Opinion ID: 2800057
Heading Depth: 2
Heading Rank: 1

Heading: The Statute and Regulations Are Ambiguous

Text: The Postal Service’s primary objection to the Commission’s Order is that the Commission lacks authority, under both the price cap statute and its implementing regulations, to consider mail preparation requirement changes in the Manual as “changes in rates” that count against the price cap. We disagree. The Postal Accountability and Enhancement Act’s price cap provision states that 19 [t]he system for regulating rates and classes for marketdominant products shall— (A) include an annual limitation on the percentage changes in rates to be set by the Postal Regulatory Commission that will be equal to the change in the Consumer Price Index for All Urban Consumers . . . over the most recent available 12-month period preceding the date the Postal Service files notice of its intention to increase rates[.] 39 U.S.C. § 3622(d)(1)(A). Under this statute, the Commission’s authority extends only to regulate “changes in rates.” A related provision defines “rates” as including “fees for postal services.” Id. § 102(7). The critical statutory question in this case is whether “changes in rates” encompasses only changes to the official posted prices of each product, as the Postal Service argues, or also changes to the prices actually applied to particular mailpieces, as the Commission argues. The language of the Act is ambiguous: “Changes in rates” is not specifically defined, and could apply either to the posted rates or the rates that customers actually pay. Neither interpretation conflicts with the statutory definition of “rates” as “fees for postal services,” since fees, like rates, can be both posted on a list and charged to specific mailpieces. See id. § 3622(d)(1)(A). The language of the statute therefore does not conflict with an interpretation of “changes in rates” as changes in the fees as applied to specific classifications of mailpieces. Moreover, nothing in the language or purpose of the statute renders unreasonable the Commission’s interpretation of “changes in rates” as extending to changes in the rates as they are applied to specific mailpieces. First, as noted, the language of the statute does not provide any relevant 20 limitation on the rates considered. Second, the Commission points out that the purpose of the price cap statute is to prevent the Postal Service from using its market-dominant power to charge customers unreasonably high prices. The Commission’s interpretation of the statute prevents the Postal Service from evading the price cap by shifting mailpieces to higher rates through manipulation of its mail preparation requirements. The Commission’s interpretation is therefore consistent with the price cap’s language and purpose, and the Commission’s delegated authority to administer the cap. The Postal Service’s arguments to the contrary are unavailing. Its plain language argument, as demonstrated above, simply does not fit the terms of the statute. The Postal Service attempts to bolster its reading of the statute by pointing out that the statute refers to “the Postal Service fil[ing] notice of its intention to increase rates.” Id. The Postal Service argues that this provision clarifies that “rates” therefore means only those rates for which the Postal Service must file notice. The Postal Service then argues that it is not required to file notice of its mail preparation requirement changes, and therefore “changes in rates” should not be considered to encompass mail preparation requirement changes. But this argument begs the question: If the Commission’s interpretation of the statute is correct, the Postal Service may, indeed, have to file a notice with the Commission when it makes certain mail preparation requirement changes that result in mailpieces being charged higher prices. That is in part the question at issue in this case. Therefore the “filing” language identified by the Postal Service clarifies no ambiguity about whether changes in rates encompass both changes to the posted rates and changes to rates brought about through the modification of the Postal Service’s classification system. 21 Nor are we convinced by the Postal Service’s observation that the Act sometimes distinguishes between “rates” and “classifications,” which the Postal Service argues requires the conclusion that a change in rates cannot be the same thing as a change in classification. See, e.g., id. § 3622(d)(1) (creating requirements for a system for regulating “rates and classes”). This argument ignores the fact that the Commission is not stating that changes in classifications are themselves changes in rates; rather, the Commission merely points out the selfevident fact that changes in classifications can cause changes in the rates experienced by mailers, a point the Postal Service does not dispute. It is those changes in rates paid by mailers that the Commission seeks to regulate, whether they occur through the posting of new prices to a list or through changes in classification. In short, the Postal Service has failed to show that “Congress has directly spoken to the precise question at issue,” Chevron, 467 U.S. at 842, or that Congress has precluded the Commission’s interpretation of the statute. The statute therefore leaves a gap to be filled by the Commission pursuant to its delegated authority to regulate rates and classes for market-dominant products. Nor can the Postal Service show that the Commission’s price cap authority over mail preparation changes is constrained by regulation. The regulations governing classification changes are also ambiguous as to whether they cover mail preparation requirement changes outside the Mail Classification Schedule. The relevant regulation reads, The Postal Service shall make reasonable adjustments to the billing determinants [i.e., volume levels] to account for the effects of classification changes such as the introduction, deletion, or redefinition of rate cells. 22 39 C.F.R. § 3010.23(d)(2). Nothing in the plain language of the regulation forbids the Commission from considering whether mail preparation requirement changes such as those in the Manual “redefine” a rate cell. As the Postal Service concedes, operational changes in the Manual can define and redefine the “eligibility” for a rate cell. The regulation is silent as to whether redefining the eligibility for a rate cell – in other words, defining which mailpieces can fit into that rate cell – is a redefinition of the rate cell itself. Certainly, however, the regulation does not foreclose the Commission’s interpretation, and we are bound to defer to that interpretation unless it is “plainly erroneous or inconsistent with the regulation.” Thomas Jefferson Univ., 512 U.S. at 512 (internal quotation mark omitted). We are not convinced by either of the Postal Service’s arguments attempting to limit the scope of this regulation. First, the Postal Service argues that “classification changes” in the regulation refers only to changes made to the official Mail Classification Schedule (which establishes rates for mail services), not changes made to the Postal Service’s operational Manual (which sets mail preparation requirements). But nothing in the language of the regulation limits its scope to classification changes contained in the Schedule. On the other hand, changes in the Manual that reclassify a mailpiece from one product or rate cell to another fall comfortably within the plain meaning of the phrase “classification changes.” The Postal Service has provided no principled reason, originating in the statute or regulations, for why the price cap should treat classification changes in the Manual differently than classification changes in the Schedule when either change can cause a change in the rates paid by mailers. The 23 regulation is therefore ambiguous and does not preclude the Commission’s reasonable assertion of authority over some mail preparation requirement changes with rate effects. The Postal Service’s final argument regarding the interpretation of the regulation is that the Commission’s reading of “classification changes” as extending beyond the Mail Classification Schedule would wreak havoc with the Postal Service’s ratemaking by requiring it to count “[a]ny mail-preparation requirement” as a classification change that may change rates. Br. of U.S. Postal Serv. 41. The Postal Service is certainly correct that the implications of the Commission’s interpretation of its authority are potentially staggering. Nonetheless, this does not change the fact that, in regulating the price cap, the Commission has some authority to take account of operational rules that have rate effects. This does not mean that the Commission has unfettered authority. Any regulatory approach must be a product of reasoned decisionmaking. We now turn to this issue.