Competitive Postal Products, 3313-3315 [2023-00944]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 12 / Thursday, January 19, 2023 / Rules and Regulations
Himamauli Das,
Acting Director, Financial Crimes
Enforcement Network.
[FR Doc. 2023–00943 Filed 1–18–23; 8:45 am]
BILLING CODE 4810–02–P
POSTAL REGULATORY COMMISSION
39 CFR Part 3035
[Docket Nos. RM2017–1 and RM2022–2;
Order No. 6399]
Competitive Postal Products
Postal Regulatory Commission.
ACTION: Final rulemaking.
AGENCY:
The Commission is adopting
a final rule concerning the minimum
amount that the Postal Service’s
competitive products as a whole are
required to contribute to institutional
costs annually. The rule as adopted uses
a formula-based approach to annually
calculate competitive products’
appropriate share of institutional costs.
For additional information, Order No.
6399 can be accessed electronically
through the Commission’s website at
https://www.prc.gov.
DATES: Effective February 21, 2023.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
I. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Final Rule
IV. Final Rule
II. Background
Pursuant to section 3633(b), the
Commission initiated Docket No.
RM2017–1 for the purpose of
conducting its second review of the
appropriate share requirement since the
enactment of the Postal Accountability
and Enhancement Act (PAEA), Public
Law 109–435, 120 Stat. 3198 (2006). In
its second review of the appropriate
share, the Commission found that
market conditions have changed since
the PAEA’s enactment and since the
Commission’s last review of the
appropriate share.1 As a result, in Order
No. 4963, the Commission adopted a
final rule implementing a dynamic
formula-based approach to setting the
appropriate share.2
However, Order No. 4963 was
appealed by the United Parcel Service,
Inc. and later remanded to the
Commission for further consideration by
the United States Court of Appeals for
the District of Columbia Circuit.3 The
court identified two major aspects of
Order No. 4963 for the Commission to
clarify on remand. The Commission
issued Order No. 6043, which was a
supplemental notice of proposed
rulemaking that addressed the issues
identified by the court and provided an
opportunity for interested persons to file
initial comments and reply comments
concerning the Commission’s third 5year review of the appropriate share as
required by 39 U.S.C. 3633(b).4 In
addition, the Commission issued Order
No. 6269, which invited public
comment relating to the Commission’s
analysis pursuant to uncodified section
703(d) of the Postal Accountability and
Enhancement Act (PAEA).5
The Commission received and
considered comments with respect to
khammond on DSKJM1Z7X2PROD with RULES
I. Relevant Statutory Requirements
Section 3633(a)(3) of title 39 of the
United States Code requires the
Commission to ‘‘ensure that all
competitive products collectively cover
what the Commission determines to be
an appropriate share of the institutional
costs of the Postal Service.’’ 39 U.S.C.
3633(a)(3). Section 3633(b) requires that
the Commission revisit the appropriate
share regulation at least every 5 years in
order to determine if the minimum
contribution requirement should be
‘‘retained in its current form, modified,
or eliminated.’’ 39 U.S.C. 3633(b). In
making such a determination, the
Commission is required to consider ‘‘all
relevant circumstances, including the
prevailing competitive conditions in the
market, and the degree to which any
costs are uniquely or disproportionately
associated with any competitive
products.’’ Id.
VerDate Sep<11>2014
16:26 Jan 18, 2023
Jkt 259001
1 See Docket No. RM2017–1, Order Adopting
Final Rules Relating to the Institutional Cost
Contribution Requirement for Competitive
Products, January 3, 2019, at 4–12, 114–170 (Order
No. 4963); see 84 FR 537 (January 1, 2019).
2 Order Adopting Final Rules Relating to the
Institutional Cost Contribution Requirement for
Competitive Products, January 3, 2019 (Order No.
4963). The Final Rulemaking was published in the
Federal Register on January 31, 2019. See 84 FR
537 (Jan. 31, 2019).
3 UPS II, 955 F.3d 1038, No. 19–1026, ECF
Document No. 1846181, at 1, (issuing formal
mandate), June 8, 2020.
