[00:00:00] Speaker 02:
The next case on the docket originally, which is number 197036, Aaron Ball versus George Washington University, the court will consider it on the briefs.

[00:00:16] Speaker 01:
Case number 19-1026, United Parcel Service and Petitioner versus Postal Regulatory Commission.

[00:00:34] Speaker 06:
Good morning and may it please the Court, Kathleen Sullivan for UPS.

[00:00:38] Speaker 06:
The Postal Accountability and Enforcement Act requires that the Postal Regulatory Commission ensure that competitive products packages collectively cover an appropriate share of the institutional costs of the Postal Service.

[00:00:54] Speaker 06:
That's 39 USC 3633A3.

[00:00:58] Speaker 06:
And in doing so,

[00:01:01] Speaker 06:
39 USC 3633B requires that the Commission shall consider, shall consider, the degree to which any costs are uniquely or disproportionately associated with any competitive products.

[00:01:17] Speaker 06:
But the PRC expressly declined to follow that statutory mandate, and that's why we say this

[00:01:26] Speaker 06:
order has to be vacated and remanded as contrary to law and arbitrary and capricious.

[00:01:40] Speaker 06:
They are not correct as a matter of law, Your Honor.

[00:01:42] Speaker 06:
And here's why.

[00:01:43] Speaker 06:
I would refer you to- Well, no.

[00:01:44] Speaker 07:
Actually, the language is sufficiently equivocal.

[00:01:47] Speaker 07:
I generally agree with the language is sufficiently equivocal in the statute.

[00:01:51] Speaker 07:
I don't have it.

[00:01:52] Speaker 07:
So that if there's a possibility, but it doesn't pan out, I read the statute seven.

[00:01:57] Speaker 07:
I don't have to do it.

[00:01:59] Speaker 07:
I'm still curious as to whether they're correct.

[00:02:02] Speaker 07:
Can I ask you some preliminary questions?

[00:02:04] Speaker 07:
I just need to have an understanding from both sides.

[00:02:08] Speaker 07:
as to what we're talking about here, so I can understand what's really at issue.

[00:02:13] Speaker 07:
Am I right in assuming there are inframarginal costs that are indisputably institutional costs?

[00:02:22] Speaker 07:
In other words, no one would argue those inframarginal costs are attributable to costs

[00:02:29] Speaker 07:
of a competitive project.

[00:02:32] Speaker 06:
Is that right?

[00:02:33] Speaker 06:
It's not right, Your Honor.

[00:02:34] Speaker 06:
And I think that where we should go is we should go back to this court's prior decision in the A-2 docket.

[00:02:40] Speaker 07:
No, no, wait.

[00:02:41] Speaker 06:
Indulge me.

[00:02:43] Speaker 06:
I want to take you to the graph there, Your Honor, to answer your question.

[00:02:45] Speaker 06:
If you go to the graph at 890 F-3rd in this court's prior decision on the A-2 docket, the docket pertaining to order number 3506, which interpreted

[00:02:58] Speaker 06:
So to answer your question, Your Honor, if you look at the graph that's at page 1060 of your prior opinion, and for ease, Your Honors, it's reprinted in the blue brief at page 30.

[00:03:09] Speaker 06:
And I think I can answer your entire question, Judge Edwards, if we look at the graph on page 30.

[00:03:16] Speaker 06:
I'm going to give it, Your Honor, this Court already considered the question of what costs are attributed to competitive products

[00:03:25] Speaker 06:
Now let's remember the statutory language under A2.

[00:03:28] Speaker 06:
That's not my question.

[00:03:29] Speaker 07:
I'm really trying to ask a preliminary question so that I can understand what I know you want to address and the other side want to address.

[00:03:38] Speaker 07:
Are there inframarginal costs that are indisputably only institutional costs?

[00:03:44] Speaker 06:
Yes, and they are not attributed to competitive products under A2.

[00:03:48] Speaker 07:
Wait, bear with me.

[00:03:51] Speaker 07:
I mean, you know this better than I do, because you've all been working with it, but I have to get myself up to speed.

[00:03:57] Speaker 07:
So that category is not in dispute here.

[00:04:01] Speaker 07:
In your mind, everyone's mind, there's no doubt that there are inframarginal costs that can be institutional costs.

[00:04:07] Speaker 07:
That's not the issue here.

[00:04:08] Speaker 06:
That is the issue here, because the inframarginal costs that are institutional costs are the very ones that we say the Postal Regulatory Commission was required to consider under A3.

[00:04:19] Speaker 06:
And they didn't.

[00:04:21] Speaker 06:
And Your Honor, I think the graph is helpful if I could kindly refer you to the blue brief at 30.

[00:04:27] Speaker 06:
Inframarginal costs occupy the white space of the graph.

[00:04:30] Speaker 06:
And I think it's helpful to go back and look at the statutory language.

[00:04:33] Speaker 06:
And Your Honor, your precise question was,

[00:04:35] Speaker 06:
Why didn't the A2 analysis that this court reviewed in its prior decision subsume the costs that we say need to be considered under A3?

[00:04:44] Speaker 06:
No, I know the court said there are some inframarginal costs that are attributed and most aren't.

[00:04:50] Speaker 06:
And the ones that are attributed under A2 are represented by the green triangle.

[00:04:56] Speaker 06:
Some that are attributed under A2.

[00:05:00] Speaker 07:
And there are some that are not.

[00:05:01] Speaker 06:
Correct, Your Honor.

[00:05:02] Speaker 07:
So there's a question, and that's why I'm asking the question, my first question, is there such a thing as an inframarginal cost that is properly characterized as an institutional cost, period.

[00:05:20] Speaker 07:
in your wireless moment, you would not say, no, you must attribute that or say it's associated with a competitive product.

[00:05:30] Speaker 05:
Your Honor, there's two different buckets.

[00:05:32] Speaker 05:
The attributable costs under A2.

[00:05:35] Speaker 05:
No, I really wish you'd answer this question.

[00:05:37] Speaker 06:
I am answering the question.

[00:05:39] Speaker 07:
No, it may be simplistic, but I really need the answer.

[00:05:41] Speaker 06:
Your Honor, yes, there are indisputably institutional costs.

[00:05:45] Speaker 06:
Inframarginal institutional costs.

[00:05:47] Speaker 06:
That's the white triangle.

[00:05:49] Speaker 06:
in the graph on page 30.

[00:05:51] Speaker 06:
None of those have ever been attributed to competitive products under A2.

[00:05:55] Speaker 07:
You're not hearing my hypothetical.

[00:06:03] Speaker 07:
You're jumping ahead of it.

[00:06:04] Speaker 07:
All I want to know is a very simple question.

[00:06:07] Speaker 07:
It's very simplistic, possibly.

[00:06:09] Speaker 07:
Or is there such a thing as an inframarginal cost

[00:06:13] Speaker 07:
that is purely institutional.

[00:06:17] Speaker 07:
No one would say it can be attributed or associated with a competitive project.

[00:06:23] Speaker 07:
Is that right or wrong?

[00:06:23] Speaker 06:
That's wrong, Your Honor.

[00:06:25] Speaker 06:
We believe that institutional costs must be associated with competitive products under A3.

[00:06:32] Speaker 06:
And A2 says that costs that are reliably identifiably caused by competitive products are attributed to competitive products

[00:06:43] Speaker 06:
under the A2 analysis.

[00:06:44] Speaker 06:
That's the blue rectangle and the green triangle in the graph on page 30.

[00:06:52] Speaker 07:
But not all institutional costs are associated with or attributable to competitive products.

[00:06:59] Speaker 06:
That's correct, Your Honor, but A2 requires that you attribute to competitive products all those that have a reliably identifiable causal relationship

[00:07:09] Speaker 06:
That's a very narrow category, Your Honor.

[00:07:12] Speaker 06:
The remainder of the inframarginal institutional costs, the institutional costs that are not attributed, so all of the white space in the graph on page 30, part of that must be considered to the extent it is uniquely or disproportionately associated with competitive products.

[00:07:33] Speaker 06:
And that's what the PRC failed to do.

[00:07:36] Speaker 06:
And, Your Honor, I think it's worth looking at the statutory language.

[00:07:38] Speaker 04:
Sorry, wait.

[00:07:38] Speaker 06:
I need to keep this picture.

[00:07:40] Speaker 04:
So you go ahead.

[00:07:40] Speaker 04:
I want you to get your questions out.

[00:07:42] Speaker 04:
Sorry.

[00:07:42] Speaker 07:
Yeah.

[00:07:42] Speaker 07:
Well, I'll wait until the other side.

[00:07:45] Speaker 07:
Mine really is a very simplistic question.

[00:07:46] Speaker 07:
I'm trying to see if I can clean out in my mind a certain category of inframarginal costs that neither you nor anyone else would suggest.

[00:07:54] Speaker 07:
we would ever say, because institutional costs are different from the costs that are clearly either associated with or attributed to competitive products.

[00:08:07] Speaker 07:
It's a broader sweep.

[00:08:08] Speaker 06:
Let me give you a simplistic answer.

[00:08:10] Speaker 06:
Part of the white triangle is associated with competitive products, and part of the white triangle may not be associated with competitive products.

[00:08:22] Speaker 06:
But we don't know what portion of the white triangle is associated with competitive rights.

[00:08:27] Speaker 07:
OK, so then your answer to my question is yes.

[00:08:29] Speaker 06:
Yes.

[00:08:30] Speaker 07:
That's all I wanted to know 10 minutes ago.

[00:08:33] Speaker 07:
That's just to help me to sort this through.

[00:08:35] Speaker 07:
I'm trying to understand the fight.

[00:08:37] Speaker 07:
You're saying some inframarginal costs have been properly been characterized as institutional costs, when in fact they should have been associated under B.

[00:08:50] Speaker 06:
No, Your Honor, that was our position the last time.

[00:08:54] Speaker 06:
We lost.

[00:08:55] Speaker 06:
But the reason why we have to win this time is that we lost on the very grounds that the area of the white triangle here was none of that.

[00:09:04] Speaker 06:
The PRC has decided in the current docket that you are reviewing that nothing in the white triangle is uniquely or disproportionately associated with packages.

[00:09:15] Speaker 06:
That cannot be true.

[00:09:17] Speaker 06:
And why can't that be true, Your Honor?

[00:09:19] Speaker 06:
Because remember, we're in the age of e-commerce.

[00:09:21] Speaker 06:
Package traffic is rising while mail is dropping.

[00:09:24] Speaker 06:
And 30% of the revenues of the post office now come from packages.

[00:09:29] Speaker 06:
And that's 30% of the costs that are attributed under A2.

[00:09:33] Speaker 07:
Now, Your Honor, why... Would you concede there are some institutional costs or some inframarginal costs that are not uniquely or disproportionately associated with competitive process?

[00:09:44] Speaker 06:
Yes, Your Honor, because the language Congress gave was uniquely or disproportionately associated.

[00:09:49] Speaker 06:
There may be some costs that are associated but not uniquely or disproportionately with packages.

[00:09:55] Speaker 06:
There are lots of joint costs that may be associated with both packages and letters.

[00:10:00] Speaker 06:
The Post Office is in the process of buying billions of dollars worth of larger trucks.

[00:10:06] Speaker 06:
Why do you need larger trucks consuming more fuel when letter traffic is going way down because of email?

[00:10:11] Speaker 06:
Because packages take up a lot of space.

[00:10:14] Speaker 06:
So when it buys these larger trucks, you can still carry letters and packages on the trucks, Your Honor, but that cost is disproportionately associated

[00:10:23] Speaker 06:
with package delivery.

[00:10:25] Speaker 06:
Why?

[00:10:25] Speaker 06:
Because the larger trucks and the additional expense to purchase them and fuel them is attributable mostly disproportionately to the higher cubic volume of packages compared with letters.

[00:10:37] Speaker 06:
Your Honor, I wanted to reserve time for rebuttal, but I've already had my time.

[00:10:40] Speaker 06:
May I keep going?

[00:10:41] Speaker 06:
So Your Honor, I want to be clear that you must be getting the key to the case to Judge Edwards.

[00:10:48] Speaker 06:
Why doesn't the A2 analysis subsume the A3 analysis?

