPay was

implemented 4/00.

The rest of the

services are in the

planning stage.

Internet Change of

Address and MoveRelated Products and

Services (MoversNet)

MoversNet includes three products and services: the hard

copy publications—Movers Guide and Welcome Kit—

and the Internet application called MoversNet.com. Currently

MoversNet.com allows downloading a form for customers to

submit changes of physical addresses and is accessible via

the USPS Web site and via direct link. It is offered through a

strategic alliance with a private company. Future MoversNet

enhancements, which are to involve integration into a

proposed MoversGuide Web site, are to allow additional

services, such as electronic changes to physical addresses,

e-mail addresses, and electronic accounts; ordering various

services (e.g., power, electric, water, cable, newspaper, and

long-distance telephone service); and new security features,

such as credit card verification. Revenue to date has been

generated by commissions from USPS’ partner.

All postal customers MoversNet was

implemented

summer 1996.

Enhancements to

MoversNet were

scheduled for

implementation in

9/00.

NetPost.Certified Is to provide confidential, ensured delivery of electronic

documents to the government. A completed electronic

delivery is to be certified back to the sender via an electronic

receipt containing a USPS electronic postmark that provides

legal proof of filing. Revenue is to be generated from

transaction fees from government agencies.

Organizations that file

information with the

government

Not implemented.

Table 1 .: USPS E-Commerce and Gray Area Initiatives as of September 2000
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 5 GAO/T-GGD-00-195

Initiative Description of initiative Intended customers Status

NetPost Mailing Online Is to allow mailers to electronically transmit their documents,

correspondence, newsletters, and other First-Class Mail and

Standard A mail (primarily advertising mail), along with

mailing lists, to USPS. Electronic files would then be

securely distributed to printing contractors who print

documents, insert them into addressed envelopes, sort the

mailpieces, and transport the mailing to post offices for

processing and delivery. Revenue is to be generated by

printing and mailing fees paid by users.

Small Office and Home

Office (SOHO)

customers

To be implemented

9/00.

PosteCS Provides a secure, private, Internet-based document delivery

system. Users establish secure links using Secure Socket

Layer (SSL) protocol. They then upload a file(s) to the

PosteCS server using desktop software. To receive PosteCS

messages, the recipients need only to have access to e-mail

and an Internet browser. USPS has joined with Canada Post

and LaPoste of France to provide this service globally. Also,

the EPM initiative was used as part of PosteCS. Revenue is

to be generated by user fees.

Large to medium-size

businesses and SOHOs

Implemented 5/00.

Stamps Online/Virtual

Store

Stamps Online allows the purchase of stamps and other

existing USPS products. After the Virtual Store is

implemented, postal customers are to be able to purchase

stamps, philatelic products, phone cards, and other USPS

merchandise via the Internet, including new products not

currently available. Revenue to date has been generated

from the face value of postage stamps and from other

existing USPS products ordered via the Internet.

All postal customers Stamps Online

implemented 12/98;

Virtual Store

implementation

planned in 2000.

Gray area initiatives

Returns@ease Enables customers to return Internet-purchased merchandise.

Using a Merchandise Return Application Program Interface,

businesses can authorize customers to download a postagepaid label directly from their Internet sites. The program is

designed to make returning items bought via the Internet,

through catalogs, and by phone easier for both buyers and

sellers. Revenue is generated from user fees and postage.

Online merchants Implemented 11/99.

Dinero SeguroTM Allows electronic fund transfers from the U.S. to Mexico.

Dinero SeguroTM, which means “Sure Money,” is a

money-by-wire service that can be used to transfer money

from designated U.S. postal locations to more than 1,300

Bancomer Bank branches in Mexico. This initiative uses

telephone lines instead of the Internet and is to become

part of a planned Sure Money® service.aRevenue is

generated by Dinero SeguroTM through money-wire transfer

fees.

Americans of Mexican

origin, most recently

immigrants

Implemented 6/96.

PC Postage Allows customers of private companies to purchase and print

stamps onto labels and envelopes using their computers and

the Internet. Private companies sell PC Postage products

after USPS certifies that these products meet USPS

standards. USPS receives revenue from the face value of

postage stamps.

