Le Page 's 2000, Inc . and Le Page 's Products , Inc . v. Postal Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 15, 2011 Decided June 7, 2011
No. 10-1031
LE PAGE 'S 2000, I NC . AND LE PAGE 'S PRODUCTS , I NC .,
PETITIONERS
v.
POSTAL REGULATORY COMMISSION ,
RESPONDENT
Consolidated with 10-1033, 10-1279, 10-1294
On Petitions for Review of an Order
of the Postal Regulatory Commission
David Himelfarb argued the cause for petitioners LePage’s
2000, Inc. and LePage’s Products, Inc. With him on the briefs
were Daniel J. Kelly and Bonnie A. Vanzler.
Miriam R. Nemetz argued the cause for petitioner United
States Postal Service. With her on the briefs was Kenneth S.
Geller.
Daniel Tenny, Attorney, U.S. Department of Justice, argued
the cause for respondent. With him on the brief were Tony
West, Assistant Attorney General, Michael S. Raab, Attorney,

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Stephen L. Sharfman, General Counsel, Postal Regulatory
Commission, R. Brian Corcoran, Deputy General Counsel, and
Kenneth E. Richardson, Attorney.
Before: S ENTELLE , Chief Judge, GRIFFITH , Circuit Judge,
and SILBERMAN , Senior Circuit Judge.
Opinion for the Court by Senior Circuit Judge SILBERMAN .
SILBERMAN , Senior Circuit Judge: T h e U n i t e d S t a t e s
Postal Service, LePage’s 2000, Inc., and LePage’s Products, Inc.
(the latter two collectively “LePage’s”), seek review of a Postal
Regulatory Commission order classifying the Service’s licensing
of its intellectual property for use on third-party mailing and
shipping supplies as “nonpostal” under the Postal Accountability
and Enhancement Act, and requiring the Service to discontinue
that activity. The petitioners contend that the Commission
improperly departed from a previous order without explanation
and failed to support its findings with sufficient evidence. We
agree with petitioners’ first argument. We therefore grant the
parties’ petitions for review, vacate the Commission’s order, and
remand for further proceedings consistent with this opinion.
I
As we explained last year in a companion to this case,
Congress created the modern government-owned corporation
known as the United States Postal Service in 1970, and imbued
it with the power not only to deliver the mail, but also to provide
special “nonpostal” services. See USPS v. Postal Regulatory
Comm’n, 599 F.3d 705, 706 (D.C. Cir. 2010). Accordingly, the
Service engaged in a number of ventures “unrelated or only
tangentially related to the delivery of mail,” to the point where
such activities became quite “substantial.” Id. Such activities
include the Service’s licensing of its intellectual property for use

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on commercially-available consumer products sold at third-party
retail locations.
The commercial licensing program encompasses several
different categories of goods, including apparel, pet products,
and fashion accessories. At issue in this case is the Service’s
commercial licensing of third-party mailing and shipping
supplies, which includes products related to the Service’s core
business of delivering the mail. The Service had five license
agreements in this program – which, for simplicity’s sake, we
will refer to as the “Bubblewrap program” – although only one
remains in effect: an agreement with LePage’s. That agreement
permits LePage’s to sell mailing and shipping supplies (such as
boxes, padded envelopes, bubblewrap, tape, packing materials,
packing tap, and return mailing labels) branded with the United
States Postal Service corporate logo at non-Postal Service retail
outlets. Each product that LePage’s sells indicates that it is the
manufacturer and that the Service is the licensor.
* * *
Congress expressed skepticism throughout the 1990s about
the Service’s nonpostal activities, and considered legislation to
eliminate or limit its authority to engage in such activities.
These efforts crescendoed after a 2003 presidential blue-ribbon
commission found the Service’s nonpostal activities “dubious”
and “far afield” of the Service’s “basic function.” Id. The
commission noted that the Service’s nonpostal activities largely
had not been profitable, created market distortion, and distracted
the Service from its basic function. It therefore recommended
that Congress “restrict the Service’s authority to include only
services directly related to the delivery of mail.” Id. at 707.
Congress responded with the Postal Accountability and
Enhancement Act (“the Act”), Pub. L. No. 109-435, 120 Stat.