[00:10:52] Speaker 06:
And the answer is because the A2 analysis did not take into account, as attributable to packages, the larger trucks that were involved in delivering packages.

[00:11:03] Speaker 06:
It didn't take into account other uniquely associated with packages.

[00:11:10] Speaker 06:
When the post office goes out and it makes a contract with an e-commerce distributor,

[00:11:15] Speaker 06:
Those transaction costs are all about packages, and yet none of those costs, none of those costs are attributed under A2.

[00:11:24] Speaker 06:
What is attributed under A2 and where the Post Office, the Postal Regulatory Commission prevailed in the last case was the extremely narrow set of costs represented by the blue triangle, sorry, the blue rectangle and the green triangle.

[00:11:36] Speaker 06:
Those incremental costs of packages.

[00:11:39] Speaker 04:
And the definition applied there.

[00:11:43] Speaker 04:
If I understand it correctly, so you've got a nice big area there.

[00:11:46] Speaker 04:
I guess it's not quite a triangle, but we'll call it a triangle.

[00:11:49] Speaker 04:
It's a leftover area.

[00:11:50] Speaker 04:
It's a polyhedron with a roughly triangular shape.

[00:11:54] Speaker 04:
Got it.

[00:11:54] Speaker 04:
OK.

[00:11:55] Speaker 04:
We'll call it the triangle at the same time.

[00:11:58] Speaker 04:
Is some portion of that white area costs of the competitive products that are not reliably calculable?

[00:12:11] Speaker 04:
Precisely, Your Honor.

[00:12:13] Speaker 04:
Those would not be institutional costs.

[00:12:15] Speaker 04:
Those would just be costs in the statute's terms, the its costs, the competitive products costs, but we just can't reliably compute them.

[00:12:24] Speaker 04:
And that would be different from things that are not its costs.

[00:12:28] Speaker 04:
Institutional costs are not its costs.

[00:12:31] Speaker 04:
Sorry, Your Honor.

[00:12:31] Speaker 06:
In this world, institutional here does not have a common sense definition like its common cost.

[00:12:38] Speaker 06:
Institutional here is the residual of a trivial cost.

[00:12:42] Speaker 06:
The white space is, by definition, institutional costs.

[00:12:45] Speaker 06:
It isn't all institutional costs.

[00:12:47] Speaker 04:
So everything not reliably calculable is an institutional cost.

[00:12:51] Speaker 04:
Well, no, no, no.

[00:12:53] Speaker 06:
So I think it's helpful to go back to the language of the statute, because it's the key to my argument.

[00:12:58] Speaker 06:
A2 and A3 are not coterminous.

[00:13:01] Speaker 06:
So the A2 analysis you approved last time looked, Your Honor, for reliably identified causal relationships.

[00:13:07] Speaker 06:
That's 3633A2 plus the definition in 3631B.

[00:13:13] Speaker 06:
Costs attributable under A2 must have reliably identified causal relationships.

[00:13:18] Speaker 06:
Reliably identified causal relationships have been defined exceedingly narrowly by the PRC approved by this court in the prior panel decision as just the incremental cost.

[00:13:27] Speaker 06:
The blue rectangle, which represents the cheapest marginal cost of the product, and the green rectangle,

[00:13:34] Speaker 06:
which represents the inframarginal costs, Your Honor, that are attributed because they're reliably identifiably caused by the competitive product.

[00:13:43] Speaker 06:
That leaves this vast white space.

[00:13:45] Speaker 06:
And last time the PRC was here, Your Honor, and I commend to your attention, if you do nothing else in this case, listen to the prior oral argument at minute 39, second 11, where the PRC very articulately stated

[00:13:59] Speaker 06:
Don't worry if we're undercounting the costs that packages cost the post office under our A2 analysis.

[00:14:06] Speaker 06:
Don't worry if the blue rectangle plus the green triangle are too small, because that vast white space, all those costs go into the institutional bucket.

[00:14:15] Speaker 06:
And under the A3 docket, which is now before you under order number 4963, the PRC will allocate, and I quote the PRC, reasonable sums that are uniquely or disproportionately associated with competitive products.

[00:14:30] Speaker 06:
And that's what the PRC refused to do.

[00:14:32] Speaker 04:
They didn't make good on that promise to this court.

[00:14:35] Speaker 04:
And I did listen to that, so I understand that point.

[00:14:37] Speaker 04:
But under B, I want to know on your statutory text.

[00:14:41] Speaker 04:
So under 3633B, when it says the sort of money language here, the degree to which any costs are uniquely or disproportionately associated with any competitive products.

[00:14:54] Speaker 04:
Correct.

[00:14:54] Speaker 04:
Does any cost there mean any institutional costs or?

[00:15:00] Speaker 04:
any attributed and institutional costs?

[00:15:03] Speaker 06:
Both, Your Honor.

[00:15:04] Speaker 04:
Any cost means any cost.

[00:15:05] Speaker 04:
I think we agree with that.

[00:15:06] Speaker 06:
And the government may say, oh, well, we took into account some uniquely or disproportionately associated costs over in the A2 analysis, because we did account a little bit for trucks over in what we attributed as costs that are reliably identifiably caused by packages.

[00:15:26] Speaker 06:
But my argument is that A3 requires more.

[00:15:29] Speaker 06:
And the answer to your honor.

[00:15:33] Speaker 06:
Why doesn't A3 subsume?

[00:15:36] Speaker 06:
And the answer, your honor, to come back to your question, is if we look at the language of B, uniquely or disproportionately associated with any competitive product.

[00:15:45] Speaker 06:
And it's any cost.

[00:15:46] Speaker 06:
You have to look at the institutional cost.

[00:15:48] Speaker 06:
It's not enough to just look at the attributable cost.

[00:15:51] Speaker 06:
Any cost.

[00:15:53] Speaker 06:
There have to be costs over in the white space that are at least disproportionately associated with competitive products.

[00:15:59] Speaker 07:
Because it's residual, the things that they're not accounting for that you say they ought to be accounting for under B are going to be considered by them as institutional costs.

[00:16:08] Speaker 06:
They didn't consider them as institutional costs.

[00:16:11] Speaker 07:
That's the whole point, Your Honor.

[00:16:12] Speaker 07:
They're in the category of institutional costs.

[00:16:14] Speaker 07:
They are, Your Honor.

[00:16:15] Speaker 07:
Right.

[00:16:16] Speaker 07:
They're in the category of institutional costs.

[00:16:18] Speaker 06:
And if I could just connect us back to the remaining statutory language we need to complete the puzzle.

[00:16:23] Speaker 06:
hop up to 3633A3 and let's look at what the Postal Regulatory Commission failed to do.

[00:16:30] Speaker 06:
It is supposed 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.

[00:16:40] Speaker 06:
And in doing that, Your Honor, down in B, it must consider the degree to which any cost, including institutional costs that weren't attributed over under A2,

[00:16:50] Speaker 06:
are uniquely or disproportionately associated?

[00:16:52] Speaker 04:
I guess I was emphasizing that language because I thought any cost would include both, I think it's self-evidently institutional here, but also things that were already attributed under A2.

[00:17:02] Speaker 04:
And so when it comes down to deciding to throw this out there for you, because yours seemed to be get whatever you missed under A2.

[00:17:09] Speaker 04:
And they say, well, that's nothing.

[00:17:10] Speaker 04:
We think we got everything under A2.

[00:17:12] Speaker 04:
And I don't know why this language, please tell me, doesn't mean, I don't care if you already counted it under A2,

[00:17:18] Speaker 04:
when you come down to determine appropriate share, you've got to sit back and look at any unique or disproportional cost, whether they're in the blue box, the green box, or the white box.

[00:17:28] Speaker 04:
And you have to factor those in to determine appropriate share.

[00:17:31] Speaker 04:
And they didn't do that.

[00:17:32] Speaker 06:
That's exactly correct, Your Honor.

[00:17:34] Speaker 06:
100%.

[00:17:35] Speaker 06:
They didn't do that.

[00:17:36] Speaker 06:
Any cost means you can't just finish the job by saying, oh, well, we captured a little itty bitty bit of trucks over in our blue rectangle and our green triangle.

[00:17:46] Speaker 06:
They've got to look at the proportion of truck purchases, big truck purchases, or new contracts with e-commerce distributors that were done disproportionately or uniquely because of competitive products.

[00:17:57] Speaker 04:
Whether they're in the green, blue, or white.

[00:17:59] Speaker 04:
Whether they're in the green, blue, or white.

[00:18:01] Speaker 04:
I thought you were just talking about white.

[00:18:02] Speaker 04:
We're just talking about white.

[00:18:04] Speaker 04:
They have to do it under white.

[00:18:05] Speaker 04:
I was just asking whether it mattered.

[00:18:06] Speaker 04:
My thought, again, on this statutory language is that I don't care if you already counted it under A2.

[00:18:13] Speaker 04:
When you read this, it says, when you decide an appropriate share, stop and go, hey, is there any cost associated with competitive products that is unique or disproportionate, whether you counted under A2 or it was the wide area?

[00:18:29] Speaker 04:
I don't care.

[00:18:30] Speaker 04:
Whatever, however many things are unique or disproportionately associated with competitive products, you've got to factor that in and determine an appropriate share.

[00:18:38] Speaker 04:
That's exactly right, Your Honor.

[00:18:40] Speaker 04:
And that's why we win, because that's what they didn't do.

[00:18:42] Speaker 04:
OK.

[00:18:42] Speaker 04:
But I thought then you said you were arguing about the white box.

[00:18:44] Speaker 04:
But you shouldn't.

[00:18:45] Speaker 04:
You should be arguing about they didn't get.

[00:18:46] Speaker 04:
Their argument that we already got unique or disproportionate under A2 is a so what.

[00:18:54] Speaker 04:
You have to count.

[00:18:55] Speaker 04:
It's a double counting.

[00:18:56] Speaker 04:
You look again under.

[00:18:57] Speaker 06:
It's actually not a double counting, Your Honor, because remember, the white space and the blue and green space are residuals of one another.

[00:19:06] Speaker 06:
They are mutually exclusive.

[00:19:08] Speaker 04:
So our argument is A. No, no, mutually exclusive whether they're called institutional or attributed costs.

[00:19:13] Speaker 04:
Yes.

[00:19:14] Speaker 04:
Right, but what I'm suggesting is that when it says any costs in B, that means any attributed or, I'll call them residual, residual costs.

[00:19:26] Speaker 04:
Any attributed or residual costs, that's code for institutional costs, that are unique or disproportionate, those together have to be factored in in calculating

[00:19:36] Speaker 04:
the appropriate share.

[00:19:37] Speaker 06:
That's correct, Your Honor, but we know that A3 requires the Postal Regulatory Commission to ensure that competitive products collectively cover the appropriate share of the institutional cost.

[00:19:51] Speaker 06:
The failure under A3 pertains just to the white space.

[00:19:54] Speaker 06:
Maybe the way to put it, Your Honor, is the failure under A3 pertains just to the white space where the PRC deployed.

[00:20:00] Speaker 04:
But it could be a part of your appropriate share of institutional cost could be, you're an 800-pound gorilla over here when it comes to truck buying.

[00:20:07] Speaker 04:
Yeah, you're capturing some of that under-attributed, but we're going to stand back and go, even if you're capturing a little bit of it, you're an 800-pound gorilla here, and so as to things that

[00:20:17] Speaker 04:
you should carry a little more weight in some sense under institutional costs.

[00:20:23] Speaker 04:
That's what I'm trying to, because the appropriate share is not so much a mechanical calculation, it's a judgment about, you bring factors in, but as they stand back and they make a judgment about what's appropriate for them to do.

[00:20:36] Speaker 04:
And so... That's correct, Your Honor.

[00:20:38] Speaker 04:
It doesn't matter if they, that's why I call it sort of a double county.

[00:20:42] Speaker 04:
Your Honor, let me... It's still a portion that you have.

[00:20:46] Speaker 07:
Go ahead, answer the judge's question.

[00:20:48] Speaker 06:
Your Honor, we agree with you that any costs that must be factored in covers both buckets, but A3 requires you to ensure that an appropriate share of the white space bucket be factored in.