4 Supplemental Notice of Proposed Rulemaking
and Order Initiating the Third Review of the
Institutional Cost Contribution Requirement for
Competitive Products, November 18, 2021 (Order
No. 6043). The Supplemental Notice of Proposed
Rulemaking was published in the Federal Register
on August 13, 2018. See 86 FR 67882 (Nov. 30,
2021).
5 Notice and Order Providing an Opportunity to
Comment on the Commission’s Section 703(d)
Analysis, September 7, 2022 (Order No. 6269);
Postal Accountability and Enhancement Act
(PAEA), Public Law 109–435, Title VII, § 703, 120
Stat. 3198, 3244 (2006).
PO 00000
Frm 00027
Fmt 4700
Sfmt 4700
3313
nearly every aspect of the Commission’s
findings in Order Nos. 6043 and 6269.
In Section IV., the Commission
addresses comments relating to the
Commission’s statutory interpretation of
the appropriate share provisions at 39
U.S.C. 3633(a)(3) and (b). After
considering these comments, the
Commission has determined not to alter
its interpretation as articulated in Order
No. 6043, which the Commission
continues to conclude is consistent with
the PAEA’s text and structure, as well
as its context and legislative history. See
Section IV.
In Section V.A., the Commission
addresses comments relating to the
application of the ‘‘uniquely or
disproportionately associated’’ phrase
from 39 U.S.C. 3633(b) to the Postal
Service’s accrued costs. The
Commission continues to find that all
attributable costs are already included
in the 39 U.S.C. 3633(a)(3) price floor
and are furthermore implicitly
considered as part of the formula. See
Section V.A.2.b. The price floors set
under 39 U.S.C. 3633(a)(1) and (a)(3)
fully ameliorate any competitive deficit
alleged to be unaddressed by the price
floor under 39 U.S.C. 3633(a)(2), and
that the use of incremental costs for
purposes of the price floors under 39
U.S.C. 3633(a)(1) and (a)(2) is sufficient
to prevent subsidization of Competitive
products. See Section V.A.3.b. Any
further attempt to account for
attributable costs as part of the
appropriate share would constitute
double-counting of those costs that
would be economically unsound and
potentially harmful to the Postal
Service. See Section V.A.4.b. There is
no meaningful relationship between
unattributed inframarginal costs and
Competitive products; there are no costs
uniquely or disproportionately
associated with Competitive products
within currently-existing institutional
costs; and using economically sound
measurement is reasonable. See
Sections V.A.5.b., V.A.6.b., V.A.7.b. The
arbitrary allocation of institutional costs
to Competitive products would
contravene the intent of the PAEA,
would be economically unsound, would
degrade the existing costing
methodology, and could harm the Postal
Service and consumers. See Section
V.A.8.b.
In Section V.B., the Commission
addresses comments relating to the
prevailing competitive conditions in the
market and other relevant
circumstances. The Commission
confirms that revenue is the appropriate
measure of market size, and that the
profitability of competitors is relevant to
assessing the prevailing competitive
E:\FR\FM\19JAR1.SGM
19JAR1
khammond on DSKJM1Z7X2PROD with RULES
3314
Federal Register / Vol. 88, No. 12 / Thursday, January 19, 2023 / Rules and Regulations
conditions in the market. See Section
V.B.2.b. The Commission presents an
updated market analysis and continues
to find that the state of competition in
the market for competitive postal
services is healthy. See id.
With respect to comments suggesting
that the Commission should consider
the Postal Service’s financial losses, the
‘‘non-existence of a level playing field’’
and ‘‘subsidization,’’ the Commission
explains why these three potential
circumstances are not relevant to this
review. See Section V.B.3.b. The
Commission finds that comparative
harm and the balance of risk and actual
Competitive product contribution to
institutional costs are relevant
circumstances which all weigh in favor
of readopting the dynamic formulabased approach. See id. Finally, the
Commission reiterates its dismissal of
comments alleging that the formula is
arbitrary and capricious. See Section
V.B.4.b.
In Section VI. the Commission
addresses comments regarding the
Commission’s analysis pursuant to
uncodified section 703(d) of the PAEA.
See PAEA 703(d). In accordance with
that provision, the Commission invited
additional public comment regarding
Commission updates to a quantification
by the Federal Trade Commission (FTC)
of the net economic effect of federal and
state laws that apply differently to the
Postal Service than to private
competitors in the market for
competitive postal services, based on
subsequent events that the Commission
found affected the ongoing validity of
the FTC’s findings. See Order No. 6269.
