DRAFT
Comments on
USPS July 11, 2001 CMRA Proposal
In its July 11, 2001 CMRA proposal to delineate which Business Center clients would be included in its CMRA regulations and which not, the USPS attempts to do with detailed product specifications what it proposed to do with a price fixing arrangement in February, 2000. That is, it attempts to rig markets outside mail delivery – and more precisely to use a mail descriptor to equate with mail receipt services a much broader range of services offered by Business Centers and used by their clients.
In economic terms, Postal Management proposes to use legislatively unauthorized administrative fiat to bias competition in a market broader than mail receipt exceeding $100 millions annually, to the disadvantage of tens of thousands of users Business Center Services and derivatively the thousands of Business Centers which serve them.
In determined pursuit of its objective, Postal Management staff casually flouts fundamental requirements for any legitimate and sustainable regulatory action.
Postal Management attempts actions ultra vires. All of what Postal Manaagement attempts to do with its address designations is beyond its authority.
The USPS has no authority to specify address forms for purposes other than mailability. More particularly, USPS has no authority to require of persons using an address to specify address forms so as to advise the mailer of the nature of the business conducted at the address.
USPS’s delegated authority to participate in curbing particular, legislatively defined fraudulent and deceptive practices provides no basis for control of identities and terms of competition in lines of commerce affected by mail delivery in a speculative attempt to diminish the possible incidence of mail fraud.
USPS has no authority to impose general, widespread withholdings of mail delivery to categories of mail recipients in its own discretion. Congress has demonstrated an intent to specify particularly the circumstances in which mail transmission and delivery can be denied. If the USPS wishes to extend its authority to withhold mail, it must go to Congress, and make a case for new legislative authority.
Aside from the lack of authority to act as proposed, Postal Management proposes to act without any factual foundation to show a need for regulatory action as to Business Centers, or to guide such action.
The USPS has demonstrated no problem at Business Center operations arguably to be acted upon, in its July 11 discussion or any previous discussion. The USPS cites no evidence to show that there is any, let alone any disproportionate, incidence or severity of mail fraud perpetrated by the businesses which would fall within the scope of the CMRA regulations at Business Centers. Postal Management cannot regulate based upon a presumption of illegitimacy in a large sector of American business.
Further, the criteria which would be used to determine the requirement of the CMRA mail address form bear no explicit or defensible relationship to any demonstrated type or incidence of fraudulent or deceptive activity, or an attempt to prevent or minimize such activity (assuming the USPS had such authority).
Rather, the criteria are patently designed to try to equate a larger category of business support services than mail receipt with mail receipt services, to protect the competitive interests of mail receiving stores, including the operations of the USPS and those of the package and mail stores subject to the USPS CMRA proposal.
Postal Management flouts the advice of the USPS Office of Inspector General. The USPS has not deigned to make any inquiry into the administrative and business-prejudicing costs which its proposed regulations would impose on the users of Business Centers, and the Centers themselves. Nor has it considered less burdensome alternative means of addressing any claimed fraud prevention or minimization goals.
Postal Management proposes to flout the pro-competitive policy of the Nation. Both in evolving and publishing its proposals, the USPS staff has shown no awareness that it is obliged to avoid prejudicing competitive offers in open, flexible efficient markets which would be affected by its proposed actions. The manner in which the USPS has arrived at these proposals is inherently likely to prejudice competition.
The USPS obviously can be held
accountable on such fundamental issues as its basic authority to use
governmental authority to promulgate regulations, and fundamental due process
of law requirements for the attempted exercise of such authority. Further, the inhibitions of 39 U.S.C. on
APA review should not be applicable to regulations which relate not to the
efficient delivery of mail, but to the organization of markets beyond mail
delivery itself.
In such a judicial review, flimsy, arbitrary and self
serving arguments will not hold up. The proposals are subject to judicial
review, and will not be able to withstand it.
RECAPITULATION
OF
CMRA PROPOSAL DOCUMENT
OF 7/11/2001
In the other portions of the CMRA proceeding, Postal
Management has claimed two principal justifications for its CMRA regulations.[1]
First,
Postal Management asserted in its March 25, 1999 publication that its intent
was “…reducing the opportunities to use
the mails for fraudulent purpose….”
Presumably this assertion was intended to apply to both the mailee
registration and the address requirements.
Secondly,
in a website explanation of its regulations – particularly the address
specification portion, Postal Management argued “We believe the sender has a
primary right to know the true identity of the location where his or her mail
is delivered.” In connection with this, Postal Management argued that “The
current use of APT, STE and other address designations by CMRA customers is
misleading… (and) the misleading use of a mailing address …may cause harm to
the sender.”
In the July 11 Business Center
proposal, Postal Management takes the
CMRA regulations and the justifications for them as a given, and here discusses the rationale for
including Business Center clients within their scope.
After observing that “CECs” or Business Centers, ‘primarily’ provide offices and business support services for clients, the text continues
CECs also may have customers that do not occupy a private office and use the CEC address primarily to receive mail and other business support services. These CEC customers receive services similar to those a CMRA provides its customers. For this reasons, a number of parties have asserted that these customers and the CECs serving them should follow the same procedures as CMRAs and their customers. The Postal Service agrees with them.
Then follows a discussion of the aborted $125 per month criterion for subjecting ‘CEC’ customers to the CMRA regulations, and further discussions with the service providers. Postal Management then states:
After reviewing the points raised by the parties, the proposed guidelines in this NPRM are based on 16 hours of private office occupancy per month. That is, if the agreement between the CEC and its customer provides the right to at least 16 hours per month of private office occupancy, (in addition to certain support services and other requirements), then that customer will not be considered a CMRA customer for postal purposes. We understand that the fees charged by CMRAS for services that include at least 16 hours per month of private offices occupancy will generally significantly exceed the fees charged by CMRAs and will ensure a meaningful distinction between CMRA and CEC customers.
The other services are:
live telephone answering,
voice mail,
full time reception services,
a listing on the office directory if available, and
other offices services on demand.