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3198 (2006). The Act significantly limited the Service’s ability
to engage in nonpostal activities, which it defined as “any
service that is not a postal service.” A “postal service” included
“the delivery of letters, printed matter, or mailable packages,
including acceptance, collection, sorting, transportation, or other
functions ancillary thereto.” The Act precluded the Service
from offering new nonpostal services after its passage, while
permitting nonpostal services offered before January 1, 2006, to
continue pending review by a newly-created Postal Regulatory
Commission. The Commission was charged with reviewing
each nonpostal service offered by the Postal Service; it could
approve for continuation a nonpostal service if the Commission
concluded that there was a (1) public need for the service and (2)
the private sector could not meet the public need for the service.
But the Commission was required to terminate any nonpostal
service that did not meet both statutory criteria.
In December 2007, the Commission began its review of the
Service’s activities. During the first part of the proceedings –
termed “Phase I” – the Service argued that several of its
programs should be classified as “postal services” and therefore
permitted to continue without further review under the Act.
These include the “ReadyPost” program, “a Postal Service-
branded line of shipping supplies designed for sale in post office
retail locations,” the customized postage program, a form of
postage prepayment in which private companies licensed by the
Service allow consumers to obtain custom postage, and the
greeting card program, in which third-party stationery is sold in
post office retail locations. Review of Nonpostal Services
Under the Act (“Phase I Order”) (Dec. 19, 2008), 32-35,
reprinted at J.A. 504.
The Commission agreed with the Service that the three
programs should be classified as “postal services.” It concluded
that the ReadyPost program was a “postal service” because its

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products were “postal related;” they would be mailed, were
designed to meet customers’ mailing needs, and, since they were
displayed at Service locations, “offer[ed] convenience to the
customer and ma[de] access to the mailstream easier.” The
customized postage program was a “postal service” because it
represented a “form of of postage prepayment, a core function
of the Postal Service.” And the greeting card program was a
“postal service” because the products fostered use of the mails.
In the Phase I proceedings, the Service also sought to have
the Commission continue several activities that it conceded were
“nonpostal services.” Relevant here is the Officially Licensed
Retail Products program, through which the Service sells postal-
branded and -themed products at Service retail locations. The
products include both items that assist customers in the use of
the mails – such as scales and stamp dispensers – and branded
miscellaneous items – such as teddy bears and key chains.
Applying the two-part statutory criteria laid out in the Act, the
Commission concluded that there was a “public need” for what
we will call the “Bears and Scales program” because it
“leverages the Postal Service’s brand, advertises and enhances
its image, and, through the revenues generated, helps support the
Postal Service’s core mission.” Id. at 49. The Commission
found that the private sector could not meet this need because no
other entity would be able to provide the Service’s intellectual
property (its brand) to manufacturers. The Commission
therefore permitted the Bears and Scales program to continue as
a nonpostal service.
The Commission lastly considered the Service’s
commercial licensing program for third-party products.1 It first
1 The Service took the position that commercial licensing was not
subject to review under the Act because it was authorized by a
separate statute. The Commission rejected this argument.

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noted that the commercial licensing program was a “nonpostal
service” because “[w]hen the Postal Service acts as a licensor,
it is granting the right to use its intellectual property [, in other
words its brand,] on consumer goods.” Id. at 71. The
Commission therefore assessed whether the program should be
continued under the Act’s two-part criteria. It found the
Service’s commercial licensing program serves a public need
because it generates revenues, benefits mailers, and promotes
and gives recognition to the Service’s brand. And it concluded
that since only the Service could license its intellectual property,
the private sector could not meet the public need for the
program. Id. at 73. The Commission therefore stated that
commercial licensing, “as a general matter,” could continue. Id.
Nevertheless, the Commission noted that its conclusion was
“not unqualified.” It observed that commercial licensing that
related to the Service’s core business of delivery of the mail –
the Bubblewrap program – “raise[d] a host of issues” that were
not sufficiently developed in the record for the Commission to
assess. Id. at 74. The Commission therefore permitted such
licenses to continue pending their full consideration in a
subsequent proceeding. In a clarification order, the Commission
indicated that the Phase I order was appealable, except as to its
conclusions regarding the commercial licensing program, which
were deemed to be interlocutory. The Service appealed the
Phase I order, which we upheld. See Postal Regulatory
Comm’n, 599 F.3d at 706.
While the Service’s appeal was pending, the Commission
began the second phase of the Act’s mandated review.
LePage’s, which had not been a party to the Phase I proceedings,
filed a motion to intervene that the Commission granted. The
Commission first confirmed that the Service’s commercial
licensing program for products other than mailing and shipping
supplies – such as apparel, pet products, and fashion accessories

