[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Proposed Rules]
[Pages 40485-40487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17498]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2018-11; Order No. 4750]


Mail Preparation Changes

AGENCY: Postal Regulatory Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Commission is initiating a review to determine when a mail 
preparation change is a rate change. This document informs the public 
of the docket's initiation, invites public comment, and takes other 
administrative steps.

DATES: Comments are due on or before October 15, 2018.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Background
III. Request for Comments

I. Introduction

    The Commission initiates this advance notice of proposed rulemaking 
(ANPR) to seek proposals for a standard and process to determine when a 
mail preparation change is a ``changes in rates'' under 39 U.S.C. 3622 
in accordance with the recent decision in United States Postal Serv. v. 
Postal Reg. Comm'n, 886 F.3d 1253 (D.C. Cir. 2018) (IMb Opinion).

II. Background

    The Commission continues to maintain that certain mail preparation 
changes are rate changes, and those changes should be regulated under 
39 U.S.C. 3622. As participants in past associated dockets are aware, 
the issues involved in regulating mail preparation changes as ``changes 
in rates'' under 39 U.S.C. 3622 are varied and complex. The process 
involved in crafting a workable standard for regulating mail 
preparation changes under the price cap has been difficult and time-
consuming. However, this difficulty does not necessarily render the 
efforts to create a standard futile. Accordingly, the Commission issues 
this ANPR requesting proposals from commenters for a standard and 
process to determine when an individual mail preparation change is a 
``change in rates'' under 39 U.S.C. 3622 that is consistent with the 
recent guidance set forth in the IMb Opinion.
    In Docket No. R2013-10R, the Commission determined that a change to 
the Intelligent Mail barcoding (IMb) requirements was a rate change 
requiring compliance with the price cap under 39 U.S.C. 3622.\1\ The 
Postal Service appealed the Commission's determination to the United 
States Court of Appeals for the District of Columbia (the Court). In 
United States Postal Serv. v. Postal Reg. Comm'n, 785 F.3d 740, 751 
(D.C. Cir. 2015), the Court affirmed the Commission's conclusion that 
``changes in rates'' under 39 U.S.C. 3622 could include changes to mail 
preparation requirements and were not limited to ``only changes to the 
official posted prices of each product.'' However, the Court remanded 
the matter to the Commission so that it could articulate an 
intelligible standard to determine when a mail preparation change was a 
``change in rates'' subject to the price cap. Id. at 744.
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    \1\ Docket No. R2013-10, Order on Price Adjustments for Market 
Dominant Products and Related Mail Classification Changes, November 
21, 2013, at 5-35 (Order No. 1890). In this docket, the Commission 
briefly sets out the relevant history supporting the request for 
comment. For a complete history of the Commission proceedings 
leading up to this docket, please see Order No. 1890; Docket No. 
R2013-10R, Order Resolving Issues on Remand, January 22, 2016 (Order 
No. 3047); Docket No. R2013-10R, Order Resolving Motion for 
Reconsideration of Commission Order No. 3047, July 20, 2016 (Order 
No. 3441).
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    In response to the Court's remand, the Commission initiated 
proceedings to establish a standard to be used for the regulation of 
mail preparation changes as ``changes in rates.'' \2\ As a result of 
those proceedings, the Commission issued Order No. 3047, which set 
forth a standard to determine when a mail preparation change requires 
compliance with the price cap. The standard established in Order No. 
3047 provided that a mail preparation change could have a rate effect 
when it resulted in the deletion or redefinition of rate cells as set 
forth by Sec.  3010.23(d)(2).
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    \2\ Docket No. R2013-10R, Order Establishing Procedures on 
Remand and Requesting Public Comment, July 15, 2015 (Order No. 
2586).
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    In establishing the standard set forth in Order No. 3047, the 
Commission used its regulation, Sec.  3010.23(d)(2), to provide the 
framework. Section 3010.23(d)(2) provides that a classification change 
will have a rate effect when it results in the introduction, deletion, 
or redefinition of a rate cell. Under the Commission's rules, the 
Postal Service must include the effects of those classification changes 
in its calculation of the percentage change in rates under the price 
cap. 39 CFR 3010.23(d)(2). The standard in Order No. 3047 defined when 
a mail preparation change would be considered a classification change 
with rate effects under Sec.  3010.23(d)(2). The standard set forth 
that deletion of a rate cell occurs when a mail preparation change 
caused the elimination of a rate, or the functional equivalent of an 
elimination of a rate by making the rate cell inaccessible to mailers. 
Order No. 3047 at 15. The standard defined redefinition of a rate cell 
to occur when a mail preparation change caused a significant change to 
a basic characteristic of a mailing, effectively changing the nature of 
the rate cell. For redefinition, the Commission stated that it would 
apply a significance analysis to determine at what point on the 
spectrum a mail preparation change caused a rate cell to be redefined 
under Sec.  3010.23(d)(2). Id.