Participants in the discussions with the USPS have indicated, and the USPS staff has not denied, that USPS initiated the extension of the CMRA regulations to OBC operations at the behest of the mail and package stores within the scope of its initial CMRA proposal. The affected mail and package store representatives protested that if OBC operations were not covered the CMRA stores would lose clients to OBC operations.
The July 11 document is thus given to distinguishing what services are to be equated with mail and package stores and what not.
Postal Management obviously is faced with a continuum of office related services. The approach it takes is to insert a discriminator based on a determination of what set of services are ‘primarily’ mail related and what services are ‘primarily’ office related.
However, the set of services which Postal Management deems ‘primarily’ mail related are obviously much broader than mail services. No reason is given for equating this much broader service aggregate with mail service other than to clear a large area in which the OBC operators’ offering of a suite address would not be price competitive with the services of mail and package stores.[2]
Further, Postal Management adduces no facts to which to tether its determination of what is ‘primarily’ mail service and what not. And the “primary” purpose mode of discrimination ignores the market facts known to Business Center operators – that the availability of a range of services flexibly available is itself the chief discriminator between mail and package stores and Business Centers. The Postal Management determination is, therefore, unfounded and arbitrary.
The July 11 statement abandons all reference to any fraud prevention or deception prevention purpose.
Postal Management’s July 11 discussion does not offer any reasoning or authority for the proposition that the Post Office’s legislative authority to participate in the investigation and prosecution of particular mail frauds can legitimately be extended to authorize it to control address forms so as, hypothetically or hopefully, to diminish the possibility of mail frauds.
Nor does the July 11 discussion cite any authority for the proposition that the USPS is authorized to prevent arguably deceptive use of address forms, as distinguished from the question of a specific fraudulent activity.
The issue of USPS authority to control address forms in this fashion is left as it has been at all points to date – that is, an unexplained, undocumented assertion.
The discussion at no point refers to the issue of whether there is or might be any incidence of fraud by clients at Business Center locations disproportionate to the incidence at other locations, or on some other grounds sufficient to warrant exercise of regulatory authority.
The USPS might conceivably have argued that if there is enough fraud to warrant regulatory action among mail and package store users, there must be an equivalent amount of fraud among users of OBC operations. However, this would have been unsupported inference.
Postal Management did not discuss how applying the CMRA rules to clients at OBC locations might or might not diminish the possibilities of fraudulent activity at such locations. This so, the discussion does not deal with questions as to how the particular criteria for inclusion and exclusion from the scope of the CMRA regulations bear any relationship to any claimed fraud fighting purpose.
In its July 11 proposal, Postal Management gives no consideration to the USPS Office of Inspector General criticisms of Postal Managements’s approach to the package and mail store element of the CMRA proceeding. Thus, it takes no account of how those criticisms might relate to Postal Management’s attempt to extend the CMRA regulations to the OBC population, though the OIG comments obviously suggest a far different approach to the OBC portion of the proceeding than Postal Management has adopted.
Thus, the discussion does not treat with elementary issues which should be dealt with in any rule making, such as those noted above -- the question whether the Postal Service should undertake to determine whether there is any problem in the OBC population requiring action, and whether the regs would do anything useful as to that portion of the OBC using population which is targeted. Other elementary issues not addressed are the costs of compliance with the regulations, and how those costs would compare with any claimed benefits to the public from the regulation.
Given the lack of any attempt at justification on any fraud or deception prevention ground, and the lack of any evidence or cognizable logic to use in attempting any such justification, the USPS proposal can be taken for what is suggested clearly by the content of its terms and the rationale which Postal Management does offer.
On the most favorable interpretation, the July 11 2001 proposal might be argued to be an attempt to identify the ‘true’ nature of the business operation at the designated address. However, evident in the proposal is a substantial bias highly favorable to the mail and package type of store, by requiring that a much larger and more expensive set of services be offered than those offered by the postal service, and by its private sector analogues, to avoid use of an address form equating the service to that of the USPS and the private sector mail and package stores.
WHICH POSTAL MANAGEMENT
SEEKS TO REGULATE
In
our earlier filing with the USPS on its February, 2000 proposal, and in a
document which PostalWatch was good enough to publish, __________ , we have attempted to explain that both the
full time and ‘part time’ components of Business Center clienteles are
demonstrating a form of ‘alternative officing’ arrangements, which have become
much more widespread in recent decades.
‘Alternative
officing’ arrangements include ‘hot desk’ facilities at major corporation office complexes, telecommuting, home based
businesses (often using ancillary officing services), ‘mobile officing’ (a term often used by the telecommunications
and computer trades to suggest how their devices and services can facilitate
use of a variety of physical facilities, or even none except those devices and
services, to maintain communications with clients, staff and suppliers) – and
Business Centers.
Indeed,
Business Centers have been created to embody this ‘alternative officing’
concept and facilitate its development.
The
alternative officing phenomenon is well recognized commercially and in academia
(some universities, such as Cornell, have organized centers to explore and
demonstrate the concepts).
A
common denominator of such arrangements is more efficient use of capital and
labor than traditional officing arrangements.
This is derived from greater particularity and greater flexibility in
defining, mixing and matching needs and
resources.
For
example, at Business Centers, ‘full time’ clients share common facilities -- phone systems, other office equipment,
staff, conference rooms, etc. This
materially reduces the cost of officing for start-up businesses, and for branch
arrangements for larger businesses.
The
‘part time’, or ‘on demand’ segment of the Business Center clientele can be
seen as an extension of this type of arrangement. These clients similarly share the offices and conference rooms,
the phone system, the other office equipment (copiers, computers, fax machines,
etc.) and the administrative staff.
They extend the sharing concept by each client not taking up a
designated space exclusively, but rather by sharing office spaces. The raison d etre, the zeitgeist,
the central utility of this development is flexibility in dynamically mixing
and matching needs and resources, to achieve greater efficiency and
economy.
In
its CMRA proposal, Postal Management proposes to rigidify and categorize these
arrangements by equating them with or distinguishing them from its own very
limited service concept, and that of a similar and competing service – mail receiving.
Postal
Management seeks the equivalent of trying to characterize a corporate ‘hot
desk’ system as a mailroom or not a mailroom, depending on how desk space and
phone use are allocated in advance –
when the entire concept is not to have either a mailroom or a traditional
office but rather to have a mixed use, as needed, dynamically configured
facility.