[00:20:59] Speaker 06:
I understand that, but you can factor in.

[00:21:01] Speaker 04:
I'm just saying if these things were reversed, if this were all blue and green and it was only a small amount and it was white, you would still say fine,

[00:21:10] Speaker 04:
The fact that they have all these things that are, well, let's assume some percentage of this is unique or disproportionate.

[00:21:17] Speaker 04:
We're going to look at the big picture of how unique or disproportionate your costs are in deciding what your appropriate share of institutional costs is.

[00:21:26] Speaker 06:
Absolutely, Your Honor, and I think we're in agreement, and the PRC failed to do that, and that's why you must remand.

[00:21:31] Speaker 06:
And how we know that the PRC failed to do that, Your Honor,

[00:21:34] Speaker 06:
is the multiple times in the order, and I would cite you joining ethics at 657 as a particularly clear example.

[00:21:42] Speaker 06:
Multiple times in the order, the PRC said there are no, at 657, second paragraph, the carryover paragraph, middle, there are no costs uniquely or disproportionately associated with competitive products that are not already attributed to those products

[00:22:00] Speaker 06:
This is because all costs that are uniquely or disproportionately associated with competitive products exhibit a reliably identified causal relationship with a specific competitive product group.

[00:22:11] Speaker 06:
That simply is false.

[00:22:13] Speaker 06:
It cannot be true because reliably identifiable causal relationships produced a very narrow test in the last docket in this court's last order that just gets you to the incremental cost at the right end of the graph, the blue rectangle and the green triangle.

[00:22:27] Speaker 06:
Everything else is institutional.

[00:22:29] Speaker 06:
And the Postal Regulatory Commission approved an approach that would not consider whether any of the institutional costs in the white space were disproportionately or uniquely associated.

[00:22:42] Speaker 06:
That means they leave out the larger chunks.

[00:22:44] Speaker 07:
Yeah, I do understand what you're saying.

[00:22:46] Speaker 07:
I want to just make sure, but I want to follow through one more step.

[00:22:51] Speaker 07:
As I understand your argument, you've got the attribution under A2.

[00:22:58] Speaker 07:
And we're saying, in addition, you have to do B. A3 plus B. Plus B. You can still end up with, having done that, let's say they did it to your satisfaction, you can still end up with some inframarginal costs that are not going to be captured either way.

[00:23:20] Speaker 07:
And they're just in the institutional category.

[00:23:22] Speaker 07:
And they will be subject to the appropriate share formula.

[00:23:28] Speaker 07:
Right?

[00:23:29] Speaker 06:
Yes, Your Honor.

[00:23:30] Speaker 06:
But institutional costs are subject to the appropriate share.

[00:23:33] Speaker 06:
Yes.

[00:23:34] Speaker 07:
No doubt about that.

[00:23:35] Speaker 07:
I'm just trying to figure out, this is all I was trying to do in the very beginning, whether you agree there's some inframarginal costs that will be captured neither by to nor be.

[00:23:48] Speaker 05:
That's correct, Your Honor.

[00:23:49] Speaker 07:
And they're simply institutional.

[00:23:51] Speaker 05:
Simply institutional.

[00:23:52] Speaker 07:
And they will be dealt with under three, A3, the sharing.

[00:23:57] Speaker 07:
Your Honor.

[00:23:58] Speaker 07:
I've dealt with is not the right word.

[00:24:00] Speaker 03:
Yeah.

[00:24:00] Speaker 07:
They are not ignored because in the sharing arrangement you're considering institutional costs which would include those inframarginal costs that are not captured by A2 or B. That's correct, Your Honor.

[00:24:12] Speaker 06:
So in the world there are two buckets of costs, the A2 costs, which won't capture all of the costs that are associated with competitive products because the task is... Adjuvanted to.

[00:24:25] Speaker 06:
Adjuvanted to.

[00:24:26] Speaker 06:
Then there'll be the institutional bucket, and we can see that there might be some portion in that bucket that are disproportionately associated with packages and some informational posts that are not.

[00:24:36] Speaker 07:
I'm doing the other way in my head.

[00:24:38] Speaker 07:
Your argument to me means you've got to do two first.

[00:24:41] Speaker 07:
And then you do B, and you now have all of those intramarginal costs accounted for the way you think they ought to be accounted for under the statute.

[00:24:50] Speaker 07:
Now you go ahead and figure out the appropriate share.

[00:24:53] Speaker 06:
Exactly, Your Honor.

[00:24:54] Speaker 06:
But you know what?

[00:24:55] Speaker 06:
PRC didn't do B. No, I understand.

[00:24:57] Speaker 06:
That's the whole problem here.

[00:24:59] Speaker 07:
The last question I have is, now I understand your argument, what are the examples, your best examples,

[00:25:07] Speaker 07:
of infomarginal costs that have slipped through the cracks.

[00:25:13] Speaker 07:
I don't want to look at the chart.

[00:25:14] Speaker 07:
Just tell me what you're talking about.

[00:25:18] Speaker 07:
I like to visualize.

[00:25:19] Speaker 07:
What are you talking about specifically?

[00:25:22] Speaker 06:
Like what?

[00:25:22] Speaker 06:
Your Honor, uniquely associated with competitive products would be things like the transaction costs of setting up new accounts with e-commerce shippers.

[00:25:31] Speaker 06:
They don't send letters.

[00:25:32] Speaker 06:
They send packages.

[00:25:34] Speaker 06:
Those transaction costs are uniquely associated with packages, but they are neither attributed in the incremental cost A2 analysis that you reviewed the last time, nor were they considered by the PRC under A3.

[00:25:47] Speaker 06:
Second example, better example, Your Honor, are larger trucks.

[00:25:50] Speaker 06:
I mean, this is very intuitive to me.

[00:25:52] Speaker 06:
I hope it hits to Your Honor.

[00:25:54] Speaker 06:
The Post Office is out there buying billions of dollars of larger trucks.

[00:25:57] Speaker 06:
Why are they doing this?

[00:25:58] Speaker 06:
Letters and postcards, old-style mail, has been decimated by email and new technology.

[00:26:04] Speaker 06:
They should be buying smaller trucks and using less fuel.

[00:26:08] Speaker 06:
But instead, they're buying bigger trucks and more of them.

[00:26:11] Speaker 06:
Why?

[00:26:11] Speaker 06:
Because packages take up so much cubic volume.

[00:26:14] Speaker 06:
The capital cost of those larger trucks was never attributed, at least not potentially in a trivial amount, under the A2 analysis.

[00:26:24] Speaker 06:
You're not going to find those big trucks down in the blue rectangle.

[00:26:28] Speaker 06:
or the associated cost, piggyback cost in the little green triangle.

[00:26:32] Speaker 07:
We're not captured under B because the agency concedes.

[00:26:35] Speaker 07:
We're not even looking there.

[00:26:36] Speaker 04:
Exactly, Your Honor.

[00:26:37] Speaker 04:
And if they're not captured... Wait, when you say not captured under B, you mean they didn't capture them under B or the statute B doesn't apply to them?

[00:26:44] Speaker 06:
No, no, you're saying it doesn't apply.

[00:26:46] Speaker 06:
B must apply to them.

[00:26:47] Speaker 04:
Okay.

[00:26:48] Speaker 04:
I want to make it clear because it's... Yeah.

[00:26:49] Speaker 06:
Our position, Your Honor... Not captured under B means they didn't capture them under B. Right.

[00:26:53] Speaker 06:
Okay.

[00:26:53] Speaker 06:
B plainly under its text requires

[00:26:55] Speaker 06:
consideration of them in the A3 analysis.

[00:26:58] Speaker 06:
Why?

[00:26:58] Speaker 06:
Because a larger truck is the quintessentially... But they say they don't as to trucks.

[00:27:03] Speaker 04:
They say we've got cost drivers and our calculations already figure out, look, probably what we send the truck out is going to have a bag or two of mail on it as well as all these boxes.

[00:27:13] Speaker 04:
And so we've calculated what percentage of the cost of that truck, its size, its gas, its fuel, everything.

[00:27:21] Speaker 04:
its maintenance is associated with packages and what's with ma- I'm using mail as a shorthand for that.

[00:27:26] Speaker 04:
Yes, Your Honor.

[00:27:27] Speaker 04:
For the non-competitive stuff.

[00:27:29] Speaker 06:
So that's incorrect.

[00:27:30] Speaker 06:
That is incorrect.

[00:27:31] Speaker 06:
The- all that- don't be bedazzled by cost drivers.

[00:27:35] Speaker 06:
Cost drivers are just the units of measurement that help determine the x-axis.

[00:27:39] Speaker 06:
We know that if there are a certain number of cubic unit miles driven for- to deliver a certain package product, like three-day delivery of a three-pound box,

[00:27:49] Speaker 06:
The cost drivers just tell you where on the cost curve you're going to attribute the price that creates the blue rectangle.

[00:27:56] Speaker 06:
Cost drivers are just a device for determining the incremental cost.

[00:28:00] Speaker 06:
It's undisputed here.

[00:28:01] Speaker 04:
When you say incremental cost, how much more does it cost us to deliver packages than if we had to drive trucks to deliver mail anyhow?

[00:28:08] Speaker 06:
But that's not what's determined there, Your Honor.

[00:28:10] Speaker 06:
Remember, A2 has been interpreted, and I commend

[00:28:13] Speaker 06:
This court's very careful analysis of this in the prior docket.

[00:28:18] Speaker 06:
At 890 at page 1057, you will see that there's an extremely narrow definition of what costs can go into the incremental cost analysis that generates what we're calling, for shorthand, the blue rectangle and the green triangle.

[00:28:32] Speaker 06:
And at 1057, at this court's prior opinion, it shows how narrow the determination is.

[00:28:40] Speaker 06:
the volume variable cost defined as the marginal cost of the last or cheapest cost driver unit multiplied by the total number of units accrued.

[00:28:48] Speaker 06:
So what goes into that analysis, Your Honor, may be a portion of the truck that is reliably, causally identified with that product and only that product, but that by definition and design leaves out all of the incremental cost of the larger trucks that is a common variable cost,

[00:29:09] Speaker 06:
The common variable cost of those trucks are over in the white space.

[00:29:13] Speaker 06:
They weren't attributed under A2 and they cannot be attributed under A3 because of the PRC's error in B. They didn't do the B analysis.

[00:29:21] Speaker 06:
Now, don't take this from me, Your Honor.

[00:29:23] Speaker 06:
Take it from the PRC.

[00:29:25] Speaker 06:
If you go back to the docket, your review of order number 3506 where you approved the very narrow blue rectangle, green triangle analysis,

[00:29:36] Speaker 06:
We opposed it.

[00:29:37] Speaker 06:
We lost.

[00:29:37] Speaker 06:
They won.

[00:29:38] Speaker 06:
They got this very narrow analysis there.

[00:29:41] Speaker 06:
Back in that decade, if you look at order number 3506 and you go to appendix A at page 16, you will see the PRC says that common variable costs are treated as institutional costs.

[00:29:54] Speaker 06:
The trucks we're talking about involve common variable costs.

[00:29:58] Speaker 06:
It takes more trucks to deliver more packages.

[00:30:00] Speaker 06:
It takes bigger trucks to deliver more packages, more drivers, more fuel.

[00:30:04] Speaker 06:
That's a common variable cost.

[00:30:06] Speaker 06:
that reflects the cost of the few letters that are in the truck and the big packages that are in the truck, Your Honor.

[00:30:13] Speaker 06:
That was not captured in the A2 analysis by definition and design because as this Court approved the A2 analysis, you never look at the common variable costs because they're in the institutional cost buckets.

[00:30:25] Speaker 06:
And that's, Your Honor, why I think it's important to go back to the words of the statute.

[00:30:29] Speaker 06:
We know why doesn't A2 subsume A3?

[00:30:33] Speaker 06:
The language of the statutes are different.

[00:30:35] Speaker 06:
Reliably identified causal relationship is much narrower than uniquely or disproportionately associated with.