SOHO market Implemented 8/99.

a

USPS has identified additional target countries, which it plans to include in an expansion effort to this

initiative, referred to as Sure Money®.

Source: USPS documents.
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 6 GAO/T-GGD-00-195

USPS does not consider products and services to be e-commerce

initiatives if they involve use of the Internet but either do not generate

revenues, or the revenues generated are related to existing core products

and services. USPS considers these products and services to be valueadded services or enhancements to existing services. For example,

customers can use the Internet to access information about USPS products

and services, look up ZIP codes and post office locations, download labels

for mailing packages, and check the status of certain items mailed without

paying any fees. Customers can also use the Internet as an alternative

channel to access existing core products and services, such as Priority and

Express Mail; to confirm delivery; or to arrange for package return. The

revenues from these enhancements are to be reported with the existing

core products and services.

USPS is also developing other initiatives, which it refers to as

infrastructure initiatives, to support its e-commerce initiatives. For

example, USPS has identified an electronic mailbox, which is a concept in

the early development stage that could link electronic and physical

addresses, as an infrastructure initiative.

USPS outlined the purpose and direction for its eBusiness and e-commerce

areas and stated that its overall goal is to use the best technology,

including the Internet, to provide customers with expanded universal

access and choices on how they do business with USPS. USPS also

explained that the criteria for these initiatives are that they be universally

available, designed to fulfill customer and marketplace needs, offer

customers voluntary choices, be secure and private, provide financial

benefits to customers and USPS, and be consistent with USPS’ mission.

USPS identified eight strategies for accomplishing its eBusiness goal and

its related e-commerce goal. Examples of these strategies were using the

Internet as a cost-effective channel, providing security and privacy for

customers, minimizing USPS investments and risks, and pursuing

partnerships and alliances with industry.

To carry out these goals and strategies, USPS has established an eBusiness

Integration team that is responsible for eBusiness implementation

planning and for developing an eBusiness strategic plan. In addition, USPS

established the eBusiness Opportunity Board (e-BOB) to provide

operational oversight in the eBusiness area and to review the performance

of e-commerce initiatives.

USPS Goals and Strategies

for the E-Commerce Area
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 7 GAO/T-GGD-00-195

In May 2000, USPS established a management process for reviewing and

approving e-commerce initiatives that is different from the review and

approval process for other new products. The e-commerce review process

was designed as an expedited 120-day process to result in quicker approval

of initiatives than USPS’ review and approval process for new products.

The e-commerce review process requires a business proposal and plan, a

public affairs/communication plan, periodic monitoring, and approval by

top management or USPS’ Board of Governors (BOG). Some e-commerce

initiatives were launched before the new process was introduced and were

therefore subject to USPS’ former approval process. In instances in which

a project contains significant capital investments, the initiative is also to be

subject to the headquarters review and approval process for capital

projects.

The Deputy Postmaster General explained to us how resource allocation

for e-commerce initiatives was unlike that for all other areas in the USPS

budget. He said that all of the funding for USPS e-commerce activities was

budgeted and kept in one overall fund. He said these funds were not

allocated to specific managers until program managers justified the use of

funds for specific projects.

USPS provided information on its performance targets and results

achieved for e-commerce initiatives implemented to date. USPS also told

us in July 2000 that the aggregate fiscal year 2001 planned revenue for ecommerce initiatives that was being submitted for BOG approval totaled

$104.0 million, and projected expenses specific to e-commerce initiatives

totaled $67.2 million. These totals do not include infrastructure and other

costs associated with e-commerce, which also are to be calculated.

Evaluation of the results of USPS’ e-commerce initiatives, according to

USPS, is generally based on the service performance provided to

consumers and businesses and on the revenue, cost, and contribution to

financial performance. A BOG resolution adopted in June 2000 specifies

that “significant new types of e-commerce initiatives, which have not been

previously presented to the Board [of Governors] for review, shall be

presented to the Board before being launched.” Initiative reviews by e-BOB

are to be conducted on at least a quarterly basis, and quarterly status

reports are to be sent to BOG.