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– met the two criteria of the Act and therefore could continue.
It therefore turned to the question whether the Service may
continue the Bubblewrap program.
The Commission found that there was no public need for
the Bubblewrap program. It observed that the benefits it
identified for the Service’s commercial licensing program
generally “are not sufficient to support a finding of public need”
for the Bubblewrap program. Phase II Review of Nonpostal
Services Under the Act (“Phase II Order”) (Jan. 14, 2010), 14-
15, reprinted at J.A. 875. In the Commission’s view, the
benefits were “either without sufficient evidentiary support or
mitigated by factors that are not applicable” to other trademark
licensing. Id. at 15. Specifically, it identified two “mitigating”
factors that it believed outweighed any benefits of the
Bubblewrap program.
First, the Commission noted that USPS-branded products
sold by third parties could confuse consumers: consumers may
believe that the Service is selling, and standing behind, the
licensed mailing and shipping supplies. Second, it found that
the Bubblewrap program could disrupt markets. It based this
conclusion on two predictions: that because the Service’s
monopoly over the delivery of mail gave it “perceived
expertise” over mailing and shipping supplies, USPS-branded
supplies may have an advantage over other products in the
consumers’ minds, and “when the Postal Service competes in a
market where the Postal Service provides regulatory oversight
of a product or system, there is the potential for unfair
competition.” Id. at 19.
The Commission also found that the Service had failed to
demonstrate that the private sector was unable to meet any
public need for the Bubblewrap program. It observed that the
“USPS-branded products are sold in large chain stores where

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similar alternative products are available in the absence of the
USPS brand.” Id. at 24. And therefore the Commission stated
that it could not “conclude that the USPS-branded mailing and
shipping products are sufficiently different from competitor
products that the private sector is not able to meet the public
need for these products.” Id. at 25. It ordered the Service to
terminate the Bubblewrap program.
After the Commission issued its Phase II order, both the
Service and LePage’s timely filed petitions for review in this
Court. The Service subsequently asked the Commission to stay
the termination of the Bubblewrap program on the ground that
the Service had sought review of the Commission’s Phase I
order. The Commission denied this request as moot when we
upheld that order.
Following the publication of our opinion, however, and
apparently unaware of the Commission’s ruling finding moot the
Service’s motion to stay, LePage’s filed a notice with the
Commission indicating its support for the Service’s motion to
stay, and promising that a “comprehensive submission” would
follow “shortly.” Three months later, in June 2010, the Service
again requested a stay in order to permit the Commission to
address LePage’s as-yet-unfiled submission. In July 2010,
nearly three-and-one-half months after its original notice,
LePage’s asked the Commission to reconsider its Phase II order,
or, in the alternative, to stay the Commission’s ruling pending
resolution of the petition for review of the Phase II order. The
Service later submitted its own petition for reconsideration. The
Commission denied both petitions for reconsideration, holding
that they were untimely and raised no new arguments that could
not have been raised during the Phase II proceeding. The
Commission, however, stayed its Phase II order pending our
review. Both the Service and LePage’s sought review of the
Commission’s denial of their motions for reconsideration, which