The Commission concludes that the
additional events (beyond those
identified by the Commission in Order
No. 6269) raised by commenters are
outside the scope of the Commission’s
703(d) analysis. See Section VI.C.
In Section VII., the Commission
addresses arguments relating to each
specific type of costs alleged by any
commenters to be uniquely or
disproportionately associated with
Competitive products. Upon
consideration of each category of costs
raised, the Commission concludes that
none of these costs raised by
commenters are uniquely or
disproportionately associated with
Competitive products and that it would
be inappropriate to alter the formulabased approach to take these cost
categories into account. See Section VII.
In Section VIII. the Commission
addresses comments proposing
alternatives to the formula-based
approach to setting the appropriate
share. The Commission concludes that
UPS’s four alternative proposals would
VerDate Sep<11>2014
16:26 Jan 18, 2023
Jkt 259001
each involve the arbitrary allocation of
institutional costs to Competitive
products, and furthermore all suffer
from numerous methodological flaws
and inconsistencies with the PAEA. See
Sections VIII.A.3., VIII.B.3., VIII.C.3.,
VIII.D.3. With respect to comments that
the appropriate share should be
eliminated, the Commission reiterates
that it has, pursuant to the discretion
accorded to it by 39 U.S.C. 3633(b),
elected to retain the appropriate share
requirement as a margin of safety
against any possibility of the Postal
Service having an unfair competitive
advantage. See Section VIII.E.3.
Based on the analysis provided above
and its review of comments, the
Commission readopts its dynamic
formula-based approach to calculating
the appropriate share.
III. Basis and Purpose of the Final Rule
The purpose of the Commission’s
formula-based approach is to provide an
objective basis on which to quantify the
statutory considerations of section
3633(b) in order to determine the yearto-year change in competitive products’
joint minimal capacity to generate profit
that can be contributed to the coverage
of institutional costs. Order No. 6399 at
114.
The formula seeks to determine the
Postal Service’s overall market power by
measuring its absolute and relative
market power. Id. at 115–117. In order
to assess the Postal Service’s absolute
market power and its market position,
the formula utilizes two distinct
components. Id. The first component is
the Competitive Contribution Margin,
which measures the Postal Service’s
absolute market power. Id. at 115.
Specifically, the Competitive
Contribution Margin is calculated by
subtracting the total attributable costs of
producing the Postal Service’s
competitive products collectively from
the total amount of revenue the Postal
Service is able to realize from those
competitive products collectively in a
given fiscal year, and then dividing this
result by the total competitive product
revenue. Id. The formula assesses the
year-over-year percent change in the
Competitive Contribution Margin to
determine how much, if any, the Postal
Service’s absolute market power has
changed. Id.
The second component of the formula
is the Competitive Growth Differential,
which measures the Postal Service’s
market position. Id. at 116–117.
Specifically, the Competitive Growth
Differential is calculated by subtracting
the year-over-year percent change in the
combined revenue for the Postal
Service’s competitors from the year-
PO 00000
Frm 00028
Fmt 4700
Sfmt 4700
over-year percent change in the Postal
Service’s competitive product revenue.
Id. at 116. This relative growth is then
weighted by the Postal Service’s market
share. Id.
Using the above-described
components, the Commission’s formula
is represented by the following
equation:
ASt∂1 = ASt * (1 + %DCCMt¥1 +
CGDt¥1)
If t = 0 = FY 2007, AS = 5.5%
Where,
AS = Appropriate Share
CCM = Competitive Contribution Margin
CGD = Competitive Growth Differential
t = Fiscal Year
Id. at 117.
In order to calculate an upcoming
fiscal year’s appropriate share
percentage (ASt∂1), the formula
multiplies the sum of the prior fiscal
year’s Competitive Growth Differential
and percentage change in the
Competitive Contribution Margin (1 +
%DCCMt¥1 + CGDt¥1) by the current
fiscal year’s appropriate share (ASt). Id.
at 118. Both components of the formula
are given equal weight. Id. The formula
is recursive in order to incorporate all
changes in the parcel delivery market
since the PAEA was enacted and the
appropriate share was initially set. Id. at
103. The formula’s calculation thus
begins in FY 2007 with a beginning
appropriate share of 5.5 percent. Id. The
upcoming fiscal year’s appropriate share
will be updated by the Commission
each year as part of the Commission’s
Annual Compliance Determination,
which is performed pursuant to 39
U.S.C. 3653. Id.