USPS Processes for

Approving E-Commerce

Initiatives

Performance Expectations

and Results
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 8 GAO/T-GGD-00-195

During our review, we identified a number of inconsistencies and other

problems in the information provided by USPS that indicated areas in

which it can improve implementation of its e-commerce initiatives. These

management deficiencies indicate that more effective management and

oversight is needed in this area. We made recommendations to USPS that

address these issues.

During the course of our review, USPS inconsistently applied its definition

of e-commerce in identifying its initiatives and provided inconsistent

information on the status of its initiatives. These inconsistencies made it

difficult to ensure we had a complete and accurate picture of USPS’

e-commerce activities. USPS was able to reconcile some of the

inconsistencies, but consistency across the organization will be necessary

for USPS to provide accurate and complete information on the status of its

e-commerce initiatives. As previously mentioned, BOG is to receive

quarterly status reports on USPS’ e-commerce initiatives.

USPS has struggled to properly classify its e-commerce and other

initiatives that relate to its broader eBusiness environment. The initial list

of e-commerce and related initiatives that USPS provided to us in April

2000 included 28 initiatives. As of July 2000, the list had been reduced to

seven e-commerce initiatives. USPS dropped some of the initiatives on the

initial list because they were identified as infrastructure or enhancements

to core products and services, and called others gray area initiatives

because they did not fit the definition of e-commerce initiatives. In

addition, some initiatives are in various stages of development, and their

classification may change as their product features evolve. As we

discussed the rationale for the classification of specific initiatives with

USPS officials, we noted several apparent inconsistencies where initiatives

that seemed to have similar characteristics were not treated similarly.

In some cases, it was difficult to understand the rationale for the

identification of the initiatives without more clarification from USPS on

how it intended to treat the revenue from these initiatives. Also, some

initiatives were provided in conjunction with other products and services,

and it was not clear how the revenues would relate to e-commerce versus

other core products or services. Finally, some initiatives were not

currently generating revenues, such as eBillPay, but USPS planned to

generate revenues from these initiatives in the future. USPS’ consistent

application of its e-commerce definitions is important so that it can

maintain complete and accurate information about its e-commerce and

related activities.

USPS Opportunities

for Improving

Implementation of

E-Commerce

Initiatives

Inconsistencies in

Identifying E-Commerce

and Related Initiatives
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 9 GAO/T-GGD-00-195

USPS also provided conflicting information related to the status of certain

e-commerce activities that made it difficult for us to determine when some

of the e-commerce initiatives had been implemented. We recognize that

activities in this area continue to evolve. However, USPS has had difficulty

providing complete and accurate information on initiatives that have been

ongoing for some time.

USPS did not consistently adhere to its process requirements for the

review and approval of its e-commerce initiatives. According to

information provided by USPS, none of the five e-commerce initiatives

fully or partially implemented to date have had all of the required

documents, such as business plans, or formal approvals from appropriate

officials. Consequently, it is not clear whether USPS management properly

reviewed and approved e-commerce initiatives to ensure that they would

support USPS’ overall mission and goals.

We identified deficiencies in the financial information provided for the ecommerce activities that raised concerns about the accuracy and

completeness of USPS’ financial reporting for its e-commerce activities.

We do not believe the financial data that USPS provided were sufficiently

complete and reliable to be used to assess USPS’ progress toward meeting

its overall financial performance expectation that revenues generated by ecommerce products and services in the aggregate are to cover USPS’ direct

and indirect costs as well as make a contribution to overhead. Without

accurate and complete information on the revenues and expenses

associated with USPS’ e-commerce initiatives, USPS and other

stakeholders will not be able to assess progress toward meeting USPS’

financial goal in the e-commerce area.