[00:30:42] Speaker 06:
And second, the PRC's own prior decision, on which this panel, sorry, on which this court in the prior panel expressly relied, if you go to the prior decision at 1067, it isn't just the representation of counsel at argument.

[00:30:55] Speaker 06:
This court accepted at page 1067 that the way that

[00:31:02] Speaker 06:
the panel put it is, UPS offers no reason to doubt that the Accountability Act prohibition on cross-subsidization and requirement that competitive products cover a share of institutional costs will adequately ameliorate any competitive deficit left by the Commission's approach to cost attribution.

[00:31:22] Speaker 06:
That was the premise.

[00:31:24] Speaker 06:
The premise of the prior decision was

[00:31:26] Speaker 06:
A2 captures an exceptionally small sliver of package costs.

[00:31:31] Speaker 07:
Another way to give you the relief that you want is to simply increase the appropriate share of the institutional costs.

[00:31:43] Speaker 07:
Yes, Your Honor, but we think... No matter whether B,

[00:31:48] Speaker 07:
was effectively employed or not.

[00:31:50] Speaker 07:
If you increase it, what is it, 5%?

[00:31:51] Speaker 07:
What's the percent now?

[00:31:52] Speaker 06:
The new formula generates 8.8%.

[00:31:56] Speaker 07:
So if you increase it to 14%, you wouldn't be making this argument, right?

[00:32:00] Speaker 06:
Well, Your Honor, if you want to order it increased to 30%, which is what we suggested to the PRC, we would bravely accept.

[00:32:06] Speaker 07:
We've got the relief you want.

[00:32:07] Speaker 06:
We would.

[00:32:07] Speaker 07:
But, Your Honor, we don't order it.

[00:32:09] Speaker 07:
Even though you would say, well, you know, the other way to address it is you really should have done this underneath.

[00:32:15] Speaker 05:
You're correct, Your Honor.

[00:32:16] Speaker 07:
But we'll take the 30%.

[00:32:17] Speaker 07:
That's what you, right?

[00:32:17] Speaker 05:
Well, Your Honor, Your Honor.

[00:32:19] Speaker 07:
I'm just trying to make sure I got all the nuances here.

[00:32:21] Speaker 07:
That's what you really, there are two ways to capture.

[00:32:24] Speaker 07:
If you increase the percentage, it doesn't matter whether you screw up on the B. You're saying a bigger percentage of the institutional cost, because they're in there in the institutional area.

[00:32:35] Speaker 06:
We agree with that, and that's what we said in our comments.

[00:32:37] Speaker 07:
We said that they- I at least finally understand.

[00:32:39] Speaker 06:
The institutional cost.

[00:32:40] Speaker 06:
Your Honor, if the Post Office is making 30% of its revenues from packages,

[00:32:44] Speaker 06:
And the packages are going up while the letters are going down.

[00:32:47] Speaker 06:
And if the A2 process fought as we thought it was at the time, if that generates 30% of costs being attributed to packages, then doesn't it seem very odd that you would attribute 8.8% of all the rest of the cost of the post office to packages?

[00:33:01] Speaker 06:
We think that's very odd, Your Honor.

[00:33:03] Speaker 04:
And let's remember, it's not if they're really only about 3.4% of the stuff they deliver.

[00:33:08] Speaker 04:
I mean, I'm not sure even if you got the analysis right that they would have to increase the number or certainly

[00:33:15] Speaker 04:
go anywhere near 30 percent.

[00:33:17] Speaker 04:
They can still do the analysis.

[00:33:19] Speaker 04:
But they have a lot of discretion under appropriate share.

[00:33:21] Speaker 04:
That's exactly right, Your Honor.

[00:33:22] Speaker 06:
And so as much as I would like to accept Judge Henderson's proposal that you simply order a higher share, we don't ask for that here.

[00:33:29] Speaker 06:
We ask for it.

[00:33:31] Speaker 06:
We would gladly accept it, but we want to respect the agency's expertise in the first instance to decide the appropriate share.

[00:33:38] Speaker 06:
But the one thing that is not within its authority to which you should defer

[00:33:43] Speaker 06:
is the ability to nullify A3 by ignoring B. You rarely have a case, and here I really do commend the language of the PRC itself on pages JA657 and all the other pages where we say, we don't have to do the disproportionately or uniquely associated cost analysis under 3633B at all, because we did it already under 3633A2.

[00:34:07] Speaker 06:
We know that cannot be true.

[00:34:09] Speaker 06:
It cannot be true, because the way they prevailed on 3633B

[00:34:12] Speaker 06:
3633A2 in the prior decision of this court was to exclude from A2 analysis many common variable costs, like the costs of larger trucks that need to be at some, that are disproportionately associated with packages and yet were not considered in the analysis.

[00:34:30] Speaker 06:
So the relief we ask for, Your Honor, is vacate and remand so that institutional share, which is the output, can be calculated in accordance with the statutory requirement

[00:34:41] Speaker 06:
that that output had the input of uniquely and disproportionately associated institutional costs.

[00:34:47] Speaker 06:
And without that input, the output can't be statutorily correct.

[00:34:50] Speaker 04:
Just to clarify, my question, where I had started before, is even if, let's just imagine in a different world, they had captured all of the, for short, and I'll say reliably attributable costs under A2.

[00:35:06] Speaker 04:
Your theory is they, sorry, they got

[00:35:11] Speaker 04:
all of the costs attributable to, sorry, take out reliable, they got all of the costs.

[00:35:16] Speaker 04:
They got the whole graph.

[00:35:18] Speaker 04:
All of that is in the A2 number.

[00:35:22] Speaker 04:
All right?

[00:35:23] Speaker 04:
So if, let's assume there's, because your argument here is they got this little, on your graph, this little portion over here, there's this big thing, whether it wasn't reliable or institutional or both or whatever, they missed all that, that has to get covered under institutional costs.

[00:35:38] Speaker 04:
But imagine everything in that graph actually through some great mechanical computation by them got put into A2.

[00:35:46] Speaker 04:
The way I read B is that doesn't matter.

[00:35:50] Speaker 04:
Or I'm suggesting that this is what B says.

[00:35:53] Speaker 04:
B says, I don't care if you already counted for it up there because some of those things you included in A2 are either uniquely or disproportionately associated, maybe not all of them,

[00:36:05] Speaker 04:
But some of them are uniquely or disproportionately associated with competitive products, like your big trucks.

[00:36:11] Speaker 04:
We just wouldn't be buying bigger trucks, or we certainly wouldn't be buying the volume of bigger trucks that we are.

[00:36:18] Speaker 04:
And so we need to take that picture, that concern about unique and disproportionate costs that you have, even if you're already paying them, into deciding what your fair share of

[00:36:29] Speaker 04:
purely institutional costs, not the things we couldn't get because it wasn't reliable, purely, you know, the coastal commissioner's salary.

[00:36:37] Speaker 04:
You still should owe a bigger share there, too, because you're doing more up here under A2.

[00:36:42] Speaker 06:
Is that wrong?

[00:36:43] Speaker 06:
It's correct, Your Honor, as long as there is any residual institutional cost.

[00:36:48] Speaker 06:
So if we take your hypothetical to an extreme and every single cost

[00:36:53] Speaker 06:
that is under every single cost under A2 that is associated with trunks.

[00:36:59] Speaker 06:
If reliably identifiably caused were broadly interpreted as all costs associated, including the salaries, then there'd be very little left in the institutional cost buckets.

[00:37:08] Speaker 04:
I'm sort of dividing, in this question, dividing the world into reliably attributed costs, costs that we think go with competitive products, but we can't quite.

[00:37:16] Speaker 04:
There's some there that we know go with them, but we can't reliably compute them.

[00:37:19] Speaker 04:
And then what we would in lay language call purely institutional costs that

[00:37:23] Speaker 04:
the commissioner's salary, health benefits, these types of things.

[00:37:28] Speaker 06:
Your Honor, we believe that if there is any institutional cost remaining after the A2 analysis, even if the triangle, the blue rectangle of the green triangle got bigger and the white space is shrunk, there still must be, they must perform the B analysis.

[00:37:43] Speaker 06:
Here they refuse to follow their statutory mandate to perform the B analysis.

[00:37:47] Speaker 04:
Right, but the B analysis includes unique and disproportionate costs of

[00:37:51] Speaker 04:
all unique in disproportionate costs, whether some counted already under A2 or not.

[00:37:58] Speaker 04:
Correct, Your Honor.

[00:37:59] Speaker 06:
Even if they were counted already under A2, if there's an institutional cost bucket left, there needs to be a decision of what the appropriate share is that's disproportionately or uniquely associated with competitive product costs.

[00:38:14] Speaker 06:
Now, I concede, of course, disproportionately and uniquely associated

[00:38:20] Speaker 06:
cost of competitive products is an input.

[00:38:22] Speaker 06:
The appropriate share analysis still looks at other things, and B still looks at other things, market conditions.

[00:38:27] Speaker 06:
But you rarely have such a clear statement by an agency that we simply refused to follow or maintain under B because we assumed that everything was covered under A2, which it could not be as a matter of law given this court's prior decision, because A2 analysis never considers common variable costs like loaded trucks that might be disproportionately associated with packages.

[00:38:49] Speaker 04:
And because of that, Your Honor, we think this is an easy case for contrary to law and for remands that the agency... Well, but on that front, sorry, I'm sorry, I know you're trying to wrap up, but on that front, this is not quite like other statutes because they actually, before we get to the language we've been talking about, they have the authority to modify this minimum contribution amount or eliminate it altogether.

[00:39:11] Speaker 04:
So wouldn't that allow them to go, look, here's what we think really matters for appropriate share and that's

[00:39:17] Speaker 04:
the competition factors that we've looked at and they had a few other factors they looked at here as well.

[00:39:23] Speaker 06:
No, it does not, Your Honor.

[00:39:24] Speaker 06:
So it is true that the agency could have decided to eliminate the institutional cost minimum contribution requirement.

[00:39:33] Speaker 06:
This was enacted a long time ago before package delivery spiked and the role of e-commerce changed the mail as we know it.

[00:39:39] Speaker 06:
And if it had turned out that packages were a bust and nobody sent packages through the Postal Service,

[00:39:45] Speaker 06:
Maybe there would be no need for the A3 analysis.

[00:39:48] Speaker 06:
But it can't be when packaged.

[00:39:51] Speaker 06:
But it's arbitrary and capricious in an age where packaged deliveries are 30% of revenue, some 30% of attributable costs.

[00:39:58] Speaker 06:
It's arbitrary and capricious to say that the costs are the uniquely or disproportionately associated costs are zero.

[00:40:06] Speaker 06:
Remember, it's the inexorable zero that is the problem in this case.

[00:40:10] Speaker 06:
The PRC said that the A3

[00:40:12] Speaker 06:
A3 number is zero, because we did everything under A2.

[00:40:16] Speaker 06:
That cannot be right.

[00:40:18] Speaker 06:
And the power to eliminate might, if they'd said they were eliminating, then we'd be here saying that was arbitrary and capricious in the current world.

[00:40:25] Speaker 06:
But they didn't.

[00:40:25] Speaker 06:
They said, oh yes, we considered it, and we assumed that we didn't have to calculate it, because we already did it.

[00:40:32] Speaker 06:
They can't have already done it, and that's the essence of our argument.

[00:40:34] Speaker 06:
Judge Henderson, you've been very indulgent.

[00:40:36] Speaker 06:
If there are no further questions, I'd like to reserve some time for rebuttal.

[00:40:39] Speaker 06:
All right.

[00:40:40] Speaker 06:
We'll give you some.

[00:40:41] Speaker 02:
Thank you, Your Honor.

[00:40:42] Speaker 02:
Thank you.

[00:40:48] Speaker 00:
May it please the court, Mike Sheaf for the commission.

[00:40:52] Speaker 00:
UPS wants to make it seem like the agency completely ignored in its order some costs that were either disproportionately or uniquely associated with competitive products.

[00:41:01] Speaker 00:
That, I cannot emphasize this enough, is simply not true.

[00:41:05] Speaker 00:
What the agency actually said is when figuring out what the appropriate share

[00:41:11] Speaker 00:
of institutional costs needs to be borne by competitive products.