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we consolidated with the previously-filed petitions to review the
Phase II order.
II
The Service contends that the Commission’s Phase II order
is unreasonable because the Commission’s decision to find that
the Bubblewrap program did not serve a public need departed
abruptly from its Phase I position that the Service’s commercial
licensing program did serve a public need. The Service also
argues that the Commission’s conclusion that there is no public
need for the Bubblewrap program is not supported by substantial
evidence.
Finally, the Service objects to the Commission’s finding
that the private sector could meet the public need for the
Bubblewrap program. According to the Service, in the Phase I
order, the Commission concluded that there was no private-
sector alternative to the Service’s commercial licensing
activities because no other entity could grant a license for the
Service’s intellectual property (its brand). But in its Phase II
order, the Commission ignored this conclusion and instead
found that the public need for the Bubblewrap program could be
satisfied by similar products that do not bear the Service’s
trademark. The Service objects to this unexplained change of
position. 2
LePage’s largely mirrors the Service’s challenges to the
merits of the Phase II order, but raises two additional arguments
2 The Service also suggests that even if the Commission is correct
in concluding that there is no public need for the Bubblewrap
program, the Commission should not have terminated the program.
Rather, it should have adopted a more measured regulatory response
to address the issues it highlighted.

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that the Service did not present. First, the Commission erred by
classifying the Bubblewrap program as a “nonpostal service.”3
LePage’s observes that the Commission decision regarding the
program is untenable in light of the Commission’s conclusion
that the ReadyPost program, the customized postage program,
and the greeting card program are “postal services.” Second, the
Commission improperly considered the economic effects of the
Bubblewrap program products as part of its “public need”
inquiry. LePage’s also argues that the Commission’s failure to
consider LePage’s’ motion for reconsideration on timeliness
grounds was arbitrary and capricious because neither the Act nor
the Commission’s rules imposed any deadline for filing such
motions.
The Commission contends that LePage’s is wrong that the
Commission should have classified the program as a “postal
service” because the activity at issue – licensing – does not meet
the definition of a “postal service” in 39 U.S.C. §102(5). The
programs the Commission classified as “postal services” all
involve sales directly made by the Service, which distinguishes
them from licensing. The Commission asserts, moreover, in
response to both the Service and LePage’s, that it rightly found
that the program did not serve a public need that could not be
met by the private sector by redeploying the arguments it offered
below. It also maintains that it reasonably denied LePage’s
motion for reconsideration on timeliness grounds, given that it
was filed approximately six months after the Commission issued
its Phase II order. In any event, the Commission notes that
because the motion failed to present new evidence that LePage’s
3 LePage’s, somewhat confusingly, suggests that the Commission
did not classify as “postal” or “nonpostal” the Bubblewrap program as
it was required to do under the Act. But this is belied by the record.
See Phase I Order at 71; Phase II Order at 8.

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could not have presented earlier, we do not have jurisdiction to
review it.4
* * *
The Commission’s order is rife with anomalies, any one of
which is sufficient to justify a remand, and all of which, when
considered together, demonstrate the Commission was
proceeding in a slapdash manner. We begin with LePage’s’
argument that the Commission erred by classifying as a
“nonpostal service” the Bubblewrap program. According to
LePage’s, its sale of licensed mailing and shipping supplies
meets the definition of a “postal service” because the sale of
such supplies is “ancillary to the carriage of mail.” 39 U.S.C. §
102(5). Indeed, it suggests that the products it is selling are akin
to the products sold as part of the programs that the Commission
found to be “postal services” in its Phase I order. For example,
the LePage’s products, like ReadyPost and greeting cards, are
designed to meet customers’ mailing needs, foster use of the
mails, and aid access to the mailstream. And LePage’s products,
like customized postage, includes Service-licensed intellectual
property.
The Commission offers a simple response in its brief:
LePage’s wrongly focuses on its sale of mailing and shipping
supplies as the activity that determines whether a service is
“postal” or “nonpostal.” According to the Commission, the Act
requires it to review each activity “offered by” the Service to
4 The Commission also asserts that the Service is incorrect in
suggesting that the Commission could have adopted regulatory
measures short of termination once it found that there was no public
need for the Bubblewrap program. We agree. Congress instructed
that the Commission “shall terminate” any service not authorized
under the Act. 39 U.S.C. § 404(e)(4).