If
one were doing an op-ed piece, once could evidence amusement at the persistent,
myopic parochialism of federal bureaucrats who seek to make a fleet and dynamic
world fit into their own antique little cubbyholes.
But
if one is offering or using these officing arrangements, one cannot limit one’s
reaction to amusement. The practical
reality one must face in one’s own world is that Postal Management is attempting to raise the costs, curtail the
flexibility, and/or minimize the commercial presence of the citizens of the
United States who have created and use these alternative officing systems, and
who do not want them falsely equated with an ossified Post Office or the much
more limited mail and package stores.
The Postal Service does not have any explicit authority, or any authority which is subject to reasonable construction, to permit it to condition or to define address forms for purposes other than mailability.
The Postal Service has no explicit authority to create ‘primary (or secondary or tertiary) rights in mailers to knowledge of what lies at the receiving end of a mail piece, and no authority which can by reasonable extension be extended to this generalized goal.
The Postal Service’s authority to assist in the investigation of and prosecution of specific mail frauds cannot be extended to warrant control of address forms in order to “reduce the possibility of use of the mails for fraudulent purposes”.
Nor can those specific mail fraud related authorities be extended to prevent the possibility that a ‘misleading’ use of a mailing address ‘may cause harm to the (mail) sender”. Such a consumer protection issue, if there is one, is generally delegated to the Federal Trade Commission.
The USPS has no authority to deal with questions of unfair competition, such as that of the Federal Trade Commission.
The USPS lacks authority to use the instrument it wishes to use as the enforcement tool for this regulation -- the withholding of mail delivery. The USPS has authority to withhold mail delivery only upon specific grounds detailed by Congress, not present in this situation.
And the USPS cannot create the missing statutory authority for any of these purposes or actions by publishing a regulation which assumes or asserts the absent authority.
Let us briefly review the key statutory authorities relevant to this situation.
According to Section 101 of Title 39, United States Code,
The Postal Service shall have as its basic function the obligation to
provide postal services
Section
403 specifies that
The Postal Service shall receive,
transmit, and deliver throughout the United States, its territories and
possessions, and … throughout the world, written and printed matter, parcels,
and like materials….
And
to this end the USPS is
… to maintain an efficient system of collection, sorting, and delivery
of the mail nationwide…
Section
404 specifies that the USPS has the particular authority
1) to provide for the
collection, handling, transportation,
delivery, forwarding, returning, and holding of mail,
and for the disposition of undeliverable mail;
All
these authorities relate directly to a mandate to deliver mail. The Postal Service has appropriately
construed this mandate to require it to deliver mail to addresses, without
generally determining the identity of the addressee[3].
Congress
has spelled out with specificity the permissible grounds for not transmitting
mail tendered to the USPS. In Sections
3001-3010 of Title 39.
Some
of this Chapter relates to items the Postal Service is not to accept, such as
motor vehicle master keys (Section 3002), locksmithing devices (3003), and
plants and plant pests (3014,15).
In
this Chapter Congress provides specifically for a limited class of mail withholding
on the grounds of actual or potential deception or fraud, on the part of the
mailer or recipient.
Subsection
3001(d) prohibits mailing of solicitations disguised as bills, Subsection (h)
and (i) prohibit mailers masquerading as government agencies or pretending to
have government endorsement when they do not,
Subsction (j) requires notice that services substitutable for free
government services state the government service availability, and (k) deals in
detail with sweepstakes mailings.
Section
3003 authorizes the detention of mail with respect to receivers found on
satisfactory evidence to be engaged in certain specified violations of laws set
out in Title 18 -- in substance, mail
fraud.
Section
3003 provides in most relevant part
Upon
evidence satisfactory to the Postal Service that any person is using a
fictitious, false, or assumed name, title, or address in conducting, promoting,
or carrying on or assisting therein, by means of the postal services of the
United States, an activity in violation of sections 1302, 1341, and 1342 of
title 18,
it may -
(1) withhold mail so addressed
from delivery; and
(2) require the party claiming
the mail to furnish proof to it of the claimant's identity and right to receive
the mail.
Section
1302 of Title 18 relates to certain proscribed aspects of gambling and
lotteries.
Section
1341 of Title 18 is the basic, and carefully worded, section defining and
prohibiting specific acts of mail fraud, by specific persons, acting as
mailers.
Section
1342 of Title 18 deals with mail fraud by mail receivers. It reads as follows
Whoever, for the purpose of conducting, promoting, or carrying on by
means of the Postal Service, any scheme or device mentioned in section 1341 of
this title or any other unlawful business, uses or assumes, or requests to be
addressed by, any fictitious, false, or assumed title, name, or address or name
other than his own proper name, or takes or receives from any post office or
authorized depository of mail matter, any letter, postal card, package, or
other mail matter addressed to any such fictitious, false, or assumed title,
name, or address, or name other than his own proper name, shall be fined under
this title or imprisoned not more than five years
To
recapitulate, Section 3003 authorizes the USPS to withhold mail and require
proof of the right to receive mail as
to specific mail receivers whom it deems, on satisfactory evidence, to be “using a
fictitious, false, or assumed name, title, or address” to facilitate fraudulent
activity prohibited by 18 USC 1341 and 1342.
Section
3004 of Title 39 provides as follows
Whenever
the Postal Service determines that letters or parcels sent in the mail are
addressed to places not the residence or regular business address of the person
for whom they are intended, to enable the person to escape identification, the
Postal Service may deliver the mail only upon identification of the person so
addressed.
Section
3005 is a long and convoluted section dealing with lotteries and similar
promotions, closely conditioning the terms on which advertisements can be made
by mail, and Section 3007 spells out specifically the remedial steps the Postal
Service is authorized to take when it has evidence to indicate that activities
are undertaken in violation of the guidelines of Section 3005.
Sections
3008 in effect gives addressees rights
to prevent mailers sending them mail which they find objectionable, on the
grounds of sexually provocative content, and Section 3009 gives addressees certain
rights as to unordered merchandise which they receive.
This
review of the Postal Service’s authorities reveals the following
1.