IV. Final Rule
In order to implement the
Commission’s formula, existing
§ 3035.107(c) is revised. Final
§ 3035.1077(c)(1) establishes the
formula which is to be used in
calculating the appropriate share and
defines each of the formula’s terms.
Final § 3035.107(c) states that the
appropriate share of institutional costs
to be covered by competitive products
set forth in that rule is a minimum
contribution level. Final
§ 3035.107(c)(2) establishes the process
by which the Commission shall update
the appropriate share for each fiscal
year. The Commission will annually use
the formula to calculate the minimum
appropriate share for the upcoming
fiscal year and report the new
appropriate share level for the
upcoming fiscal year as part of its
Annual Compliance Determination.
E:\FR\FM\19JAR1.SGM
19JAR1
Federal Register / Vol. 88, No. 12 / Thursday, January 19, 2023 / Rules and Regulations
List of Subjects for 39 CFR Part 3035
DEPARTMENT OF THE INTERIOR
Administrative practice and
procedure.
Office of the Secretary of the Interior
For the reasons stated in the
preamble, the Commission amends
chapter III of title 39 of the Code of
Federal Regulations as follows:
43 CFR Part 10
[NPS–WASO–NAGPRA–33240;
PPWOVPADU0/PPMPRLE1Y.Y00000]
RIN 1024–AE78
PART 3035—REGULATION OF RATES
FOR COMPETITIVE PRODUCTS
Civil Penalties Inflation Adjustments
Office of the Secretary, Interior.
Final rule.
AGENCY:
1. The authority citation for part 3035
continues to read as follows:
■
Where,
AS = Appropriate Share, expressed as a
percentage and rounded to one decimal
place
CCM = Competitive Contribution Margin
CGD = Competitive Growth Differential
t = Fiscal Year
This rule revises U.S.
Department of the Interior regulations
implementing the Native American
Graves Protection and Repatriation Act
to provide for annual adjustments of
civil penalties to account for inflation
under the Federal Civil Penalties
Inflation Adjustment Act Improvements
Act of 2015 and Office of Management
and Budget guidance. The purpose of
these adjustments is to maintain the
deterrent effect of civil penalties and to
further the policy goals of the
underlying statute.
DATES: This rule is effective on January
19, 2023.
FOR FURTHER INFORMATION CONTACT:
Melanie O’Brien, Manager, National
NAGPRA Program, (202) 354–2204,
National Park Service, 1849 C Street
NW, Washington, DC 20240.
SUPPLEMENTARY INFORMATION:
If t = 0 = FY 2007, AS = 5.5 percent
I. Background
(2) The Commission shall, as part of
each Annual Compliance
Determination, calculate and report
competitive products’ appropriate share
for the upcoming fiscal year using the
formula set forth in paragraph (c)(1) of
this section.
On November 2, 2015, the President
signed into law the Federal Civil
Penalties Inflation Adjustment Act
Improvements Act of 2015 (sec. 701 of
Pub. L. 114–74) (‘‘the Act’’). The Act
requires Federal agencies to adjust the
level of civil monetary penalties
annually for inflation no later than
January 15 of each year.
SUMMARY:
Authority: 39 U.S.C. 503; 3633.
2. Amend § 3035.107 by revising
paragraph (c) to read as follows:
■
§ 3035.107
Standards for Compliance.
*
*
*
*
*
(c)(1) Annually, on a fiscal year basis,
the appropriate share of institutional
costs to be recovered from competitive
products collectively, at a minimum,
will be calculated using the following
formula:
ASt∂1 = ASt * (1 + %DCCMt¥1 +
CGDt¥1)
By the Commission.
Erica A. Barker,
Secretary.
II. Calculation of Annual Adjustments
The Office of Management and Budget
(OMB) recently issued guidance to assist
[FR Doc. 2023–00944 Filed 1–18–23; 8:45 am]
BILLING CODE 7710–FW–P
khammond on DSKJM1Z7X2PROD with RULES
ACTION:
Description of the penalty
43 CFR 10.12(g)(2) ................
43 CFR 10.12(g)(3) ................
Failure of Museum to Comply ................................................