[00:41:14] Speaker 00:
The answer is not to raise the appropriate share like UPS wants.

[00:41:19] Speaker 00:
So we heard counsel from UPS say that the only way to do it is to have the percent input equal the percent output, 30% in, 30% out.

[00:41:28] Speaker 00:
But if you look at the statutory text of 3633B,

[00:41:33] Speaker 00:
That's not at all how the statute works.

[00:41:35] Speaker 04:
The statute started... Well, I get that you have a lot of discretion and it's certainly not sort of a cost allocation approach here at all, but what they're saying is, look, you just missed the vote under B because you said we're not going to look at costs that are unique or disproportionate in B. That's not correct.

[00:41:57] Speaker 04:
Because we already looked at them under, we already factored them in under

[00:42:00] Speaker 04:
That's not correct.

[00:42:02] Speaker 00:
There's a difference between looking at a cost and then setting the appropriate share to take a certain percentage of the cost.

[00:42:09] Speaker 00:
So let me just start with this example of trucks, because I think it's actually very important.

[00:42:13] Speaker 00:
So I don't think Council for UPS can contend that the Commission never thought about trucks, because everybody knows, as our cost driver example demonstrated, that in order to deliver packages or mail, you need trucks.

[00:42:27] Speaker 00:
And so the cost attribution mechanism, the price floors in A2 already take that into account.

[00:42:34] Speaker 00:
It's also taken under account in A1.

[00:42:36] Speaker 04:
Are they wrong to say that you only took it into account in the little blue and green and you missed it here?

[00:42:42] Speaker 00:
So I want to be precise about what I mean by taking it into account.

[00:42:45] Speaker 00:
So the cost of the truck that can be reliably be said to be caused by a competitive product, that product has already got to cover that price.

[00:42:56] Speaker 00:
That's right.

[00:42:57] Speaker 00:
It is true that under the commission's cost attribution methodology, we only do what is reliable.

[00:43:05] Speaker 00:
And what is reliable is the cost that would disappear if we stopped making that product.

[00:43:10] Speaker 00:
And so there are some portions of the truck that don't go to that particular competitive product.

[00:43:15] Speaker 00:
It doesn't make sense to make that competitive product be set there as a price floor.

[00:43:20] Speaker 00:
But it's not true that we completely ignored the stuff on the other side.

[00:43:26] Speaker 00:
That cost did not disappear from the commission's analysis.

[00:43:30] Speaker 00:
That cost is an institutional cost.

[00:43:32] Speaker 07:
That sits in the institutional cost category.

[00:43:35] Speaker 00:
It is.

[00:43:35] Speaker 07:
And it's calculated under a three is what you're going to argue, right?

[00:43:41] Speaker 00:
It's not just an argument.

[00:43:42] Speaker 00:
That is an accurate characterization of what the commission does.

[00:43:45] Speaker 00:
So anything that's not in

[00:43:47] Speaker 00:
this green or blue box.

[00:43:49] Speaker 00:
And we disagree with their annotations on the court's box.

[00:43:53] Speaker 00:
Our discussion of this on the red brief at page 51, that gives a more accurate picture of what that graph is meant to do.

[00:43:59] Speaker 00:
Anything that's in the green or blue box, a particular competitive product has got to cover the cost floor.

[00:44:05] Speaker 00:
They want you to believe, Your Honor, that everything white goes away.

[00:44:09] Speaker 00:
And that is simply not true.

[00:44:10] Speaker 00:
Everything that is white

[00:44:12] Speaker 00:
falls into the category of institutional cost.

[00:44:15] Speaker 00:
And so the results of the formula is 8.8% of that plus all of the other spaces.

[00:44:21] Speaker 04:
But I think the question is, is there anything in the white that's uniquely, I think, or maybe disproportionate would be the word for the trucks, disproportionately associated with packages.

[00:44:35] Speaker 04:
Is there anything in the white that's disproportionately associated with competitive products?

[00:44:40] Speaker 00:
I have two answers to that, Your Honor.

[00:44:42] Speaker 00:
So first, under the Commission's interpretation of unique and disproportionate, the answer is no, because, you know, construing unique and disproportionate from first principles, the Commission defined those terms in a way that just happens to match what is in the green and the blue, but not the white.

[00:44:59] Speaker 00:
But the other more important piece of this answer, Your Honor, and this really is critical, it doesn't matter even if UPS is right,

[00:45:08] Speaker 00:
about what the word unique means or what the word disproportionate means.

[00:45:12] Speaker 00:
And this is important because, again, suppose that they're right, that some stuff in the white really does qualify as uniquely associated or disproportionately associated and the commission is wrong, a premise that I do not mean to concede.

[00:45:28] Speaker 00:
It's not that

[00:45:29] Speaker 00:
What follows then is that the commission has to attribute all of that to competitive products as a whole.

[00:45:36] Speaker 00:
The appropriate share doesn't need to be that percent.

[00:45:38] Speaker 04:
I get that it's not that mechanical, but isn't the problem here if we assume there's something in that wide area that is disproportionately associated with competitive products like bigger trucks?

[00:45:53] Speaker 04:
You just wouldn't need for... Just assume there's something there.

[00:45:58] Speaker 04:
You're doing more big trucks than you would if you were just doing first class meal.

[00:46:03] Speaker 04:
I know there's more about it.

[00:46:05] Speaker 04:
If you're just doing that, you're doing that.

[00:46:06] Speaker 04:
And it's disproportionate.

[00:46:09] Speaker 04:
You didn't factor that in.

[00:46:11] Speaker 04:
The commission didn't factor that in in determining the appropriate share in this case.

[00:46:16] Speaker 04:
Is that correct?

[00:46:17] Speaker 00:
the commission's formula doesn't require that.

[00:46:21] Speaker 04:
No, no, the commission said there's nothing, because there's many factors, it's an including, so there's more than what's even listed in the statute, but it says let's look at things like the competitive environment and, you know, you gotta do at least the including things, and things that are uniquely or disproportionately associated with competitive products.

[00:46:41] Speaker 04:
You've gotta at least look at those, and maybe there's some other things you throw in, so it doesn't mean

[00:46:46] Speaker 04:
I'm not at least suggesting in this question that there's any strict formulaic response.

[00:46:52] Speaker 04:
It's simply did the agency do what Congress said and said that your analysis has to include in deciding their appropriate share

[00:47:01] Speaker 04:
You've got to factor in things that are disproportionate.

[00:47:03] Speaker 04:
Now the factor could be, yes, they are, but it's so marginally, I don't know if you can have marginally disproportionate, it's just over the disproportionate line, or it's outbalanced by other things, or yeah, it's there, but the competitive environment, it's not that they couldn't explain it in a way and even end up in the same number, it's that they just didn't talk about it.

[00:47:22] Speaker 00:
That's not right, Your Honor.

[00:47:23] Speaker 00:
Okay.

[00:47:23] Speaker 00:
It's not right because UPS wants to trade on the intuition that

[00:47:29] Speaker 00:
somehow there exists this more stuff that is not already captured either under A2, which is what UPS spends all of its time talking about, or here, A1, which is more broader and would include a lot of those other costs.

[00:47:46] Speaker 00:
This is the prohibition on cross-subsidization.

[00:47:49] Speaker 07:
And so let me try to break.

[00:47:51] Speaker 07:
You're changing the floor.

[00:47:55] Speaker 07:
of the competitive product cost by doing it your way as opposed to their way.

[00:48:02] Speaker 07:
In our first case, we said there are some inframarginal costs that are not being captured under two with respect to competitive projects.

[00:48:14] Speaker 07:
We said that.

[00:48:14] Speaker 07:
But the commission assures us it'll all clean up in the end.

[00:48:20] Speaker 07:
I took that to mean

[00:48:21] Speaker 07:
that when you get to three, the percentage would be... That's not right.

[00:48:25] Speaker 07:
But forget that.

[00:48:27] Speaker 07:
I don't know what the clean up means unless you go to B and deal with those infomarginal costs.

[00:48:36] Speaker 07:
Because if you don't deal with... We have already said you have not captured all infomarginal costs

[00:48:43] Speaker 07:
in the way you do two, in part because the definition's so narrow.

[00:48:47] Speaker 07:
So there are some leftover inframarginal costs.

[00:48:50] Speaker 07:
You just kind of throw them in the institutional area.

[00:48:52] Speaker 07:
So unless you do three to their satisfaction, you change the floor on the competitive project cost.

[00:49:02] Speaker 07:
The pricing is definitely affected because you've changed the floor.

[00:49:05] Speaker 07:
If you found something under B, the floor would change.

[00:49:10] Speaker 07:
Because you would have what you found under 2, and you would add what you found under B. Yeah, that's right.

[00:49:17] Speaker 00:
There's one minor technical detail here, which is A3 is the operative language, not B. A3 sets the minimum contribution requirement.

[00:49:25] Speaker 00:
That's for all competitors.

[00:49:26] Speaker 00:
No, no, no, no.

[00:49:26] Speaker 07:
I understand that.

[00:49:27] Speaker 07:
What I'm saying is to try and get the cost for a competitive product.

[00:49:34] Speaker 07:
If you leave out something, you've changed the floor, right?

[00:49:38] Speaker 00:
Correct.

[00:49:39] Speaker 07:
It is the case that in A2... Yeah, and if A2 doesn't in fact take into account everything, then the floor is wrong.

[00:49:48] Speaker 00:
No, Your Honor.

[00:49:49] Speaker 00:
A2, as Discord held, takes into account precisely those costs that can be said to be caused by the production of a product.

[00:49:57] Speaker 00:
I understand, but... They disagree with that.

[00:49:59] Speaker 00:
But... No, no, no.

[00:50:01] Speaker 07:
I think the disagreement is broader than that.

[00:50:04] Speaker 07:
They are saying, I thought you were agreeing with me,

[00:50:07] Speaker 07:
that if you leave out the analysis under B as well as acknowledge that our court has already said you left out some inframarginal costs in your A2 analysis.

[00:50:18] Speaker 07:
You just have, maybe because of the way you define it.

[00:50:21] Speaker 07:
So the inframarginal cost

[00:50:24] Speaker 07:
are not fully accounted for in your A2 analysis.

[00:50:28] Speaker 07:
They're not.

[00:50:28] Speaker 07:
And the court has said that.

[00:50:30] Speaker 07:
And they were assured by you that, well, we'll work it all out.

[00:50:33] Speaker 07:
Well, they're saying, well, one way you can work it out is do what's required under B. And they're saying you haven't done it.

[00:50:40] Speaker 07:
And so the cost for the competitive project, the floor is wrong.

[00:50:46] Speaker 00:
I understand that that's what they say, Your Honor.

[00:50:48] Speaker 07:
Well, why is it not wrong?

[00:50:49] Speaker 00:
It's wrong.

[00:50:50] Speaker 00:
They're incorrect because

[00:50:53] Speaker 00:
And this conflation just flows throughout their briefs and also through the first argument.

[00:50:57] Speaker 00:
Again, they're conflating, you know, whether the commission has considered the costs with whether the appropriate share is set with the percent input and the percent output.

[00:51:08] Speaker 00:
Now, that answer, I know, doesn't answer Judge Millett's question, which is, you know, maybe, you know, it's true that percent input doesn't have to equal percent output and the commission still needs to think about those costs and it didn't.

[00:51:18] Speaker 00:
And I want to turn back to that question because it's very important.

[00:51:21] Speaker 00:
But as to this question, Your Honor,

[00:51:23] Speaker 00:
It's very important to remember that nothing in section A3

[00:51:29] Speaker 00:
mandates the sort of proportional allocation that UPS believes is in the statute.

[00:51:35] Speaker 00:
And the word consider simply doesn't mean the appropriate share has got to be whatever costs are uniquely or disproportionately associated as a matter of the statute.

[00:51:45] Speaker 00:
And the reason we know that is because Congress said that you can make the minimum contribution requirement zero even if there are a whole bunch of disproportionately associated or uniquely associated costs.

[00:51:58] Speaker 00:
So that's why I want to push back against the idea that somehow there is this mandate of 30% in, 30% out that needs to be captured either through A2 or A3 reading B the way they do or both.