The basic mandate of the
Postal Service is to deliver mails.
2.
There is no specific
mandate for the Postal Service to condition address forms on any basis other
than efficiency and accuracy in mail delivery, and no basis for implying any
such authority is apparent.
3.
Congress has carefully
circumscribed the authorities of the Postal Service to withhold delivery of
mails, spelling out with great specificity the particular circumstances in
which it may do so.
4.
As to fraud and
deception questions, the Postal Service has been authorized to detain or refuse
to deliver mail only as to specific instances of the use of false names or addressed
to facilitate fraudulent activity, and as to minutely defined violations of
guidelines applicable to mass promotions involving elements of lotteries and
games of chance.
The
Postal Service has been granted no authority to use its physical ability to
withhold the delivery of mail to force mail recipients and those who serve them
to use an address designator of the Postal Service’s choice, having nothing to
do with mail delivery efficiency, or to enforce its notions of competitive
equity in alternative officing markets, or to reduce or minimize the mere
possibility of mail fraud, or for any other purpose which Postal Management has
cited in this proceeding.
The preceding paragraph is the bottom line, insofar as the CMRA
proposals of the USPS are concerned. This conclusion applies to the patrons of “Commercial Mail Receiving
Agencies” and to the operators of those entities across the board.
Thus,
the enforcement device which Postal Management apparently has believed to be
available to it for the enforcement of the CMRA regulations is not available to
it. Any attempt to use mail withholding to enforce the CMRA regulations is ultra
vires -- outside the authority given the Postal Service. And it is
elementary that the Postal Service cannot create a statutory authority which it
does not have simply by publishing a regulation which assumes, asserts or
claims it.
As
a protestant in the USPS attempt to apply the CMRA rules to Business Centers,
we are not at this time in a position to attempt to protect the interests of
the mail and package store operators, and their clients, who may have
acquiesced in these regulations.
However, if the USPS attempts to extend its unauthorized scheme to Business Centers, we must point
out that it cannot lawfully do so, either as to the clients of Business
Centers, or to the operators of Business Centers, or to the clients and operators of package and mail stores.
Though
Postal Management has thus far not acknowledged it, apparent in its address
specification proposals is a desire to prevent what might be called unfair
competition on the part of mail and package stores. That is, as a competitive
vendor of mailbox services, Postal Management can argue that it is put at a
competitive disadvantage vis-à-vis private sector mail and package stores when
such stores permit their clients to represent to the general public that they
have at the private store something they do not have and the USPS does not
offer – office facilities.
If
Postal Management acts in accordance with one of the primary purposes of the
Postal Reorganization Act of 1970 – to act as a business enterprise – then it
can and should take this sort of issue to the federal forum established to deal
with questions of unfair competition and related consumer protections issues –
the Federal Trade Commission. Postal Management should not attempt to use
federal regulatory authority intended to be used for mail delivery purposes to
address competitive issues in markets
other than mail delivery, as it does here.
This constitutes an attempted abuse of
regulatory authorities. We
expand on the remnedy available to USPS is in Appendix ______
As
to authority issues, if the Postal Service wishes to engage in control of
address descriptions for purposes other than mailability, so as to attempt to
characterize the sort of business activities undertaken at the addresses, and
if the Postal Service wants to obtain broad authority to deny mail delivery to
persons and businesses which do not wish to accept the characterizations of
their businesses which the Postal Service designates, the Postal Service needs
to go to Congress to justify such an extraordinary and intrusive expansion of
its authorities and its operations.
OTHER FATAL DEFICIENCIES OF
THE CMRA PROCEEDING,
AS APPLIED TO BUSINESS CENTERS
First,
there is absent any showing of public need to regulate the forms of addresses
used at Business Centers, which number in the thousands, and serve hundreds of
thousands of businesses. In the United
States, people are generally presumed innocent, and honorable, and not having
need of federal stricture, until there is a convincing showing to the contrary.
The
Postal Service has yet to produce or to cite any record evidence that there is
any incidence of fraudulent activity at Business Centers which would justify
Postal Service action, had it authority to take general measures to reduce
fraudulent practices as distinguished from particular instances of mail fraud
or other particular practices described in 39 U.S. Code.
Some
State Attorneys General have expressed concern about the possibility that some issuers of ‘commercial
and charitable solicitations’ would use Business Center addresses to create an
impression of localization and local business size to consumer disadvantage. But no data are given on the prevalence of
such activities, the number of persons mislead to disadvantage, what the
disadvantage amounts to, and so forth. One does not legislate, or regulate, so
as to affect the economic lives of tens of thousands of businesses on the basis
of apprehensions and generalized concerns.[4]
This
is not to say that there are no users of Business Centers which engage in
deceptive or otherwise unlawful practices.
Some incidence of unlawful activity can be found in any line of
commerce, and in virtually any type of location in the United States (or abroad
for that matter).
But
the costs and burdens of regulatory
constraint cannot be imposed without facts as to what problem is to be
addressed, facts to guide the form of
regulation which is proposed, and facts to determine whether the costs and
burdens of regulation outweigh the putative benefits.
The
Office of Inspector General’s criticism of the Postal Management’s CMRA
proceeding across all affected by its proposals – that Postal Management has not compiled a statistically valid
and meaningful set of data sufficient to warrant regulatory action – applies
with conclusive force to the Business Center component of firms which Postal
Management seeks to control. None of
the data which Postal Management cited to attempt to refute the OIG criticism
drew upon Business Center operations.
The
Postal Service might assume that whatever incidence of fraudulent activity
which it believes to occur at mail and package stores may or must occur at
Business Centers. But the Postal
Service has produced no systematic or substantial data to support such an
inference. The USPS cannot rationally
or discriminately regulate on such an inference. Postal Management cannot impute problems to a sizable segment of
honest business people – both at the Centers and in their user populations –
without firm factual foundation.
Secondly,
it is readily apparent that users of Business Centers have available to them
office ‘suite’ facilities, and there is no obvious or clear reason to suppose
that they should not use a ‘suite’ address.
We
have pointed out that the the USPS has no authority to prevent deception in
address form on any general, across the board basis, as distinguished from its
specified authority to deal with specific instances of the sort cited in the
previous section.