Continued Failure to Comply Per Day ....................................
Consistent with the Act, the adjusted
penalty levels for 2023 will take effect
immediately upon the effective date of
the adjustment. The adjusted penalty
levels for 2023 will apply to penalties
assessed after that date including, if
VerDate Sep<11>2014
16:26 Jan 18, 2023
Jkt 259001
consistent with agency policy,
assessments associated with violations
that occurred on or after November 2,
2015. The Act does not, however,
change previously assessed penalties
that the Department is collecting or has
PO 00000
Frm 00029
Fmt 4700
Sfmt 4700
Federal agencies in implementing the
annual adjustments required by the Act
which agencies must complete by
January 15, 2023. See December 15,
2022, Memorandum for the Heads of
Executive Departments and Agencies,
from Shalanda D. Young, Director,
Office of Management and Budget, re:
Implementation of Penalty Inflation
Adjustments for 2023, Pursuant to the
Federal Civil Penalties Inflation
Adjustment Act Improvements Act of
2015 (M–23–05). The guidance states
that the cost-of-living adjustment
multiplier for 2023, based on the
Consumer Price Index (CPI–U) for the
month of October 2022, not seasonally
adjusted, is 1.07745.
Annual inflation adjustments are
based on the percent change between
each published October’s CPI–U. In this
case, October 2022 CPI–U (298.012)/
October 2021 CPI–U (276.589) =
1.07745.) The guidance instructs
agencies to complete the 2023 annual
adjustment by multiplying each
applicable penalty by the multiplier,
1.07745, and rounding to the nearest
dollar.
The annual adjustment applies to all
civil monetary penalties with a dollar
amount that are subject to the Act. A
civil monetary penalty is any
assessment with a dollar amount that is
levied for a violation of a Federal civil
statute or regulation, and is assessed or
enforceable through a civil action in
Federal court or an administrative
proceeding. A civil monetary penalty
does not include a penalty levied for
violation of a criminal statute, or fees for
services, licenses, permits, or other
regulatory review. This final rule adjusts
the following civil monetary penalties
contained in the Department regulations
implementing the Native American
Graves Protection and Repatriation Act
(NAGPRA) for 2023 by multiplying
1.07745 by each penalty amount as
updated by the adjustment made in
2022:
Current
penalty
including
catch-up
adjustment
CFR citation
3315
$7,475
1,496
Annual
adjustment
(multiplier)
1.07745
1.07745
Adjusted
penalty
$8,054
1,612
collected. Nor does the Act change an
agency’s existing statutory authorities to
adjust penalties.
E:\FR\FM\19JAR1.SGM
19JAR1
]]>Agencies
[Federal Register Volume 88, Number 12 (Thursday, January 19, 2023)]
[Rules and Regulations]
[Pages 3313-3315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00944]
=======================================================================
-----------------------------------------------------------------------
POSTAL REGULATORY COMMISSION
39 CFR Part 3035
[Docket Nos. RM2017-1 and RM2022-2; Order No. 6399]
Competitive Postal Products
AGENCY: Postal Regulatory Commission.
ACTION: Final rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commission is adopting a final rule concerning the minimum
amount that the Postal Service's competitive products as a whole are
required to contribute to institutional costs annually. The rule as
adopted uses a formula-based approach to annually calculate competitive
products' appropriate share of institutional costs. For additional
information, Order No. 6399 can be accessed electronically through the
Commission's website at https://www.prc.gov.
DATES: Effective February 21, 2023.
FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at
202-789-6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Final Rule
IV. Final Rule
I. Relevant Statutory Requirements
Section 3633(a)(3) of title 39 of the United States Code requires
the Commission to ``ensure that all competitive products collectively
cover what the Commission determines to be an appropriate share of the
institutional costs of the Postal Service.'' 39 U.S.C. 3633(a)(3).
