United States Postal Service v. Postal Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 18, 2013 Decided June 11, 2013
No. 12-1221
UNITED S TATES P OSTAL S ERVICE,
P ETITIONER
v.
P OSTAL R EGULATORY C OMMISSION ,
R ESPONDENT
ASSOCIATION FOR P OSTAL C OMMERCE, ET AL.,
INTERVENORS
On Petition for Review of Orders
of the Postal Regulatory Commission
David C. Belt, Attorney, U.S. Postal Service, argued the
cause for petitioner. With him on the briefs was Michael J.
Elston, Chief Counsel.
Daniel Tenny, Attorney, U.S. Department of Justice,
argued the cause for respondent. With him on the brief were
Stuart F. Delery, Acting Assistant Attorney General, Michael
S. Raab, Attorney, Stephen L. Sharfman, General Counsel,
Postal Regulatory Commission, and R. Brian Corcoran,
Deputy General Counsel.

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Before: HENDERSON, GRIFFITH, and KAVANAUGH , Circuit
Judges.
Opinion for the Court filed by Circuit Judge KAVANAUGH.
KAVANAUGH , Circuit Judge: Through snow and rain
and heat and gloom of night, the Postal Service delivers the
mail. But the Postal Service does so under the watchful eye
of a separate independent agency, the Postal Regulatory
Commission. As relevant here, the Commission regulates the
rates that the Postal Service may charge for mail.
This case concerns the rates that the Postal Service
charges for presorted mail. Presorted mail generally refers to
bulk mail that the mailer presorts by destination before giving
it to the Postal Service. The Postal Service charges less for
presorted First-Class Mail than for single-piece First-Class
Mail. The discount encourages presorting, and presorting
lowers costs for the Postal Service because the Postal Service
does not itself have to do the sorting.
The Commission claims that the Postal Service is giving
too large a discount for presorted mail. In its order in this
case, the Commission explained that the Postal Service’s
lower rate for presorted mail is the result of what the
governing statute calls a “workshare discount.” As defined
by the statute, a “workshare discount” is a “rate discount[]
provided to mailers for” performing certain tasks – like
“presorting” – that the Postal Service otherwise would
perform itself. 39 U.S.C. § 3622(e)(1). The statute says that
the workshare discount for presorted mail may “not exceed
the cost that the Postal Service avoids as a result of workshare
activity” like presorting. 39 U.S.C. § 3622(e)(2). Here, the
Commission found that the Postal Service’s discount for
presorting exceeds the cost that the Postal Service avoids as a

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result of presorting. Therefore, the Commission determined
that the Postal Service must revise its discount for presorting.
The Postal Service is unhappy because it believes that it
needs to offer bulk mailers large discounts so that bulk
mailers will continue to use the U.S. Postal Service rather
than, say, email. The Postal Service’s primary legal
argument is that the statutory limits on the amount of a
workshare discount do not apply here because presorted
First-Class Mail is not the same “product” as single-piece
First-Class Mail. But the statutory language governing
workshare discounts does not refer to products. We think the
correct statutory analysis here is extremely simple and
supports the Commission: The discount that the Postal
Service offers for presorting is a “rate discount[] provided to
mailers for . . . presorting.” 39 U.S.C. § 3622(e)(1).
Therefore, it is clear that, as the Commission concluded, the
amount of the discount that the Postal Service may offer for
presorting is subject to the statute’s workshare discount limit,
and the discount may not exceed the cost that the Postal
Service avoids as a result of the presorting. See Chevron
U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S.
837 (1984).
The Postal Service separately argues that the Commission
unreasonably applied Commission precedent. Under
Commission precedent, the workshare-discount limit applies
in presort cases only when mailers presort their mail primarily
because of the lower price charged for presorted mail. See
Order No. 536, Docket No. RM2009-3, at 49 (P.R.C. Sept.
14, 2010). The Postal Service claims that mailers do not
choose to presort their mail primarily because of the lower
price charged by the Postal Service for presorted mail.

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But the Commission reasonably concluded that mailers
choose between single-piece and presorted First-Class Mail
based on price. Economic models in the record demonstrate
that a one-percent increase in the price difference between
presorted and single-piece First-Class Mail would produce a
significant change in demand. See 2010 Order, at 54-59.
That is, when the price of presorted mail changes by about
one percent, customers become more or less likely to presort
their mail. That means that customers are choosing between
the services based in part on price – something one would
expect as a matter of common sense. And that conclusion is
further supported by evidence of a “significant industry” that
has developed to convert single-piece First-Class Mail into
presorted First-Class Mail. See id. at 52.
Finally, the Postal Service raises an additional – albeit
rather counterintuitive – argument that, if the workshare
discount provision applies, then the Commission has been too
generous in calculating the maximum discount that the Postal
Service may offer. We need not delve into the merits of that
argument. If the Postal Service wants to offer a smaller
discount – and recall that the Postal Service brought this
challenge so that it could offer larger discounts – nothing in
the Commission’s decision precludes it from doing so. For
standing purposes, the Postal Service is not injured to the
extent it independently claims that the Commission’s
calculation allows the Postal Service to offer too large a
discount.
* * *
We have considered all of the Postal Service’s arguments,
and we deny the petition for review.
So ordered.

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