In the legal area, USPS has provided legal information and analysis that

should be a valuable reference to Congress and other stakeholders

interested in how laws and regulations apply to USPS’ e-commerce

activities. We did not evaluate USPS’ legal analysis or attempt to obtain

others’ views for our report, although we summarized some of the

concerns that have been raised regarding USPS’ e-commerce activities. We

also summarized some of our reports that may relate to the application of

laws and regulations to USPS e-commerce activities, although, due to time

constraints, we did not update this past work for the purposes of our

review of specific USPS e-commerce activities.

USPS Has Not Consistently

Followed its Processes for

Approving E-Commerce

Initiatives

Problems and

Inconsistencies in USPS’

Reported Financial Results

for the E-Commerce Area

USPS’ Views on Legal

Matters Relating to its

E-Commerce Activities
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 10 GAO/T-GGD-00-195

USPS believes that it has broad statutory authority to offer e-commerce

products and services in ways that it finds appropriate to its assigned

functions and in the public interest. USPS told us this authority is

grounded in several provisions of the Postal Reorganization Act of 1970,4

not just the provision relating to its specific power to offer nonpostal

services. USPS said that the law provides discretion to its Board of

Governors to determine whether particular new services are appropriate

and in the public interest.

We have issued reports that may relate to the application of laws and

regulations to USPS e-commerce activities:

• We reported in 1998 that statutory and regulatory authorities governing

USPS provide it broad latitude to develop and market a wide variety of

new products, including both postal and nonpostal products.5

• We reported in 1996 and 1999 that we and USPS had differing

interpretations of federal privacy protections that relate to change-ofaddress information reported by USPS customers.6

According to USPS, numerous federal laws and regulations apply to its ecommerce products and services, but it has a different legal status from its

private sector competitors in some respects. For example, USPS reported

that federal privacy laws afford USPS e-commerce customers greater

protection than is provided for customers of private sector providers.

Further, USPS told us that the public interest, universal service,

antidiscrimination, and other policy provisions of the Postal

Reorganization Act of 1970 provide consumer protections in connection

4

P.L. 91-375.

5

Our analysis showed that USPS is subject to at least three constraints in developing and marketing

new products: (1) explaining how any new product will further USPS’ mission to provide postal

services to bind the nation together; (2) requesting a recommended decision from the Postal Rate

Commission (PRC) in the case of domestic postal products; and (3) addressing constraints or

influences that may arise from congressional oversight, restrictions imposed during the appropriations

process, or other legislative actions. See U.S. Postal Service: Development and Inventory of New

Products (GAO/GGD-99-15, Nov. 24, 1998).

6 We reported that in our view, use of information linked to the National Change of Address (NCOA)

program to create or maintain new-movers lists by USPS licensees, who are viewed under the Privacy

Act as if they were USPS employees, would be inconsistent with the Privacy Act. USPS disagreed,

stating that the NCOA program does not violate the Privacy Act because NCOA information provided

to licensees, and by licensees to their customers, is limited to the new addresses of persons whose

names and addresses are already on the licensee's or the customer's list. See U.S. Postal Service:

Improved Oversight Needed to Protect Privacy of Address Changes (GAO/GGD-96-119, Aug. 13, 1996);

and U.S. Postal Service: Status of Efforts to Protect Privacy of Address Changes (GAO/GGD-99-102,

July 30, 1999).

USPS’ Views of Its

Authority in the

E-Commerce Area

Our Reports That Discussed

USPS Legal Authority

USPS’ Views on the

Application of Laws,

Regulations, and Policies to

its E-Commerce Activities
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 11 GAO/T-GGD-00-195

with its e-commerce products and services, but many other federal

consumer protection laws are inapplicable to USPS. However, USPS stated

that some federal consumer protection laws may apply to USPS in certain

circumstances, and others may apply to USPS contractors or financial

institutions that help USPS offer e-commerce products and services.

Concerning law enforcement and e-commerce, USPS reported that the

Postal Inspection Service, a part of USPS that is responsible for enforcing

postal laws, has authority and responsibility to investigate violations of law

that involve USPS e-commerce products and services. The authority of the

Inspection Service was enhanced in 1998 by a delegation of authority from

the U.S. Attorney General. This delegation gave the Inspection Service

limited jurisdiction to investigate violations of certain crimes that may

relate to USPS’ e-commerce products, such as the Electronic Postmark.