[00:52:12] Speaker 00:
That's the premise that I'm disagreeing with.

[00:52:14] Speaker 00:
Now I know that that doesn't get the commission all the way there.

[00:52:16] Speaker 00:
Because even if you accept that, it is true that the Commission has got to talk about all of this stuff in its order.

[00:52:22] Speaker 00:
And the answer to your question, Judge Millett, is that the other side really wants to parse costs down in the manner that I've just been describing.

[00:52:32] Speaker 00:
So the only way you can fairly say that the Commission never thought about this

[00:52:36] Speaker 00:
is if you accept that the commission exceedingly pretended like some portion of truck costs don't go into institutional costs at all.

[00:52:48] Speaker 00:
And that's just not correct.

[00:52:50] Speaker 04:
No, no, no, no.

[00:52:51] Speaker 04:
No, my question is a different one.

[00:52:54] Speaker 04:
Did the commission pause to address that some portion of trucks uniquely or probably disproportionately

[00:53:05] Speaker 04:
are associated with competitive products, when it was trying to figure out what the appropriate share was for competitive products, to get technical.

[00:53:20] Speaker 04:
And if you can tell me where they did that, because I had read your argument, maybe it's my fault, as saying because they had thought everything was covered under A2, they didn't need to do that under

[00:53:33] Speaker 04:
A3 slash B. Maybe it would help if I described it.

[00:53:36] Speaker 07:
That's really important.

[00:53:37] Speaker 07:
Are you changing that?

[00:53:38] Speaker 07:
Because that's my assumption, too.

[00:53:40] Speaker 00:
No, Your Honor.

[00:53:41] Speaker 07:
Whatever you did on the A2 subsumes whatever you might have been required to do under B. No, Your Honor.

[00:53:47] Speaker 00:
Let me try to describe the Commission's reasoning this way.

[00:53:51] Speaker 00:
The Commission started with the text of the statute.

[00:53:54] Speaker 00:
What does it mean for a cost to be uniquely associated?

[00:53:57] Speaker 00:
What does it mean for a cost to be disproportionately associated?

[00:54:00] Speaker 00:
The Commission came up with definitions of those terms.

[00:54:03] Speaker 00:
Then the commission said, we define those terms in a particular way.

[00:54:07] Speaker 00:
And I notice some skepticism, so I want to explain this in more detail.

[00:54:14] Speaker 00:
Whatever those terms mean, we think we've done a good enough job accounting for it, either because the costs that would fall into those categories are separately baked into the price scores under A2 or, critically,

[00:54:29] Speaker 00:
are separately accounted for by the prohibition on cross-subsidization in A1 or both.

[00:54:35] Speaker 00:
Now, maybe there might be some cost that you... Wait, wait, wait.

[00:54:42] Speaker 07:
You ran through the A1 too quickly.

[00:54:43] Speaker 00:
Oh, no problem.

[00:54:44] Speaker 00:
Yeah, what does that mean?

[00:54:46] Speaker 07:
That's just a self-serving conclusion.

[00:54:49] Speaker 00:
A1 is very important.

[00:54:50] Speaker 07:
What do you mean when you say that?

[00:54:52] Speaker 07:
I know it's very important.

[00:54:53] Speaker 00:
What do you mean when you say satisfied?

[00:54:55] Speaker 00:
It says A1 prohibits the postal service from

[00:54:59] Speaker 00:
subsidizing the costs of its competitive products with money for market dominant products.

[00:55:05] Speaker 00:
So the way that the commission tests that is they figure out how much cost is going to go away if the postal service just stopped producing every single competitive product that it makes.

[00:55:18] Speaker 00:
So I think it makes upwards of 1,000 competitive products or something like that.

[00:55:22] Speaker 00:
So suppose the postal service gets out of that business entirely.

[00:55:27] Speaker 00:
How many costs would go away?

[00:55:28] Speaker 00:
And then the postal service must then show that all of its competitive products are recovering at least that amount.

[00:55:37] Speaker 00:
So if they're getting back all of the money that it costs to make the competitive products, then the competitive products are definitionally priced in a way that doesn't have this improper subsidization because otherwise they would be getting back less money.

[00:55:53] Speaker 00:
Does that make sense?

[00:55:55] Speaker 00:
I hear you.

[00:55:55] Speaker 00:
So the way that that intersects with this case is that a lot of the costs that UPS is talking about are reflected in that calculation under A1.

[00:56:09] Speaker 00:
So for example, again, the question goes back to trucks.

[00:56:15] Speaker 00:
And obviously, trucks don't just do the delivery of parcels.

[00:56:20] Speaker 00:
They also deliver letters and all of that.

[00:56:23] Speaker 04:
Well, what about the salary of the, talk about this in terms of, I don't want to interrupt it because it's very important for me to understand this, but talk about it instead of in terms of the person who's in charge, who spends a large percentage of their time negotiating contracts with e-commerce companies.

[00:56:39] Speaker 04:
No, I call it mail.

[00:56:41] Speaker 04:
I know some mail is competitive, but we're not talking about first class mail here.

[00:56:45] Speaker 04:
We're only talking about packages, which you'll say.

[00:56:49] Speaker 04:
Yes.

[00:56:49] Speaker 04:
That's unique.

[00:56:51] Speaker 00:
That's only going to the... It's accounted for too, right?

[00:56:53] Speaker 04:
How's that accounted?

[00:56:54] Speaker 00:
The methodology that the commission uses.

[00:56:56] Speaker 04:
It doesn't matter what... You say accounted for.

[00:56:58] Speaker 04:
You mean it's already captured under A2 or it's counted for under B?

[00:57:03] Speaker 00:
Under A1 and A2, Your Honor.

[00:57:05] Speaker 04:
And is it your position that once it's counted under A1 and A2, it doesn't have to be looked at again under B?

[00:57:12] Speaker 04:
That's how I understood the commission's decision and that seems to be taxed really difficult.

[00:57:18] Speaker 00:
I understand why, if that's what you understand the commission to have said, there would be that difficulty.

[00:57:23] Speaker 00:
But I don't think that that's the fairest reading of what the commission did.

[00:57:26] Speaker 04:
Do you agree any costs and being means both?

[00:57:29] Speaker 00:
Absolutely.

[00:57:30] Speaker 00:
Both institutional and, so I, you know, the commission agrees with it.

[00:57:34] Speaker 04:
Reliably attributed costs and lay person institutional costs and not reliably attributed costs.

[00:57:41] Speaker 00:
You know, the terms are totally different.

[00:57:44] Speaker 00:
The interpretation needs to be totally different.

[00:57:46] Speaker 00:
the textual interpretation of those terms that, as explained in the brief and as cited in the order, it's not that we look at this and we say that these must be equivalent for some sort of purpose.

[00:57:58] Speaker 00:
No, it's a statutory interpretation.

[00:58:00] Speaker 00:
We look at what the word unique means, what the word disproportionately means, and we say, it turns out these concepts map on.

[00:58:06] Speaker 00:
And maybe this delta will help to explain why the commission hasn't just equated the two.

[00:58:13] Speaker 00:
Suppose that UPS were able to identify

[00:58:16] Speaker 00:
a cost that is uniquely associated or disproportionately associated that isn't adequately accounted for by the cost methodology in A1 or the cost methodology in A2.

[00:58:30] Speaker 00:
In other words, suppose that A1 is very bad and A2 is very bad and the commission is in the process of updating those methodologies

[00:58:40] Speaker 00:
So the commission knows that there's that gap, because A1 and A2 just cannot capture that particular cost.

[00:58:45] Speaker 00:
If that were true, the commission would, of course, consider that cost.

[00:58:51] Speaker 00:
And nothing in the commission's interpretation of the statute would prevent the commission from considering the cost.

[00:58:56] Speaker 00:
The problem for UPS is that every single example they give.

[00:58:59] Speaker 04:
Stop that.

[00:59:00] Speaker 04:
Nothing would prevent it from considering.

[00:59:02] Speaker 04:
No.

[00:59:02] Speaker 04:
And my question is, doesn't the statute require them to consider it?

[00:59:05] Speaker 00:
Oh, exactly.

[00:59:05] Speaker 00:
But nothing in the commission's analysis

[00:59:09] Speaker 00:
says that they wouldn't, in other words.

[00:59:11] Speaker 00:
If such a cost did exist.

[00:59:14] Speaker 00:
But no such cost exists, and that's the problem.

[00:59:18] Speaker 04:
There are no, so the commission's theory is I had understood the theory to be not that there is no such thing as a unique or disproportionate cost.

[00:59:27] Speaker 04:
I had understood it to be that there's no such thing as a unique or disproportionate cost that we haven't already captured the cost of it under A2 and now you say A1 as well.

[00:59:37] Speaker 04:
Is that, which is correct, the first or the second?

[00:59:39] Speaker 00:
The second is correct.

[00:59:41] Speaker 04:
But then if the statute says I don't care,

[00:59:44] Speaker 04:
If B says, I don't care if you already counted it under A1 or A2, I'm telling you, when you compute the minimum contribution for purposes of A3, you've got to look again and say, you've got disproportionate and unique costs.

[01:00:06] Speaker 04:
Yeah, we already captured that up there, but in deciding what your appropriate share is,

[01:00:10] Speaker 04:
We're going to again factor in the fact that at least in one area or two or three areas, you're the 800-pound gorilla.

[01:00:18] Speaker 04:
And that's what I didn't see happening here.

[01:00:21] Speaker 04:
And so am I just misreading the statute or am I misreading the commission's decision?

[01:00:26] Speaker 04:
And they did do that.

[01:00:27] Speaker 00:
We disagree as to what the commission did in our view.

[01:00:33] Speaker 00:
the Commission's decision is best read to do exactly the sort of statutory analysis that Your Honor explained.

[01:00:39] Speaker 00:
I know that the other side is giving quotations from the conclusion, right?

[01:00:43] Speaker 00:
But there are two questions.

[01:00:44] Speaker 00:
The first question is, you know, what are these costs?

[01:00:48] Speaker 00:
And the second question is, what do we do about these costs with respect to the appropriation?

[01:00:53] Speaker 04:
And then the first question, does the Commission agree that there are some unique or disproportionate costs associated with competitive products, period?

[01:01:01] Speaker 04:
Yes, of course.

[01:01:02] Speaker 04:
It did.

[01:01:03] Speaker 04:
OK.

[01:01:03] Speaker 04:
And did it agree?

[01:01:08] Speaker 04:
Where did it say we're considering that in determining their appropriate share?

[01:01:13] Speaker 04:
Where on their decision?

[01:01:15] Speaker 04:
I must not have read it correctly.

[01:01:19] Speaker 04:
Where did they say we're factoring that?

[01:01:21] Speaker 00:
If you'll give me a second, Your Honor, I want to locate the portion of the brief where we discussed this.

[01:01:25] Speaker 00:
Sure.

[01:01:25] Speaker 04:
It's a long decision.

[01:01:26] Speaker 04:
I know.

[01:01:30] Speaker 00:
Sorry.

[01:01:32] Speaker 00:
The commission's discussion of these terms comes at pages 657, 58 of the appendix.

[01:01:39] Speaker 00:
And, you know, there are other places where it comes in.

[01:01:41] Speaker 04:
657, 658?

[01:01:42] Speaker 00:
657, 658.

[01:01:43] Speaker 04:
And there are other places.

[01:01:45] Speaker 04:
Is there discussion of how these things are being factored in?

[01:01:49] Speaker 04:
So that's talking about the prior decision.

[01:01:51] Speaker 04:
657, 58 is just talking about, the heading for that is previous commission decision.

[01:01:56] Speaker 00:
Right.

[01:01:56] Speaker 00:
So what the commission did, and so this entire section beginning in A657 and going all the way until the end, the statutory analysis piece goes to 667.

[01:02:12] Speaker 00:
Right.

[01:02:12] Speaker 00:
So this is the critical, this section of the commission's order is the critical section of the commission's order.

[01:02:19] Speaker 04:
Right.

[01:02:19] Speaker 04:
On this issue.

[01:02:19] Speaker 04:
Right.

[01:02:20] Speaker 00:
On this issue.