But
let us put that point in suspension for the moment. The Postal Service has compiled no information to support any
judgment on the question as to whether the public is mislead in any meaningful
way, so as to result in any identifiable harm, as to the use of a ‘suite’
address form by any definable subset of the users Business Center users.[5]
Postal
Management’s attempt to use the concept of ‘primary’ purpose in office system
use is an attempt to use a logical category without factual foundation
sufficient to permit logical application.
And for reasons we will set out later, this logical category is not apt
for the Business Center situation.
Thirdly,
as noted in prior discussion, the Postal Service can make no rational,
verifiable argument to demonstrate that use of criteria which the Postal
Service proposes to differentiate inclusion or exclusion in its regulations
would diminish, in any reliable way, the incidence of fraud or deception in the
affected population.
Taken
individually, criteria such as the use of live phone answers, or contracting
for sixteen rather than any other posited number of hours, or use of a
directory listing, have no verifiable or supportable relationship to the degree
of honesty or responsibility, or fraud or irresponsibility, among the people
using Business Center arrangements.
Indeed,
it is insulting and perjorative to suppose that an attorney, or therapist, or
consultant, or business of any kind, which uses offices for 4 or 10 or 15 hours
a month is less honest than one using the facilities for 16 or 17, 20 or 160
hours per month. And the same can be said for the question of how the phone is
answered, or what sort of voice mail system is or is not used. Postal
Management has no basis for regulating on a presumption of illegitimacy in this
business population.
Postal
Management might try to make the argument that though no one criterion it
proposes differentiates more or less risky populations (as if it were properly
in the business of doing so), the over all assemblage of criteria defines a
population likely to use suite addresses irresponsibly. But where are the data to support such a
conjecture? Without such data, where is there any rational basis for proposing
this set of criteria?
Fourthly,
Postal Management has made no effort to quantify the costs of compliance with
these proposals which would be levied upon clients of Business Centers, and the
Business Centers themselves.
Fifthly,
but as significantly as other observations, the proposal fails any test related
to recognizing and implementing the general pro-competitive policy of the
nation as a whole.
We
pointed out in our previous filing on the price criterion, proposed in February
of 2000, that agreement among vendors of a product or service or set of
products or services having competitive interplay, on the prices to be
associated with such products or services is a per se violation of the
antitrust laws. This is so because such
collective attempts are overwhelmingly likely to dampen competitive rivalry
among the participants, to burden consumers of the products or services, and to
bias consumer choices from those which would obtain in a more competitive market.
The
same considerations apply to collective attempts to control the characteristics
of products or services. See Areeda, Einer Elhauge, & Hovenkamp, Antitrust
Law, Sections 1500-1511. Here, Postal
Management makes a transparent attempt to achieve the same results as a price
fix by using product descriptions, and even gives the game away in its own
discussion of its objectives, by referring to its desire to achieve a price
level for the use of a suite address form
well above that usually charged for their services by mail and package
stores.
As to
the agreement among competitors element of
a trade restraint, Postal Management in effect argues that in its closed
door interaction with market participants it is not participating in an
agreement among competing vendors, but rather unilaterally specifying rules.
However,
in its discussion and in its proposed action, Postal Management allies itself
with the contentions and expressed interests of package and mail stores, whose
operations are much like its own, to require the use of an address designator
in such a way as to equate with its own and its mailbox competitors a much
broader set of services.
Though
the mail and package store representatives would probably like Postal
Management to attempt to make a broader scope of services appear to be
equivalent to mailbox services, there is no reasonable doubt that they agree
with the scope being at least as broad as is now proposed.[6]
And,
of course, however we treat the agreement question, the intent and effect of
Postal Management’s ukase is the same as that to be created by explicit
agreement as between it and its mail and package store competitors.
This
July 11 2001 proposal, just as the February 2000 proposal, amounts to market
rigging, in concert with competitive interests, by use of coercive effect of
the monopoly power of the postal service over mail delivery.
In
prior Postal Service proceedings, the Department of Justice has pointed out that
the Postal Service is obliged to recognize the pro-competitive policy of the
United States as a whole, and to accommodate that policy in any regulatory
proceedings it may undertake which have significant competitive implications. A copy of one such comment is appended.
The
current proposal of Postal Management would not accommodate, but rather would
contravene, the nation’s procompetitive policies.
We
submit that all of the above deficiencies amount to action so arbitrary and
capricious as to constitute a violation of the due process of laws requirement
of the fifth amendment to the constitution of the United States.
Postal
Management proposes not to be bound by the confines of its own statutory
authority, to take no account of the need for evidence to justify action which
would adversely affect the lives and properties of tens of thousands of
Americans, and to provide no significant or substantive rationale which would
defensibly relate its action even to those authorities which it claims but does
not have. This course of action does
not meet ‘due process’ requirements.
The
‘due process of law’ requirement is a living entity in the law. It is so
formulated to have reference to the standards of the day, and the specific
circumstances of the case. Postal
Management’s actions are so bizarrely aberrant from standards of conduct
required of other government agencies in the coercive use of government
authority to affect lives and properties in the society, and in its economic
operation, as to meet no reasonable
standard of ‘due process’. [7]
ADVERSE ECONOMIC EFFECTS
OF THE JULY 11 PROPOSAL
Postal
Management has made no effort to learn how many businesses would be affected by
its proposal, or what the effects on them will be.
No
close estimate of the cost impact is feasible absent an organized effort to
generate a statistically valid approximation method. However, some preliminary observations are possible.
The
Office Business Center Association estimates the total revenues of Business Centers in the United States at
about $3 billions. The proportion of that revenue stream allocable to clients
other than full time clients is generally taken to be between five and ten
percent. Let us take the lower number for present purposes. Five percent of $3 billions is about $150
millions annually.
At
this time, there has been no industry survey which would give a good
approximation, based on a valid sampling, of the proportion of the businesses
generating this $150 or so millions which fall within the product definition
set out in the July 11 proposal.
