SCOTUS Declines to Hear UPS Case on USPS Pricing

On Monday, the U.S. Supreme Court in an unsigned order declined to hear an appeal of a lower court ruling which denied UPS’s legal claim that the U.S. Postal Service’s pricing model gave it an unfair advantage over its parcel shipping competitors.

Just about a year ago, a U.S. Appellate Court in Washington, DC upheld the pricing methodology, knocking down a challenge from UPS against the Postal Regulatory Commission (PRC) that characterized USPS as unfair and anti-competitive.

By law, the PRC cannot use revenue from its market-dominant letter delivery business to subsidize its competitive products, especially parcel delivery. The three-judge appellate panel found last year that the USPS’s transfer of some profits from its first-class mail monopoly to offset parcel delivery costs did not amount to a subsidy of those operations.

In its appeal, UPS had asked SCOTUS to review the lower court’s ruling and clarify or overturn a policy whereby “courts generally defer to an administrative agency’s reasonable interpretation of an ambiguous statute that it administers,” referring to the subsidy ban, according to Fox Business.

UPS was “disappointed” with the SCOTUS decision, adding it would “continue to work with the Postal Regulatory Commission to advocate for transparent cost accounting at the USPS,” per Fox.

MCM Musings: Amazon, a large user of USPS for last-mile deliveries, backed the postal service in the court cases. President Trump has loudly protested the relationship, called USPS Amazon’s “delivery boy” and claiming the ecommerce giant gets favored treatment over other shippers. Of course, he is also not a fan of Amazon CEO Jeff Bezos, owner of the Washington Post, a frequent and harsh Trump critic. Amazon does benefit from its unmatched ability to do direct DDU injection of presorted packages for USPS last-mile delivery, based on its network assets. A 2017 analysis by Citigroup estimated that if the USPS fairly allocated shared costs between letter and parcel delivery, the latter would cost an average of $1.46 more per package, effectively creating a subsidy. The appellate court did not see it that way. It’s also interesting that FedEx has opted not to fight this battle in the courts.