[01:02:21] Speaker 04:
Right.

[01:02:21] Speaker 04:
And so I hear them say, here's what our old decision did.

[01:02:27] Speaker 04:
But then that's where they say, are not already attributed.

[01:02:31] Speaker 04:
Right on 657 they say, don't worry, we already captured those under A2.

[01:02:36] Speaker 04:
Where do they say, but we're looking again under B to see, you know, should that influence, should be the nature or the volume of these unique disproportionate costs?

[01:02:51] Speaker 04:
influence their appropriate share.

[01:02:52] Speaker 04:
What does it say we looked again under B?

[01:02:55] Speaker 00:
So that goes to the Commission's discussion of whether to adopt the 30 percent, 30 percent, you know, proportional allocation.

[01:03:02] Speaker 04:
Right, but that's not, my argument isn't that you have to do it, you know, it's not percentage matching here.

[01:03:09] Speaker 04:
It's simply that, I'm sorry, so where do they look at them and say, we looked at them and

[01:03:15] Speaker 04:
It is factored in and it gets, you know, .05 points or whatever and it's going to be a big computation that ends up producing a number.

[01:03:24] Speaker 04:
So where does it come in?

[01:03:25] Speaker 04:
In the formula or in their analysis?

[01:03:27] Speaker 00:
The way I would explain this is one, they summarize.

[01:03:29] Speaker 00:
So a lot of the commission's rationale was set forth in this initial notice order 402.

[01:03:36] Speaker 00:
The first piece of this, so 657 through 659, summarizes the commission's reasoning in that circumstance and also what commenter said in response.

[01:03:47] Speaker 00:
And then at 659, the commission goes to UPS's statutory arguments.

[01:03:54] Speaker 00:
And so this is where UPS says,

[01:03:58] Speaker 00:
like A2 and A3, I'm sorry, A2 and A1 don't deal with costs that are uniquely or disproportionately associated.

[01:04:05] Speaker 00:
They say that there's some disjunctive.

[01:04:07] Speaker 00:
Or all of UPS's arguments against the statutory interpretation that the commission gave are discussed and rebutted in that section and the following section.

[01:04:17] Speaker 04:
I don't care whether it's narrower or not.

[01:04:19] Speaker 04:
I guess my understanding of the statute is whether it's narrower or not doesn't matter.

[01:04:22] Speaker 04:
The fact that you counted it once doesn't mean you ignore it.

[01:04:27] Speaker 04:
in determining the appropriate share.

[01:04:28] Speaker 04:
So where does it say we're factoring into the appropriate share?

[01:04:30] Speaker 04:
This seems to be responding to that first argument, not as to the second.

[01:04:34] Speaker 04:
Here's where we are factoring.

[01:04:36] Speaker 04:
Now they could say there are some unique or disproportionate proportions, but they're so small it just doesn't affect the appropriate share.

[01:04:42] Speaker 04:
Where does it say that?

[01:04:43] Speaker 00:
So this is 662 to 663.

[01:04:45] Speaker 00:
So now the commission says.

[01:04:48] Speaker 00:
So we've explained the statutory interpretation.

[01:04:50] Speaker 00:
We've explained why we disagree with UPSs.

[01:04:53] Speaker 00:
Then it says, like,

[01:04:56] Speaker 00:
disproportionately associated must be broader or it would serve no purpose.

[01:05:01] Speaker 00:
And then, you know, the commission describes all of the other factors that get to be looked at by the commission that the commission has to look at in figuring out what share would be appropriate.

[01:05:11] Speaker 00:
So the commission explains, for example, in the carryover paragraph, at the bottom of 662 and the beginning of 663,

[01:05:17] Speaker 00:
that there is considerable discretion given to the Commission about what to do, even assuming that there are such costs.

[01:05:26] Speaker 00:
And the next paragraph on 663 says, a higher degree of flexibility is inherent in the appropriate share of provisions.

[01:05:32] Speaker 00:
The relevant factors are set forth and, you know, as noted, there are more than one.

[01:05:37] Speaker 00:
Each relevant factor uses flexible language for the Commission to interpret.

[01:05:41] Speaker 00:
And no specific finding related to a relevant factor would mandate a specific result with regard to the appropriate share level.

[01:05:49] Speaker 00:
And then it goes through, you know, from the bottom of 663 all the way to the end of 667, you know, for the relevant factor at issue.

[01:06:00] Speaker 00:
UPS focuses on the meaning of disproportionately associated and responds to all of the textual arguments there, so.

[01:06:09] Speaker 04:
I guess that all seems to be an argument about what the statutory language means.

[01:06:13] Speaker 04:
I'm asking for the more practical point of given our view of what the statutory language means.

[01:06:20] Speaker 00:
Given UPS's view.

[01:06:22] Speaker 04:
Given the commission's, sorry, the commission's saying given our view, the commission's view of the statutory language.

[01:06:27] Speaker 04:
Here's how we factored unique or disproportionate costs into determining the appropriate share.

[01:06:32] Speaker 04:
Where does it say that?

[01:06:36] Speaker 00:
So, I mean, the Commission says Congress does not- Which page are you on?

[01:06:40] Speaker 00:
That's 663.

[01:06:40] Speaker 00:
Okay.

[01:06:41] Speaker 00:
Congress does not require costs to be found, only for the Commission to consider whether any exist.

[01:06:47] Speaker 00:
Nothing prevents the Commission from concluding that costs uniquely or disproportionately associated are in fact captured by the costing methodology it currently

[01:06:56] Speaker 00:
And so, if I may, Your Honor, can I just explain why that responds to your question?

[01:07:04] Speaker 00:
The premise of your question is that the Commission failed to even talk about this alleged missing category.

[01:07:11] Speaker 04:
But that's... Just to be clear, before you go on, not talk about, factor it in.

[01:07:16] Speaker 04:
Talk about it could be, it doesn't apply.

[01:07:18] Speaker 04:
I'm saying it does apply, and where did you factor it in?

[01:07:22] Speaker 00:
I think we mean the same... I think we're disputing the meaning of the word consider.

[01:07:26] Speaker 00:
For the commission to consider one of these unique or disproportionate costs, it does not mean that the commission has to do anything in particular with that cost when it comes to setting the appropriate share requirement.

[01:07:40] Speaker 04:
And I guess this is why... I think we'd have to explain why it thinks that doesn't affect the appropriate share, because this is...

[01:07:46] Speaker 04:
Congressional identified.

[01:07:47] Speaker 04:
And they didn't say, we're not doing it here.

[01:07:50] Speaker 04:
They didn't make a decision under their authority to modify or eliminate here.

[01:07:55] Speaker 04:
So Congress said.

[01:07:56] Speaker 00:
No, they did.

[01:07:56] Speaker 00:
They modified the appropriate share.

[01:07:58] Speaker 00:
And they used their authority.

[01:07:59] Speaker 00:
This was their authority to modify it.

[01:08:01] Speaker 04:
They didn't modify the statutory rules for what you consider.

[01:08:05] Speaker 04:
If you mean modify the appropriate share as if they changed it from 5.5 to a formula, we agree on that.

[01:08:11] Speaker 04:
But they did not, in doing so, they did not say, we no longer

[01:08:15] Speaker 04:
need to consider unique or disproportionate costs.

[01:08:18] Speaker 00:
Of course not, Your Honor.

[01:08:20] Speaker 04:
So where do they say?

[01:08:21] Speaker 04:
Go ahead.

[01:08:22] Speaker 04:
I shouldn't have interrupted you.

[01:08:23] Speaker 00:
I'm sorry, Your Honor.

[01:08:24] Speaker 04:
Give me a full explanation for how they factor it in.

[01:08:27] Speaker 00:
I apologize, Your Honor, for being unable to make this quite clear.

[01:08:32] Speaker 04:
It's my density.

[01:08:35] Speaker 00:
I understand the question to be, where does the commission say, in setting what share is appropriate?

[01:08:43] Speaker 00:
We are going to set it at this particular number, regardless of whether there might be unique or disproportionate costs that exist that aren't captured in A2 or A1.

[01:08:55] Speaker 00:
It's difficult for me to point to an exact citation for that.

[01:08:58] Speaker 07:
I thought the commission's position was all such costs were captured in the A2 analysis.

[01:09:04] Speaker 00:
Yes, I was accepting that.

[01:09:06] Speaker 07:
That's why the answer is so odd.

[01:09:08] Speaker 07:
You're starting premises that A2 captures whatever B requires.

[01:09:13] Speaker 00:
No, the starting premise is that according to the commission's definition of the language in B, interpretation of that language, either A1 or A2 captures it.

[01:09:25] Speaker 04:
And therefore, it shouldn't affect the appropriate share?

[01:09:30] Speaker 00:
Correct.

[01:09:31] Speaker 00:
And so I'm trying to explain the therefore piece.

[01:09:34] Speaker 00:
And the commission's therefore piece has many different parts.

[01:09:38] Speaker 00:
And with some leave of your honor, I would like to just go through it.

[01:09:43] Speaker 00:
The commission made a lot of very expressed findings about the relative health of the market and how the market is incredibly healthy.

[01:09:53] Speaker 00:
So the commission pointed out, for example, that the three big players in the parcel delivery market have increased prices at about the same rate.

[01:10:01] Speaker 00:
This is at 530 to 531 of the appendix.

[01:10:04] Speaker 00:
The commission pointed out that the postal service has a huge incentive right now to maximize the prices of its competitive products, regardless of what the price floors are, because it's hemorrhaging money on the market-dominant side, and its ability to raise the prices of market-dominant products is, as Your Honor knows, quite capped.

[01:10:21] Speaker 00:
This is at $5.79 to $5.80.

[01:10:25] Speaker 00:
And, you know, the Postal Service has increased prices every year at a rate far exceeding inflation.

[01:10:30] Speaker 00:
It's voluntarily exceeded the existing appropriate share requirement every year.

[01:10:34] Speaker 00:
There's no evidence that the Postal Service has ever charged less than cost.

[01:10:38] Speaker 00:
And there's a complete absence of antitrust actions levied against the Postal Service, right?

[01:10:42] Speaker 00:
All of these were factual findings by the Commission.

[01:10:45] Speaker 00:
Right.

[01:10:45] Speaker 04:
They all go to the including as a relevant circumstance of prevailing competitive conditions.

[01:10:50] Speaker 04:
It all goes to that.

[01:10:51] Speaker 00:
So then, you know, the commission talks about this other piece, right, so the A1 and A2 and A3, right, and unique and disproportionate cost.

[01:11:00] Speaker 00:
The policy arguments animating UPS's position are that, you know, the Postal Service is this 800 pound gorilla, and so we have got to make them bear, you know, some greater portion than currently exists.

[01:11:15] Speaker 00:
In UPS's view, it's unfair that, you know,

[01:11:20] Speaker 00:
trucks bought to make some purchases are not put into the price floors for those products.

[01:11:28] Speaker 00:
And the Commission rejects that at every turn.

[01:11:31] Speaker 00:
The Commission says that there's no empirical support

[01:11:37] Speaker 00:
for the idea that there is any sort of relationship between institutional costs on the one hand, and the Postal Services focus on competitive products on the other hand.

[01:11:49] Speaker 00:
And so, for example, they point out that most of the changes in institutional costs

[01:11:56] Speaker 00:
the increase in institutional costs, are principally linked to factors that are unrelated to competitive products, such as postal service pensions, interest rate fluctuations, and other non-operational factors.

[01:12:07] Speaker 00:
That's at 675 of the appendix.

[01:12:10] Speaker 00:
And so this is where the Commission says, you know, we get UPS's view about what ought to be done with uniquely or disproportionately associated costs.

[01:12:21] Speaker 00:
We're still not going to adopt

[01:12:23] Speaker 00:
UPS's proposed solution.

[01:12:25] Speaker 04:
I get rejecting their solution.

[01:12:27] Speaker 04:
I got that.

[01:12:28] Speaker 04:
I'm just trying to... I think I understand your position.

[01:12:33] Speaker 04:
Just to be clear, because I think you said, their position ultimately was because these costs, in our view, are all captured under A1 and A2, they just don't factor into the appropriate share under B. No.