However, in the O.S.I. clientele, we can say that most of the non-full
time clients do not explicitly contract for more than 16 hours of office use in
advance, each month. Rather, what they generally contract for is the ability to
use hours as needed, either with or
without other Center services. Actual
usage varies widely as between clients, and can vary substantially, over time,
as to an individual client.
Let
us suppose that 80% or more of the current OBC clients do not now contract to
be assured 16 or more hours of office use in advance, either with or without
the other services which the USPS proposes to specify.
If
this is so, and this operator believes it is so, recognizing that no one has a
usable industry wide survey in hand, the Postal Management proposes to drive up
the costs of Business Center usage, utilizing an ordinary Suite address form,
on over $100 millions in revenues annually.
That
Postal Management’s intent is to assure a target level of costs will be levied
to permit usage of an ordinary suite address is evident in the language of the
proposal –
“We understand that
the fees charged by CECs for services that include the right to at least 16
hours per month of private office occupancy will generally significantly exceed
the fees charged by CMRAs…. “
We
do not know just how the Business Centers would react to the plan, in
structuring and pricing their offerings.
Nor do we know just how the clients of the Business Centers would react
to the regulations, in terms of paying more or accepting an address equating
their service to that of a mail and package store. What we do know is that, as to about $100 millions in commerce, the USPS seeks to drive costs up, or alternatively
to gain a competitive advantage by inducing Business Center clients to use an
address form equating their broader services with mailbox services like those
of the USPS and the package and mail stores.
Now
let us take this $100 millions order of magnitude number as to commerce
affected, and try to compare it with such amount of commerce as may be involved
in (a) mail frauds conducted by OBC clients, and (b) such amount of commerce as
may be affected to citizen disadvantage by reason of the OBC clients using a
suite address rather than a mailbox-like address.
The
problem with attempting to make this comparison is that no one has any data
whatsoever on the amount of commerce involved in either of these two categories of supposed public harms.
In
sum, we have the Postal Service trying to drive up costs to small business
people (in the main) on about $100 millions of commerce, for no gain in
consumer protection which can be rationally offset against the harm to OBC
users and their clients in the general public.
There
is of course no defensible logic to this position.
What
does emerge starkly from this analysis is the competitive motivations of the
Postal Service, and the mail and package stores with which it acts in effective
concert in this portion of the CMRA proceeding.
Postal
Management apparently seeks to obfuscate this situation with the proposition
that OBC users which satisfy its criteria use OBCs ‘primarily’ for office
services, and those which do not meet those criteria are primarily interested
in CMRA type services.
There
are no data, and there is no clear logic, to support this proposition. And it
misconceives the market which it addresses.
Business
Center operators know that their clients – both exclusive use clients and
others -- seek out Business Centers in order to access in one location a range
of business support services much exceeding mailbox and packing services.
Objective verification of this is afforded by the fact that OBC operators put
in place and financially support this much broader range of services, for both
exclusive use and other clients.
A
major component of what the OBCs offer and their clients buy is the ability to
mix and match a range of office support services as needed, from time to time,
on a flexible basis. Some clients will
enter the system on a very limited basis, and expand their uses over time. Some will enter the system in a traditional
full time, exclusive use officing pattern, and curtail their office use, from
little to much, as business needs
change. Some will have periods of
relatively intense office use, interspersed with periods of little use. Some
will mix telephone call relays, cell phone use, voice mails, and live answers in
ingenious and flexible ways, responsive to their particular business
needs.
It
is true that at any given time some portion of the OBC clients – not all of
them -- may focus primarily on one or another of this mix of services. It is also true that a client with a
particular focus at a particular time may change focuses -- modify and permute their service plan
-- and they use the OBC system because
it enables them to do so. If all they
wanted were mailbox service, they have cheaper alternatives. If all they wanted
were phone answering, they have in some cases cheaper and in some cases more
expansive phone answering alternatives. What attracts clients to the business center is the combination of
services available.
Absent
any showing of a substantial incidence of clear harm to the public from the use
of a suite address by firms having this form of office support system, there
can be no sound reason for the USPS, or any other government body, seeking to
compartmentalize and rigidify this system.
Any attempt to increase costs and rigidify the system will tend to harm
a sizable group of entrepreneurs who use Business Centers as business incubators.
THE
AVAILABILITY OF JUDICIAL CORRECTION
The
preceding sections of this paper have pointed out that the CMRA proposals are
in excess of the statutory authority given the USPS, that they lack foundation
in facts showing any public harm to be avoided, that there is no rational
connection between the criteria for imposing the regulations and the avoidance
of any public harm, that they would raise costs and/or reduce flexibility in
commerce approximating $100 millions annually, that there is no cognizable cost
benefit analysis supporting them, that they are designed to serve an
anticompetitive purpose in contravention of the national policy in favor of
open competitive markets not biased by private and public restraints, that they
were arrived at by a process inherently likely to produce restraints upon
competition – closed door discussions among competitors -- and that they would burden tens of thousands
of entrepreneurs at the early stage of business development.
In
short, the grounds for judicial review are abundant. The deficiencies of statutory authority are apparent. The ‘due process’ failures are egregious and
pervasive. Upon review, the need for
judicial correction is likely to be apparent to a reviewing court.
It
is the well settled law in the D.C. circuit that private parties have a
non-statutory right of judicial review
when the issues relate to the statutory authority of the federal agency, or
constitutional questions. Chamber of
Commerce v Reich, 74 F 3rd 1322 (D.C. Cir 1996)
The
Court in Reich cited language cited from the root case for the
nonstatutory judicial review, American
School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902), involving
Postmaster General McAnnulty. The logic
of the Supreme Court is as applicable
in 2001 as in 1902, and as applicable
to the current USPS as it was to Postmaster Mcannulty
…acts of all (a government department’s) officers must be justified by
some law, and in case an official violates the law to the injury of an
individual the courts generally have jurisdiction to grant relief…..Otherwise
the individual is left to the absolutely uncontrolled and arbitrary action of a
public and administrative officer, whose action is unauthorized by any law, and
is in violation of the rights of the individual.
We
are confident that this logic will continue to prevail. It rests, fundamentally, on the separation
of powers built in to the Constitution of the United States, and on that
Constitution’s guarantee of citizen protection and fundamental fairness
embodied in the fifth amendment’s assurance of due process of law.