[[Page 40486]]

at 16-17. Using these parameters, when a mail preparation change caused 
a rate cell to be deleted or redefined, it would constitute a rate 
change requiring compliance with the price cap.\3\
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    \3\ In conjunction with Order No. 3047, the Commission initiated 
a separate rulemaking proceeding to develop a procedural rule that 
would ensure the Postal Service properly accounted for the rate 
effects of mail preparation changes in accordance with the 
Commission's standard articulated in Order No. 3047. Docket No. 
RM2016-6, Notice of Proposed Rulemaking on Motions Concerning Mail 
Preparation Changes, January 22, 2016, at 1-2 (Order No. 3048). The 
Notice of Proposed Rulemaking on Motions Concerning Mail Preparation 
Changes was published in the Federal Register on February 1, 2016. 
See 81 FR 5085 (February 1, 2016). The rulemaking resulted in a 
final procedural rule concerning mail preparation changes. See 
Docket No. RM2016-6, Order Adopting Final Procedural Rule for Mail 
Preparation Changes, at 22-23, January 25, 2018 (Order No. 4393). 
The Order Adopting Final Procedural Rule for Mail Preparation 
Changes was published in the Federal Register on March 5, 2018. See 
83 FR 4585 (March 5, 2018). That rule is being revised as a result 
of the IMb Opinion.
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    After Order No. 3047 was issued, the Postal Service requested the 
Commission reconsider its decision.\4\ In response, the Commission 
issued Order No. 3441 resolving the Postal Service's request for 
reconsideration and maintaining the standard as articulated in Order 
No. 3047. The Postal Service then petitioned the Court for review of 
the revised standard set forth in Order Nos. 3047 and 3441.\5\
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    \4\ Docket No. R2013-10R, Motion for Reconsideration of Order 
No. 3047, February 22, 2016.
    \5\ Petition for Review, United States Postal Serv. v. Postal 
Reg. Comm'n, 886 F.3d 1253 (D.C. Cir. 2018).
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    The Court issued its decision and vacated the Commission's standard 
in Order Nos. 3047 and 3441. IMb Opinion at 1255. In its decision, the 
Court concluded that the Commission's standard to determine when a mail 
preparation change was a rate change rested on an unreasonable 
interpretation of ``changes in rates'' under 39 U.S.C. 3622 that went 
beyond the meaning of the statute. Id.
    In its opinion, the Court referred to its previous decision in 2015 
to remand the matter to the Commission, stating that this decision 
``laid down a marker for what might qualify as rates and `changes in 
rates.' Time and again [it] tied `rates' to payments by mailers to the 
Postal Service, and `changes in rates' to changes in those payments.'' 
Id. at 1256. The Court explained that its 2015 decision affirmed the 
Commission's authority to regulate changes in posted prices and changes 
in mail preparation requirements because both could cause a change in 
rates paid by the mailer. Id. However, the Court vacated the 
Commission's standard set forth in Order No. 3047 because it viewed the 
standard as improperly regulating changes to mailers' costs as opposed 
to the price mailers pay. The Court stated that the standard cannot 
look ``solely to mailer costs . . . without comparing those costs to 
the additional payment a mailer would avoid by making the mail 
preparation change'' in order to predict whether mailers will pay a 
higher rate. Id. at 1260 (emphasis in original).
    Although the Court's IMb Opinion vacated the standard set forth by 
the Commission, it did not abrogate the Commission's authority to 
regulate mail preparation as ``changes in rates'' under the statute. 
Rather, the Court disagreed with the Commission's approach and found 
that the Commission's standard did not answer the question of whether a 
change to a mail preparation change would cause a mailer to pay a 
higher rate. The Court did not endorse any particular method to 
determine when a mail preparation change is a ``change in rates'' under 
39 U.S.C. 3622, but provided its views on approaches that could 
potentially conform to the statute.
    In order to find that a mail preparation change is a rate change 
under 39 U.S.C. 3622, the Court indicated that the standard should be 
able to ``single out mail preparation changes that induce mailers to 
shift to a higher-priced service.'' Id. at 1259. The Court suggested 
that the Commission could have ``tried to integrate mail preparation 
requirements into its authority over `changes in rates' with the 
following argument: Where an increase in mail preparation requirements 
for one cell will drive mailers to use a higher-priced cell, the 
resulting increase in volume in the latter should count against the 
rate cap.'' IMb Opinion at 1256 (emphasis in original). The Court 
qualified this opinion by stating that it identified ``this approach 
not in order to offer any final judgment on it but to indicate how 
treating a change in mail preparation requirements as a rate change 
might, as a matter of arithmetic, be integrated with the Commission's 
system of volumetric assessment.'' Id.
    As suggested by the Court, the standard must look to predict mailer 
behavior in response to the mail preparation change in order to 
``single out mail preparation changes that induce mailers to shift to a 
higher-priced service.'' Id. at 1259. To do so, the Court indicated 
that the Commission would have to compare mailers' compliance costs 
with the offsetting rate benefit in order to determine whether mailers 
would be driven to a higher rate cell and pay a higher rate. Id. at 
1260. The Court acknowledged the complexity of this potential approach, 
especially where the mailer ``costs (however estimated) would have to 
be compared with a benchmark--the rate increment faced by mailers--that 
would be quite precise.'' Id.
    In response to the IMb Opinion, the Commission is continuing to 
explore whether a workable standard can be developed in order to 
determine when a mail preparation change is a rate change. The 
Commission seeks comment on the possibility of crafting a standard that 
would not only comport with the Court's decision but also be workable 
in the context of the Commission's proceedings.