Section 3633(b) requires that the Commission revisit the appropriate
share regulation at least every 5 years in order to determine if the
minimum contribution requirement should be ``retained in its current
form, modified, or eliminated.'' 39 U.S.C. 3633(b). In making such a
determination, the Commission is required to consider ``all relevant
circumstances, including the prevailing competitive conditions in the
market, and the degree to which any costs are uniquely or
disproportionately associated with any competitive products.'' Id.
II. Background
Pursuant to section 3633(b), the Commission initiated Docket No.
RM2017-1 for the purpose of conducting its second review of the
appropriate share requirement since the enactment of the Postal
Accountability and Enhancement Act (PAEA), Public Law 109-435, 120
Stat. 3198 (2006). In its second review of the appropriate share, the
Commission found that market conditions have changed since the PAEA's
enactment and since the Commission's last review of the appropriate
share.\1\ As a result, in Order No. 4963, the Commission adopted a
final rule implementing a dynamic formula-based approach to setting the
appropriate share.\2\
---------------------------------------------------------------------------
\1\ See Docket No. RM2017-1, Order Adopting Final Rules Relating
to the Institutional Cost Contribution Requirement for Competitive
Products, January 3, 2019, at 4-12, 114-170 (Order No. 4963); see 84
FR 537 (January 1, 2019).
\2\ Order Adopting Final Rules Relating to the Institutional
Cost Contribution Requirement for Competitive Products, January 3,
2019 (Order No. 4963). The Final Rulemaking was published in the
Federal Register on January 31, 2019. See 84 FR 537 (Jan. 31, 2019).
---------------------------------------------------------------------------
However, Order No. 4963 was appealed by the United Parcel Service,
Inc. and later remanded to the Commission for further consideration by
the United States Court of Appeals for the District of Columbia
Circuit.\3\ The court identified two major aspects of Order No. 4963
for the Commission to clarify on remand. The Commission issued Order
No. 6043, which was a supplemental notice of proposed rulemaking that
addressed the issues identified by the court and provided an
opportunity for interested persons to file initial comments and reply
comments concerning the Commission's third 5-year review of the
appropriate share as required by 39 U.S.C. 3633(b).\4\ In addition, the
Commission issued Order No. 6269, which invited public comment relating
to the Commission's analysis pursuant to uncodified section 703(d) of
the Postal Accountability and Enhancement Act (PAEA).\5\
---------------------------------------------------------------------------
\3\ UPS II, 955 F.3d 1038, No. 19-1026, ECF Document No.
1846181, at 1, (issuing formal mandate), June 8, 2020.
\4\ Supplemental Notice of Proposed Rulemaking and Order
Initiating the Third Review of the Institutional Cost Contribution
Requirement for Competitive Products, November 18, 2021 (Order No.
6043). The Supplemental Notice of Proposed Rulemaking was published
in the Federal Register on August 13, 2018. See 86 FR 67882 (Nov.
30, 2021).
\5\ Notice and Order Providing an Opportunity to Comment on the
Commission's Section 703(d) Analysis, September 7, 2022 (Order No.
6269); Postal Accountability and Enhancement Act (PAEA), Public Law
109-435, Title VII, Sec. 703, 120 Stat. 3198, 3244 (2006).
---------------------------------------------------------------------------
The Commission received and considered comments with respect to
nearly every aspect of the Commission's findings in Order Nos. 6043 and
6269.
In Section IV., the Commission addresses comments relating to the
Commission's statutory interpretation of the appropriate share
provisions at 39 U.S.C. 3633(a)(3) and (b). After considering these
comments, the Commission has determined not to alter its interpretation
as articulated in Order No. 6043, which the Commission continues to
conclude is consistent with the PAEA's text and structure, as well as
its context and legislative history. See Section IV.