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determine if it is “postal” or “nonpostal.” See 39 U.S.C. §
404(e)(3) (emphasis added). With regard to the Bubblewrap
program, the only activity “offered by” the Service is licensing,
which the Commission has concluded does not meet the
definition of a “postal service.” By contrast, ReadyPost and the
greeting card program are “postal services” because in each case
the Service sells mailing and shipping supplies at its retail
locations and on its website. And the customized stamp
program is a “postal service” because it involves the sale of
postage to third parties. In other words, the Commission seems
to assert that so long as it is the Service itself that sells mailing
and shipping supplies, it is a “postal service.”
The Commission may well be correct that the crucial
distinction is the seller’s identity. But whatever the merits of
this position, we cannot consider it because the Commission did
not set it forth below. It did not label ReadyPost, the greeting
card program, or the customized postage program “postal”
because they involved sales by the Service itself. And we, of
course, “cannot ‘accept appellate counsel’s post hoc
rationalizations for agency action’; for an agency's order must
be upheld, if at all, ‘on the same basis articulated in the order by
the agency itself.’” Fed. Power Comm’n v. Texaco Inc., 417
U.S. 380, 397 (1974) (quoting Burlington Truck Lines, Inc. v.
United States, 371 U.S. 156, 168-69 (1962)). Indeed, the
position the Commission presses now is inconsistent with the
position it took below, where it assessed whether the products
at issue – as opposed to the activity offered by the Service –
could “reasonably be viewed as ancillary to the carriage of
mail.” Phase I Order at 33.
Distinguishing the Bubblewrap program from ReadyPost
and the greeting card program based on the rationale offered
below (to the extent the Commission still relies on it) is
untenable. The Commission found ReadyPost and the greeting

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card program to be “postal services” because these products
fostered use of the mail and enhanced consumers’ convenience.
Yet, as LePage’s and the Service persuasively argue, these
articulated factors apply to the Bubblewrap program as well.
The Bubblewrap program products – indistinguishable from the
ReadyPost products, compare Phase I Order at 32, with
Supplemental Statement of Gary Thuro (Jan. 30, 2009), 2,
reprinted at J.A. 634 – meet customers’ mailing needs, make
access to the mailstream easier, and, because they are available
in a many retail establishments, improve customer convenience.5
We remand the Phase II order to the Commission to explain its
departure from the Phase I order and to adopt a reasoned
rationale for classifying the Bubblewrap program a “nonpostal
service.”
III
We turn now to the petitioners’ alternative argument
challenging the Commission’s conclusion that there is no public
need for the Bubblewrap program.
It will be recalled that the Commission found no public
need for the program because “[a]ny benefits are outweighed by
the disadvantages of selling USPS-branded products that can
confuse consumers and disrupt markets.” Phase II Order at 15.
But the Commission’s assessment of the benefits of the
Bubblewrap program is flawed. In its Phase I order, the
Commission determined that commercial licensing, as a general
matter, served a public need because it generated revenue,
benefitted mailers, and gave recognition to the Service’s brand.
5 It is of no moment that, as the Commission observed, the
Bubblewrap program may generate less mail for the Service than sales
of the same supplies at Service retail locations. A mere comparison
of volume cannot save the Commission.

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In its Phase II order, the Commission again recognized these
benefits, yet noted that they were “without sufficient evidentiary
support” for the Bubblewrap program. Id. at 14-15. But the
evidence the Commission relied on for the benefits of the
commercial licensing program – a statement from the Service’s
manager of licensing – did not distinguish between different
types of commercial licensing. The Commission does not
explain how it can read the same evidence differently when
applied to different aspects of the same program.
The Commission recognized, moreover, in finding a public
need for the Bears and Scales program, that the Service’s sales
of USPS-branded mailing and shipping products serve the same
public need as commercially-licensed products generally: they
“leverage[] the Postal Service’s brand” and “help[] support the
Postal Service’s core mission.” Phase I Order at 49. We do not
understand why these same benefits would not accrue to the
Bubbewrap program, which aside from the seller’s identity, is
substantially similar to the Bears and Scales program. At the
least, the Commission must explain this differential treatment of
seemingly like cases. See Westar Energy, Inc. v. FERC, 473
F.3d 1239, 1241 (D.C. Cir. 2007).
LePage’s would have us go further and hold unreasonable
the supposed disadvantages of the Bubblewrap program that the
Commission identified. As we discussed, the Commission
concluded that the Bubblewrap program products will cause
customer confusion and will result in market distortion.
According to LePage’s, the Act does not permit the Commission
to analyze “public need” based on the predicted economic
effects of a product. We find some merit in this position. The
Act requires the Commission to assess the “public need” for the
service “offered by” the Postal Service. 39 U.S.C. §
404(e)(3)(A). Yet the service offered by the Postal Service in
the Bubblewrap program is, of course, the licensing of