III. Request for Comments

    The Commission requests comments from interested parties to propose 
a standard and process to determine when a mail preparation change is a 
rate change under 39 U.S.C. 3622 that comports with the IMb Opinion. In 
proposing a new standard, commenters should respond to the parameters 
and guidance set forth by the Court in the recent IMb Opinion and 
explain how the suggested standard is consistent with those parameters. 
Specifically, commenters should propose a standard that could be used 
to predict ``possible mailer migration to higher-priced products'' to 
determine when a mail preparation change results in a ``change in 
rates'' under 39 U.S.C. 3622. In addition to comments proposing a 
standard in line with the IMb Opinion, commenters should propose a 
practical process for the Commission to determine and resolve disputes 
over whether a mail preparation change is a rate change.
    In creating a new docket for this proceeding, the Commission 
acknowledges that although the issue before the Commission centered on 
the Postal Service's change to the IMb requirements in Docket No. 
R2013-10, the standard eventually adopted by the Commission will apply 
to all future mail preparation changes. The Commission appreciates the 
complex nature of this issue and the input provided by commenters in 
previous attempts to establish a workable standard to regulate mail 
preparation changes as rate changes.
    Initial comments are due no later than 60 days after the date of 
publication of this document in the Federal Register. After reviewing 
the initial comments, the Commission will decide if reply comments are 
necessary. Commission rules require that comments (including reply 
comments) be filed online according to the process outlined at 39 CFR 
3001.9(a), unless a waiver is

[[Page 40487]]

obtained. Additional information regarding how to submit comments 
online can be found at: http://www.prc.gov/how-to-participate. All 
comments accepted will be made available on the Commission's website, 
http://www.prc.gov.
    Pursuant to 39 U.S.C. 505, Kenneth E. Richardson is designated as 
an officer of the Commission (Public Representative) to represent the 
interests of the general public in this proceeding.
    It is ordered:
    1. Interested persons may submit initial comments no later than 60 
days from the date of the publication of this document in the Federal 
Register.
    2. Pursuant to 39 U.S.C. 505, the Commission appoints Kenneth R. 
Moeller to serve as an officer of the Commission (Public 
Representative) to represent the interests of the general public in 
this docket.
    3. The Secretary shall arrange for publication of this Order in the 
Federal Register.

    By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2018-17498 Filed 8-14-18; 8:45 am]
 BILLING CODE 7710-FW-P