In Section V.A., the Commission addresses comments relating to the
application of the ``uniquely or disproportionately associated'' phrase
from 39 U.S.C. 3633(b) to the Postal Service's accrued costs. The
Commission continues to find that all attributable costs are already
included in the 39 U.S.C. 3633(a)(3) price floor and are furthermore
implicitly considered as part of the formula. See Section V.A.2.b. The
price floors set under 39 U.S.C. 3633(a)(1) and (a)(3) fully ameliorate
any competitive deficit alleged to be unaddressed by the price floor
under 39 U.S.C. 3633(a)(2), and that the use of incremental costs for
purposes of the price floors under 39 U.S.C. 3633(a)(1) and (a)(2) is
sufficient to prevent subsidization of Competitive products. See
Section V.A.3.b. Any further attempt to account for attributable costs
as part of the appropriate share would constitute double-counting of
those costs that would be economically unsound and potentially harmful
to the Postal Service. See Section V.A.4.b. There is no meaningful
relationship between unattributed inframarginal costs and Competitive
products; there are no costs uniquely or disproportionately associated
with Competitive products within currently-existing institutional
costs; and using economically sound measurement is reasonable. See
Sections V.A.5.b., V.A.6.b., V.A.7.b. The arbitrary allocation of
institutional costs to Competitive products would contravene the intent
of the PAEA, would be economically unsound, would degrade the existing
costing methodology, and could harm the Postal Service and consumers.
See Section V.A.8.b.
In Section V.B., the Commission addresses comments relating to the
prevailing competitive conditions in the market and other relevant
circumstances. The Commission confirms that revenue is the appropriate
measure of market size, and that the profitability of competitors is
relevant to assessing the prevailing competitive
[[Page 3314]]
conditions in the market. See Section V.B.2.b. The Commission presents
an updated market analysis and continues to find that the state of
competition in the market for competitive postal services is healthy.
See id.
With respect to comments suggesting that the Commission should
consider the Postal Service's financial losses, the ``non-existence of
a level playing field'' and ``subsidization,'' the Commission explains
why these three potential circumstances are not relevant to this
review. See Section V.B.3.b. The Commission finds that comparative harm
and the balance of risk and actual Competitive product contribution to
institutional costs are relevant circumstances which all weigh in favor
of readopting the dynamic formula-based approach. See id. Finally, the
Commission reiterates its dismissal of comments alleging that the
formula is arbitrary and capricious. See Section V.B.4.b.
In Section VI. the Commission addresses comments regarding the
Commission's analysis pursuant to uncodified section 703(d) of the
PAEA. See PAEA 703(d). In accordance with that provision, the
Commission invited additional public comment regarding Commission
updates to a quantification by the Federal Trade Commission (FTC) of
the net economic effect of federal and state laws that apply
differently to the Postal Service than to private competitors in the
market for competitive postal services, based on subsequent events that
the Commission found affected the ongoing validity of the FTC's
findings. See Order No. 6269. The Commission concludes that the
additional events (beyond those identified by the Commission in Order
No. 6269) raised by commenters are outside the scope of the
Commission's 703(d) analysis. See Section VI.C.
In Section VII., the Commission addresses arguments relating to
each specific type of costs alleged by any commenters to be uniquely or
disproportionately associated with Competitive products. Upon
consideration of each category of costs raised, the Commission
concludes that none of these costs raised by commenters are uniquely or
disproportionately associated with Competitive products and that it
would be inappropriate to alter the formula-based approach to take
these cost categories into account. See Section VII.
In Section VIII. the Commission addresses comments proposing
alternatives to the formula-based approach to setting the appropriate
share. The Commission concludes that UPS's four alternative proposals
would each involve the arbitrary allocation of institutional costs to
Competitive products, and furthermore all suffer from numerous
methodological flaws and inconsistencies with the PAEA. See Sections
VIII.A.3., VIII.B.3., VIII.C.3., VIII.D.3. With respect to comments
that the appropriate share should be eliminated, the Commission
reiterates that it has, pursuant to the discretion accorded to it by 39
U.S.C. 3633(b), elected to retain the appropriate share requirement as
a margin of safety against any possibility of the Postal Service having
an unfair competitive advantage. See Section VIII.E.3.
Based on the analysis provided above and its review of comments,
the Commission readopts its dynamic formula-based approach to
calculating the appropriate share.
III. Basis and Purpose of the Final Rule
The purpose of the Commission's formula-based approach is to
provide an objective basis on which to quantify the statutory
considerations of section 3633(b) in order to determine the year-to-
year change in competitive products' joint minimal capacity to generate
profit that can be contributed to the coverage of institutional costs.
Order No. 6399 at 114.
The formula seeks to determine the Postal Service's overall market
power by measuring its absolute and relative market power. Id. at 115-
117. In order to assess the Postal Service's absolute market power and
its market position, the formula utilizes two distinct components. Id.