The
Postal Service is familiar with judicial review for ultra vires
actions. See Combined Communications v
USPS, 891 F.2d 1221 (6th Cir. 1989) and Association of American
Publishers v. USPS, 485 f. 2d 768 D.C. Cir, 1972).
For
elaboration of the standards the courts could utilize in such a review, one can
look at Tovar v USPS, 3 F3rd 1271 (9th
cir, 1993). The first questions
presented in this CMRA proceeding relate to a complete lack of statutory
authority for the actions proposed here.
However, Tovar points out that even where there may be a claim of
statutory authority for a regulatory action, the court can review whether the
agency’s construction of its statute is arbitrary and capricious, and, beyond
that, whether the construction meets ‘reasonableness’ standards.
As
to the reasonableness standard, the Court noted that where the regulation was
on its face discriminatory as to the person affected, an employee, “…the
government is obligated, at a minimum, to offer concrete, evidentiary facts to
explain why the regulation is nevertheless reasonable”. (at 1278).
Here,
for reasons we have pointed out, Postal Management would be unable to offer
facts to show a rational connection to its authorities, a rational connection
to its claimed permissible objectives,
or a rational connection to the realities of the markets which it
attempts to address.
The
availability of a non-statutory right of review makes unnecessary any appeal to
Administrative Procedure Act standing. However, for reasons set out in the footnote,
APA standing should also be available, in this particular case, involving an
attempt to extend regulatory reach beyond the delivery of mail and necessary
administrative arrangements for doing so. [8]
Before
departing the question of judicial review, we will also point out that if, as
we believe is clear, Postal Management is seeking to act ultra vires, and to impose
anticompetitive restraints which violate the standards of the antitrust laws,
both the USPS and its individual managers individually can be held monetarily
accountable for such antitrust law violations and the harms attendant to
them. Ultra Vires acts can and
should have unwelcome consequences.
CONCLUSION
Postal
Management may have entered into this CMRA proceeding with mixed motives,
though it has thus far not been willing to admit having done so.
We
understand that Postal Inspectors are distressed by, and wish to correct,
fraudulent activity facilitated by the use of the mails, whether at their own
Post Box facilities, at CMRAs or at any commercial location.
But
a commercial interest is also apparent – the competition with mail and package
stores who have offered a more attractive form of address – the suite
designator.[9]
This
commercial interest has led Postal Management far afield from its legislative
authorities to deliver the mail, its experience and its competence.
First
Postal Management tried to control the addresses of its direct competitors, the
mail and package stores. The competing mail and package stores then complained about competitive disability
relative to Business Centers. Postal Management’s attempt to respond to that
complaint led it into an attempt to govern competitive relationships, by means
of address form, in a portion of the
‘alternative officing’ field extending far beyond its apparent knowledge or
competence.
Postal
Management’s attempts to control competitive relationships have been
disingenuous, crude, and clumsy. It attempted to act as a cartel administrator
in setting up a price fixing arrangement. Finding that embarrassing, it has now attempted to achieve the same ends
by using product specifications with intended cost and price consequences -- and in its ineptness even states its
intent to do so. Postal Management now transparently seeks to equate with
limited mail and package services a grouping of services far wider.
The
July 11 proposal is embarrassingly deficient. It is obviously unconnected with
the statutory authorities of the Postal Service. It lacks any defensible,
rational connection with the initial claimed objectives of the CMRA proposals,
even though those themselves were in substantial measure specious. It violates
due process requirements left, right and center. Whether by intent,
inattention, or irresponsible indifference, it would burden tens of thousands
of entrepreneurs who use Business Center facilities to do honest business
flexibly and economically.
Upon
judicial challenge, this proposal should collapse like a house of cards. It
won’t fly.
APPENDIX A
THE AVAILABILITY OF
REMEDY FOR A CLAIM OF
UNFAIR COMPETITION
If
the USPS, as an operating entity, acting as a business pursuant to its
statutory directions to do so, feels that it has a claim against a group
of mail and package store owners for
unfair competition, involving an element of deception, its proper remedy is to
present its complaint to the Federal Trade Commission, and/or to equivalent bodies at the State
level.
This
may make the USPS feel less than God-like, reduced in this respect to the
status of a mere private company in petitioning a government agency for redress
for a business problem encountered in its business operations. But that appears to be implicit in the directions
the Congress gave it to start acting like a private company.
The
rationale for the CMRA rules made in the USPS web announcement seems close to
asserting such a claim. That is, Postal Management seems to be claiming that it
is deceptive to claim to have a suite when one has a mailbox, and implicitly it
is unfair competition for a private vendor to facilitate such claims by
offering Suite addresses.
However,
such a claim does not on its face apply to users of Business Centers, since
such persons do have available to them physical suites, where they use a
variety of office support services, and the operators of such Business Centers
do provide them such suites.
If
the Postal Service believes a subset of such persons use a business suite
address in a deceptive fashion, and Business Center operators facilitate such
actions, then its remedy is to try to define that subset, and present its
contentions to the Trade Commission.
We
would note, in anticipation of any such action, that the Postal Service must be
prepared to demonstrate to the Trade Commission much more than it has spelled
out in its justifications for its proposed application of the CMRA regulations
to Business Centers and their clients.
At
the Trade Commission, the USPS would be required to demonstrate that the use of
suite address forms by some specifically defined subset of Business Center
users has a “direct, substantial, and reasonably foreseeable effect” on
commerce, and that it causes “substantial injury to consumers which is not
reasonably avoidable by consumers themselves and not outweighed by
countervailing benefits to consumers and competition.” 15 U.S.C. 45(a)
Having
made no factual inquiry into the nature of the population of businesses using
Business Centers, or the effects of their use of Center suite addresses, the
Postal Service cannot at this time make any such showing, either in this
proceeding or in a Trade Commission proceeding. We do not think the Postal Service would be able to make such a
showing as to any significant class of users of Business Centers. But it is welcome to try, in a proper
proceeding, before an unbiased adjudicator.