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intellectual property. The Commission’s focus on the economic
effect of the products that result from licensing, then, would
seem to depart from the Act’s plain language.
Nevertheless, we need not resolve this issue of statutory
interpretation (nor whether the Commission’s interpretation of
“public need” is entitled to deference) because the
Commission’s assessment of “public need” in its Phase II order
departs from the Phase I order. In the Phase I order, the
Commission noted that it would consider a variety of factors in
analyzing public need: “the demand for the service, its
availability, its usefulness, whether it is a customary business
practice, or serves the efficiency of operations.” Phase I Order
at 39. All of these factors focus on the public need for the
service, not the products resulting from that service, a point that
the Commission makes clear in its own analysis. In concluding
that commercial licensing served a public need, the Commission
observed that licensing “generat[ed] revenues and “benefitt[ed]
mailers.” Phase I Order at 73. It could not have been concerned
with the commercially-licensed products themselves because
they generate no revenue for the Service; they are manufactured
and sold by third parties. The Commission, however, subtly,
and without explanation, changed this approach in its Phase II
order, assessing the disadvantages of the Bubblewrap program
based only on the program’s products.
Further, the Commission never indicated in its Phase I order
that it was going to consider economic impact as part of its
“public need” inquiry. In fact, the Commission’s only reference
to economic impact in its Phase I order occurs in its discussion
of how it intends to analyze whether the private sector can meet
a public need for a nonpostal service. Yet we perceive no

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explanation of how this concern migrated, in Phase II, to the
Commission’s “public need” inquiry.6
* * *
Although the Commission’s finding that there was no
public need for the Bubblewrap program required it to terminate
the program, see 39 U.S.C. § 404(e)(3) (service must both meet
a public need and be without a private sector alternative to
continue), it went on to hold that the private sector could meet
any public need for the program. Petitioners challenge this
conclusion, contending that the Commission departed without
explanation from its Phase I conclusion that the private sector
could not possibly meet the public need for commercial
licensing. We agree. In Phase I, the Commission held that
commercial licensing could not be met by the private sector
because no entity other than the Service could license its
intellectual property. In Phase II, however, the Commission
changed course, explaining that other entities were able to
provide substitutes for the licensed mailing and shipping
products. In other words, the Commission altered its analytic
frame from the activity the Service engaged in to the products
that resulted from that activity.
The Commission offered no reason for this departure. And
we, of course, cannot uphold a decision “where an agency
departs from established precedent without a reasoned
explanation.” ANR Pipeline Co. v. FERC, 71 F.3d 897, 901
(D.C. Cir. 1995); accord Motor Vehicle Mfrs. Ass’n v. State
6 Both the Service and LePage’s also contend that the
Commission failed to support its catalogue of disadvantages of the
Bubblewrap program. Because we do not know what the
Commission’s order after remand will look like, we cannot address
this argument here.

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Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983). Nor, in fact,
do we see how the Commission could adopt the position it does
in its Phase II order. As we discussed – and as the Commission
itself argues before us – under the Act, the Commission must
assess the activity the Service offers. In the case of commercial
licensing – whether for mailing and shipping supplies or for
other products – that activity is licensing. Therefore, for the
Commission to review the private sector factor by assessing
ability of the private sector to provide similar products would
bring the Commission into conflict not only with the Act, but
also with its (newly-minted) rationale for classifying
commercial licensing a “nonpostal service.”7
IV
For the foregoing reasons, we grant the petitions to review
the Phase II order, vacate the order, and remand for further
proceedings consistent with this opinion. The Commission has
much work to do on remand remedying the abundant
inconsistencies in its order.
So Ordered.
7 Because we find that the Phase II order is arbitrary and
capricious, we need not address LePage’s’ additional argument that
the Commission erred in denying LePage’s’ motion for
reconsideration.

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