The first component is the Competitive Contribution Margin, which
measures the Postal Service's absolute market power. Id. at 115.
Specifically, the Competitive Contribution Margin is calculated by
subtracting the total attributable costs of producing the Postal
Service's competitive products collectively from the total amount of
revenue the Postal Service is able to realize from those competitive
products collectively in a given fiscal year, and then dividing this
result by the total competitive product revenue. Id. The formula
assesses the year-over-year percent change in the Competitive
Contribution Margin to determine how much, if any, the Postal Service's
absolute market power has changed. Id.
The second component of the formula is the Competitive Growth
Differential, which measures the Postal Service's market position. Id.
at 116-117. Specifically, the Competitive Growth Differential is
calculated by subtracting the year-over-year percent change in the
combined revenue for the Postal Service's competitors from the year-
over-year percent change in the Postal Service's competitive product
revenue. Id. at 116. This relative growth is then weighted by the
Postal Service's market share. Id.
Using the above-described components, the Commission's formula is
represented by the following equation:
ASt+1 = ASt * (1 + %[Delta]CCMt-1 +
CGDt-1)
If t = 0 = FY 2007, AS = 5.5%
Where,
AS = Appropriate Share
CCM = Competitive Contribution Margin
CGD = Competitive Growth Differential
t = Fiscal Year
Id. at 117.
In order to calculate an upcoming fiscal year's appropriate share
percentage (ASt+1), the formula multiplies the sum of the
prior fiscal year's Competitive Growth Differential and percentage
change in the Competitive Contribution Margin (1 +
%[Delta]CCMt-1 + CGDt-1) by the current fiscal
year's appropriate share (ASt). Id. at 118. Both components of the
formula are given equal weight. Id. The formula is recursive in order
to incorporate all changes in the parcel delivery market since the PAEA
was enacted and the appropriate share was initially set. Id. at 103.
The formula's calculation thus begins in FY 2007 with a beginning
appropriate share of 5.5 percent. Id. The upcoming fiscal year's
appropriate share will be updated by the Commission each year as part
of the Commission's Annual Compliance Determination, which is performed
pursuant to 39 U.S.C. 3653. Id.
IV. Final Rule
In order to implement the Commission's formula, existing Sec.
3035.107(c) is revised. Final Sec. 3035.1077(c)(1) establishes the
formula which is to be used in calculating the appropriate share and
defines each of the formula's terms. Final Sec. 3035.107(c) states
that the appropriate share of institutional costs to be covered by
competitive products set forth in that rule is a minimum contribution
level. Final Sec. 3035.107(c)(2) establishes the process by which the
Commission shall update the appropriate share for each fiscal year. The
Commission will annually use the formula to calculate the minimum
appropriate share for the upcoming fiscal year and report the new
appropriate share level for the upcoming fiscal year as part of its
Annual Compliance Determination.
[[Page 3315]]
List of Subjects for 39 CFR Part 3035
Administrative practice and procedure.
For the reasons stated in the preamble, the Commission amends
chapter III of title 39 of the Code of Federal Regulations as follows:
PART 3035--REGULATION OF RATES FOR COMPETITIVE PRODUCTS
0
1. The authority citation for part 3035 continues to read as follows:
Authority: 39 U.S.C. 503; 3633.
0
2. Amend Sec. 3035.107 by revising paragraph (c) to read as follows:
Sec. 3035.107 Standards for Compliance.
* * * * *
(c)(1) Annually, on a fiscal year basis, the appropriate share of
institutional costs to be recovered from competitive products
collectively, at a minimum, will be calculated using the following
formula:
ASt+1 = ASt * (1 + %[Delta]CCMt-1 +
CGDt-1)
Where,
AS = Appropriate Share, expressed as a percentage and rounded to one
decimal place
CCM = Competitive Contribution Margin
CGD = Competitive Growth Differential
t = Fiscal Year
If t = 0 = FY 2007, AS = 5.5 percent
(2) The Commission shall, as part of each Annual Compliance
Determination, calculate and report competitive products' appropriate
share for the upcoming fiscal year using the formula set forth in
paragraph (c)(1) of this section.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2023-00944 Filed 1-18-23; 8:45 am]
BILLING CODE 7710-FW-P