However, USPS told us that the Inspection Service has no authority to

investigate electronic communications that do not “have a postal nexus.”

In the competition area, USPS told us that the antitrust laws and general

competition-related statutes do not apply to USPS, with the exception of

the advertising and competition provisions of the Lanham Act.7 However,

USPS stated that federal law prescribes competition-related factors that

must be considered with regard to USPS e-commerce activities.

USPS also said that in some cases, major federal regulations apply to its ecommerce products, including regulations adopted by USPS and other

federal agencies, such as Department of the Treasury and Federal Reserve

regulations related to USPS’ eBillPay initiative. However, it also noted that

the ability to make generalizations about how the regulations apply to

USPS is somewhat limited. USPS reported that it has authority to issue

regulations pertaining to its own e-commerce products and services, but

USPS also said it has “no authority to act as a regulator over economic

activity in general or over the Internet in particular.”

Finally, USPS reported that its activities in the e-commerce area are

generally not subject to administration policies that apply to other

executive branch agencies. According to USPS, executive orders and

Office of Management and Budget (OMB) instructions, unless grounded

in separate statutory authorization covering USPS or by national security

laws, do not apply as a matter of law, although USPS may voluntarily be

guided by certain of them.

7 15 U.S.C. § 1125(a).
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 12 GAO/T-GGD-00-195

USPS, some competitors, and other stakeholders have conflicting views on

the extent of USPS’ legal authority to offer e-commerce products and

services and under what circumstances it should offer such services. Some

USPS competitors and others have recently raised concerns that USPS has

an unfair competitive advantage in the e-commerce area because it is

subject to legal and regulatory requirements that are different from those

its competitors are subject to. On the other hand, the Postmaster General

and some other stakeholders have said that current laws put USPS at a

competitive disadvantage and have called for changes to give USPS

increased flexibility to compete. The appropriate role of USPS has been

debated for many years and continues to be debated in the context of

proposals for comprehensive legislation to reform the nation’s postal laws.

In addition, some specific concerns have been raised about USPS

e-commerce activities that also relate to emerging e-commerce issues,

such as the privacy of consumer information and what new e-commerce

products are subject to PRC review.

Our report recommended that the Postmaster General take the following

actions to help ensure more effective management and oversight of USPS’

e-commerce activities:

• take appropriate actions to help ensure that e-commerce and related

initiatives are appropriately identified and maintain accurate and complete

information related to the status of these initiatives,

• follow processes and controls that have been established for developing

and approving e-commerce initiatives, and

• provide complete and accurate information on costs and revenues for the

financial data on e-commerce initiatives.

In commenting on our draft report, USPS generally agreed with the facts in

our report and endorsed the report’s recommendations. However, USPS

noted differences in perspectives related to some of the concerns we

discussed. Specifically, USPS stated that its senior management had

reviewed and approved all of its e-commerce initiatives before

implementation. If so, such approvals were not fully documented. USPS

also stated that it is already taking the necessary actions to implement the

recommendations in our report within a management structure that will

provide long-term as well as day-to-day oversight of its e-commerce

program. PRC generally agreed with the report’s analysis of the issues and

further commented on USPS’ pricing policy for its e-commerce initiatives.

Concerns Have Been Raised

About USPS E-Commerce

Activities

Recommendations
Statement

U.S. Postal Service: Electronic Commerce Activities and Legal Matters

Page 13 GAO/T-GGD-00-195

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Mr. Chairman, this concludes my statement. I would be pleased to respond

to any questions you or the Members of the Subcommittee may have.

Contact and Acknowledgments

For further information regarding this testimony, please contact Bernard L.

Ungar at (202) 512-8387. Individuals making key contributions to this

testimony included Teresa L. Anderson, Kenneth E. John, Angela S. Davis,

Casey L. Brown, Hazel J. Bailey, Alan N. Belkin, and Victor B. Goddard.
Page 14 GAO/T-GGD-00-195
Page 15 GAO/T-GGD-00-195
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