UPS has asked J. Gregory Sidak of the Georgetown University Law Center to address the Federal Trade Commission concerning what it considers network advantages that are bestowed on the US Postal Service by legal monopolies and other special privileges.
Congress asked the FTC to conduct a study of the advantages and disadvantages of the Postal Service compared to private carriers. Sidak is responding to the FTC’s RFI.
“We chose Sidak because he is the leading economist on this issue,” said Malcolm Berkley, public relations manager at the UPS.
“State-owned enterprises (SOEs) such as the Postal Service have stronger incentives than profit-maximizing firms to use their networks to pursue activities that are harmful to competition and consumers, even though SOEs may be less concerned with generating profit,” Sidak wrote. ” The Postal Service also enjoys a unique statutory monopoly, created when Congress chose to establish and perpetuate a public enterprise with monopoly power. This statutory monopoly confers a substantial network advantage, which may further encourage and enable the Postal Service to set prices for competitive products that fall well below rivals’ costs.”
Under the new postal law, the Postal Service is permitted to set competitive pricing on certain product lines. The FTC must decide the guidelines governing this. To help determine those guidelines, the FTC is in an public comment period. Any member of the public would include companies in the package and shipping industry that can provide written comment. The Postal Service also will provide comment, but it has not been filed and therefore is not yet available to the public.
“There may exist a tendency for regulators and policymakers to disregard or minimize the consequences of the Postal Service’s network advantage,” Sidak wrote. “Therefore, it bears emphasis that lower prices are not always better, particularly if price falls below marginal cost. In addition, low prices for competitive products may come at the expense of higher prices for market-dominant products. Such a pricing structure would effectively penalize the designated beneficiaries of the Postal Service’s core mandate.”