APPENDIX B
THE ISSUE OF REASONABLENESS
OF THE CLIENT REGISTRATION REQUIREMENTS
AS TO BUSINESS CENTER CLIENTS
The
Postal Service does have authority to withhold mail in specific cases where it
appears that a person is the Postal Service by using a ‘fictitious, false or
assumed name or name other than his own proper name” as a part of a fraudulent
scheme prohibited in 18 USC 1341. The Postal Service now has procedures for
dealing with such individual circumstances.
The
Postal Service would be closer to reasonable interpretations of its authorities
in attempting some form of registration review procedure, than in its address
form proposals.
As
one Business Center operator, we would be much less troubled by a registration
review process than the address form proposals.
However,
we note that internet emessaging rapidly gains in utility and volume without
any such federal requirement as to internet service providers (the commercial
emessage CMRAs) and their subscribers, and such a federal requirement for
uniform registration procedures as to snail mail appears to be unnecessary as
well.
All
this is aside from cooperation with Postal Inspectors as to any specific use of
the mail service provided at the Business Center to perpetrate fraudulent
schemes. We believe the typical
Business Center operator wants to steer clear of such use of its facilities,
for a number of reasons, and will usually be eager to cooperate with law
enforcers of whatever legitimate description, to identify business scams.
In
our opinion, Business Center operators would react favorably to any lawful form
of interaction with Postal Inspectors designed specifically to facilitate
identifying and bringing to justice particular persons engaged in the use of
mail – and our facilities – for fraudulent schemes.
But
that is not what the CMRA proceeding is about, and certainly not that portion
of it having to do with addressing requirements.
[1] We think the ‘security of
the mails’ justification is frivolous, or if not that antique in concept. As to
the relationship between registration of mail recipients and fraud prevention,
we can see some rational connection. We will discuss this more in the
appendices.
[2]
The text asserts that the proposal seeks to “ensure a meaningful distinction
between CMRA and CEC customers” by having fees charged by OBC operators for the
combined services “generally significantly exceed the fees charged by CMRAs”.
[3] The USPS has established a category of mail as to which the sender
desires confirmation of delivery, but even as to this category proof of
identity of the receiver is not required.
[4] We note also that if there
is a problem of the sort the Attorneys General relate, then this can be
documented and a remedy specific to the problem crafted, as was done with
lottery solicitations, cited later in this paper.
[5] What sort of data would be required? In a Trade Commission proceeding, the USPS would be required to demonstrate that the use of suite address forms by some specifically defined subset of Business Center users has a “direct, substantial, and reasonably foreseeable effect” on commerce, and that it causes “substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers and competition.” 15 U.S.C. 45(a) No less standard should be used here. It is obvious that this standard has not been met in this proceeding.
[6] We understand that some
mailbox store interests may try to make the ingenious argument that they are
competitively disadvantaged because an office support capability consisting of
a combination of office use (16 hours or some other similar quantity of hours),
phone service, and a number of other office capabilities amounts to little or
nothing more than mail and package service, and for that reason does not
warrant the use of a ‘suite’ address designator by the clients of Business
Centers. Taken on its face, and
assuming for the moment a role for the Postal Service in making this sort of
judgment, this assertion does not pass the giggle test. One need only visit virtually any Business
Center and virtually any mail and package store to see that Business Center
clients – part time or full time – have available officing functionalities far
in excess of those of the typical mail and package store, and can represent
that they do have officing support.
We would agree with
any given mail and package store which on its own created office support
capabilities that it and the clients using those officing arrangements should
not be characterized as a conventional mail and package store.
But this area and type of argumentation
merely illustrate that the Postal Service has no proper role in deciding such
issues, and they are better determined, if at all, in a forum such as the
Federal Trade Commission which has the statutory authority, the statutory guidelines,
and the experience needed to assess unfair competition and consumer protection
issues. In such a forum, with any kind
of organized factual inquiry, we do not
think contentions of equivalence between Business Center and mail and package
store officing supports would go far or last long.
[7]
We must observe, in this section on
procedural and substantive deficiencies of this proceeding to date, that Postal
Management’s failure, or perhaps refusal, even to recognize and discuss the
advice of the Postal Service’s office of Inspector General, as that advice
would apply to the specific business sector involved in this segment of the
CMRA proceeding, evidences an insular
and irresponsible mindset which is part and parcel of Postal Management’s
unauthorized, arbitrary and capricious, anticompetitive, and even
unconstitutional conduct.
[8]
The legal offices
of USPS will presumably be aware that the Postal Service attempted to get the
Supreme Court to rule that there could
be no judicial review of its regulations in Air Courier Conference of America
v. American Postal Workers Union of the AFL-CIO 498 U.S. 517 (1991), and the
Supreme Court declined to adopt this position, finding other grounds for
decision in that case. A review of the
briefing of this earlier case reveals two interesting points.
First, the pleadings reveal
that the appellate issue presented is more properly, we suggest, whether the
Administrative Procedure Act provides a basis for appeal, than whether Section
410 of 39 U.S. Code prevents judicial review.
That becomes important quickly, as we shall shortly demonstrate.
Secondly, in the Courier
Conference case the Postal Union made an interesting, and in our opinion
valid, suggestion that the language of Section 410 should be construed to invalidate
applicability of the APA to postal service ratemaking only as to the
operational aspects of delivering mail, and the administrative apparatus
supporting that function, as distinguished from rule makings which are directed
to commercial markets outside the scope of the USPS’s proprietary, or
ministerial, function – such as, in this case, the markets for mail receiving
operations and other markets which appear to be in some sense adjacent to the
mail receiving markets.
Were there a contest over the
nature of the applicability of the Administrative Procedure Act, and the
meaning of 39 U.S.C. 410 language, we
expect that we would make the same contention as did the union in the Courier
Conference case. We believe that
were the issue pressed to the final
judicial arbiter, where the adverse effects of the construction the USPS has
sought would be clearly evident, as in this proceeding, this more reasonable
construction would be upheld.
[9] No one in the market is
buying the suggestion which M. Spates made to the House Small Business
Committee recently to the effect that USPS does not compete with mail and
package store operations. In the colloquial – Please! One is led to advise Postal Management to credit people with a
modicum of common sense, and the ability to look at what goes on at post
offices and at mail and package stores.