[01:12:48] Speaker 00:
The appropriate share does not need to be set at a percentage.

[01:12:52] Speaker 04:
That reflects whatever that number is.

[01:12:56] Speaker 04:
There's more to the world than don't consider it all and we're not adopting your percentage.

[01:13:03] Speaker 04:
There's more that could do and one is it could be fine, we're going to factor that into a formula, it'll be some element in our formula or it could be we have looked at them and concluded that they are so small relative to everything that's going on here that

[01:13:22] Speaker 04:
they don't move the needle.

[01:13:25] Speaker 04:
And it sounds like you're saying that's implicit when they talk about all these other things like really institutional costs or healthcare benefits these days.

[01:13:34] Speaker 04:
But I don't hear what, I guess I had in the scene where they said, we've looked at them because the statute tells us to look at them.

[01:13:42] Speaker 04:
And we've just concluded that a lot's already captured and whatever isn't captured doesn't warrant any change to our formula

[01:13:52] Speaker 00:
And I hope this answer is seen as answering because it does.

[01:13:59] Speaker 00:
You've seen it all together.

[01:14:00] Speaker 00:
Piecing it together, the commission did it this way.

[01:14:03] Speaker 00:
The commission said we get that in UPS's world, except that there are these more costs beyond what A1 and A2 capture.

[01:14:17] Speaker 00:
This is indeed UPS's policy proposals.

[01:14:22] Speaker 00:
I want to make clear that baked into those proposals is consideration of precisely those types of costs, the white area under the graph, the trucks and all of that.

[01:14:35] Speaker 00:
So the commission had to think about those costs in the course of assessing UPS's alternative proposals for what the appropriate share ought to be because those alternative proposals are essentially dependent completely

[01:14:52] Speaker 00:
on these allegedly omitted costs.

[01:14:54] Speaker 00:
In other words, UPS's arguments are.

[01:14:55] Speaker 04:
They had to consider them, but that was simply rejecting their formulaic approach.

[01:15:01] Speaker 04:
And that's how I had read it, is look, you want what they were calling essentially cost allocations, a rejected methodology.

[01:15:06] Speaker 04:
But that's not the same thing as saying we've done our job of looking at these things and it's

[01:15:12] Speaker 04:
moves the needle on Iota or it doesn't move the needle at all.

[01:15:16] Speaker 00:
That's my only answer.

[01:15:16] Speaker 00:
It is, Your Honor, because the reasons the Commission gave for rejecting that sort of, you know, proposal was not just, you know, we don't think the statute thinks 30% equals 30% or whatever.

[01:15:30] Speaker 00:
The Commission made a policy judgment and, you know, examples of this are

[01:15:37] Speaker 00:
Throughout the brief, when we talk about proportional allocation and all of that, the citations that are given and throughout the order, there's a lot of discussion of these proportional type allocations.

[01:15:47] Speaker 00:
The Commission didn't just say we can't do that as a statutory matter.

[01:15:50] Speaker 00:
The Commission said that as a matter of economic

[01:15:53] Speaker 00:
policy.

[01:15:54] Speaker 00:
We don't want to do that because we don't think that it makes sense to require products to bear costs like that.

[01:16:02] Speaker 00:
Instead, it makes sense to require competitive products to collectively cover

[01:16:09] Speaker 00:
some other percentage set by this formula that reflects a whole bunch of other factors, right?

[01:16:14] Speaker 00:
Let me ask you one last thing, please.

[01:16:16] Speaker 07:
Judge Taylor's opinion says that the marginal costs are not fully captured in the 8-2 analysis.

[01:16:26] Speaker 07:
That was our conclusion.

[01:16:29] Speaker 07:
So they are somewhere unaccounted for.

[01:16:34] Speaker 00:
Yes, Your Honor, but I want to be precise about how I answer that question.

[01:16:38] Speaker 07:
You mean some of what you've been doing up to now is not very exciting?

[01:16:42] Speaker 00:
I just want to continue.

[01:16:43] Speaker 00:
This language is incredibly complicated.

[01:16:46] Speaker 00:
So I just want to make sure I'm using the exact words.

[01:16:51] Speaker 00:
What the court held in the previous UPS case is that for the purposes of the A2 cost floor, the commission has captured all of the inframarginal costs that a product has cost.

[01:17:05] Speaker 00:
It's true that under A2,

[01:17:08] Speaker 00:
There are other inframarginal costs that the product cannot be said to have caused, but that might exist, right?

[01:17:17] Speaker 00:
And so the answer to your question is the commission didn't say those costs disappear.

[01:17:23] Speaker 07:
Yeah, where are they accounted for?

[01:17:25] Speaker 07:
My question is simple.

[01:17:26] Speaker 07:
Where are they accounted for?

[01:17:27] Speaker 00:
They are all institutional costs, Your Honor.

[01:17:29] Speaker 00:
Every single one of those costs.

[01:17:31] Speaker 07:
No, no, I understand.

[01:17:32] Speaker 07:
You're saying anything.

[01:17:33] Speaker 07:
I mean, we keep going in circles, but I guess I need to make sure the circle hasn't changed.

[01:17:37] Speaker 07:
Anything not captured in two, you're saying.

[01:17:41] Speaker 00:
Is anything that's not a cost a trivial?

[01:17:43] Speaker 00:
Yes, I understood that.

[01:17:44] Speaker 07:
Is it an institutional cost?

[01:17:45] Speaker 07:
Yes, it's an institutional cost.

[01:17:47] Speaker 07:
That means you're putting the weight on three.

[01:17:51] Speaker 07:
You're saying that the answer is going to be in three.

[01:17:52] Speaker 07:
We'll do our work nicely there, and so no one should complain.

[01:17:57] Speaker 07:
Is that adequate?

[01:17:59] Speaker 07:
Because we've got a problem.

[01:18:00] Speaker 07:
The court has said, and this is the part that I hear no answer to.

[01:18:04] Speaker 07:
The court said you're not capturing

[01:18:08] Speaker 07:
all inframarginal costs under A2 that are there to be captured.

[01:18:12] Speaker 07:
You are not doing it, but we hear you, and it'll probably all work out.

[01:18:19] Speaker 07:
I honestly thought that what the court probably might have meant was that, you know, there's room under B. And some of those are, and then you gave me a very vague answer, which I don't, I don't want you to try and answer it, and I'll go back and look at the materials.

[01:18:34] Speaker 07:
You say, wow, that's under A1 somewhere.

[01:18:37] Speaker 07:
That's how we accounted for the inframarginal.

[01:18:39] Speaker 07:
I'm actually listening to you.

[01:18:41] Speaker 07:
You said that's where the inframarginal costs that have not been properly captured under two, we've accounted for them somehow under A1.

[01:18:50] Speaker 07:
I have the famous study which you're talking about.

[01:18:53] Speaker 07:
And I still don't get it if the statute says you have to.

[01:18:59] Speaker 07:
Look at B. We previously have said under two, we made a finance inconsistent with your premise.

[01:19:08] Speaker 07:
Everything under A2 you said, everything required under B is captured under A2.

[01:19:13] Speaker 07:
We previously, hell, that's not true.

[01:19:16] Speaker 07:
We said that A2, your A2 analysis does not capture all inframarginal costs.

[01:19:23] Speaker 07:
It doesn't do it.

[01:19:25] Speaker 07:
So your starting assumption seems wrong.

[01:19:28] Speaker 00:
No, Your Honor.

[01:19:29] Speaker 00:
So first, I want to make clear what the court held in your request.

[01:19:32] Speaker 07:
I know what the court held.

[01:19:33] Speaker 07:
Tell me what your answer is.

[01:19:35] Speaker 07:
I know the court held you had not captured all infirmary.

[01:19:39] Speaker 00:
But the court did not hold.

[01:19:40] Speaker 00:
And this is the reason I kind of want to push back, Your Honor.

[01:19:42] Speaker 00:
The court did not hold that everything is going to get shaken out exclusively in the A3 slash B bucket.

[01:19:49] Speaker 00:
The court's reference to the prohibition on cross-subsidization is exactly the answer that I was giving with respect to A1.

[01:19:56] Speaker 00:
So that's just the first piece that I wanted to say.

[01:19:58] Speaker 00:
The second, and I guess more fundamental answer to your question, is that your honor's question assumes that what the commission did was have three categories of cost, essentially.

[01:20:10] Speaker 00:
So there would be cost attributable, then there will be institutional costs, and then there will be this.

[01:20:16] Speaker 07:
Institutional, so that's residual.

[01:20:18] Speaker 00:
Yeah, exactly.

[01:20:19] Speaker 07:
I'm worried about the A, two, and B. Right.

[01:20:22] Speaker 00:
And so every single cost,

[01:20:26] Speaker 00:
Everyone that is not attributable under A2 is an institutional cost.

[01:20:34] Speaker 00:
That is part of the equation for figuring out what the appropriate share is.

[01:20:38] Speaker 07:
And some of those institutional costs may be B costs.

[01:20:41] Speaker 00:
Some of those institutional costs may be B costs.

[01:20:45] Speaker 00:
Could be, but the court never took a position

[01:20:48] Speaker 00:
Okay, but we're now there.

[01:20:51] Speaker 07:
So maybe it's because, and it will matter whether you account for them.

[01:20:54] Speaker 07:
They really are because, right?

[01:20:57] Speaker 00:
Yes, Your Honor.

[01:20:58] Speaker 00:
We're not disagreeing at all with respect to the structure of the statute.

[01:21:02] Speaker 00:
Where we are disagreeing is whether the Commission has adequately accounted for them and, you know,

[01:21:10] Speaker 00:
I've indicated in an answer to you there are two ways you might think about accounting for, one of which is flatly wrong and that's the, you know, it needs to be baked into the appropriate share like the other side says it does.

[01:21:23] Speaker 00:
The correct way to think about consider to account for is whether the Commission adequately discussed it and for the reasons I've given, you know, we think the Commission's order is best interpreted as adequately explaining why not withstanding UPS's arguments

[01:21:39] Speaker 00:
you know, accepting the existence of these theoretical costs that are not adequately captured by A2 or A1, it nevertheless makes sense to set the appropriate share where it is.

[01:21:49] Speaker 04:
Because the formula, their judgment is their share of this stuff that wasn't covered

[01:21:56] Speaker 04:
Whoever wasn't covered and gets shipped down to the B, their fair share of that is covered by our formula.

[01:22:02] Speaker 00:
The appropriate share, not the fair share.

[01:22:04] Speaker 04:
Sorry.

[01:22:05] Speaker 04:
The appropriate share of that is covered by the formula.

[01:22:09] Speaker 00:
Right, because if it were true that the Commission zeroed it all out, right, there wouldn't be any appropriate share requirement at all.

[01:22:16] Speaker 00:
It would be 0%.

[01:22:18] Speaker 00:
But instead, the Commission's formula has resulted in an appropriate share requirement that would cost them.

[01:22:22] Speaker 04:
It would be 0% because of their findings about the competitive market.

[01:22:25] Speaker 00:
If UPS's characterization of the Commission's decision were true, in other words, the Commission ignored all of this.

[01:22:33] Speaker 00:
The only stuff that the competitive product has to bear are the costs of A2 and then also satisfy the cross-subsidy mechanic of A1.

[01:22:42] Speaker 00:
If that really were what the Commission said, and the Commission thought that that were adequate under the statute,

[01:22:49] Speaker 00:
there would be no appropriate share requirement at all, because after all, it's all captured in A1 or A2.

[01:22:57] Speaker 00:
But the point is, it's not that it went away.

[01:23:01] Speaker 00:
The commission created a formula that made the appropriate share requirement go up.

[01:23:05] Speaker 00:
The real dispute in this case is that it just didn't go up as much as UPS wanted it to go up.

[01:23:11] Speaker 00:
And UPS's statutory argument is that, well, the commission didn't explain itself and disagree as to whether or not the commission did.

[01:23:19] Speaker 00:
But fundamentally, the Commission's explanation is we hear UPS's arguments about the existence of all of these other costs.

[01:23:26] Speaker 00:
But it doesn't matter because given our expert assessment of the prevailing market conditions and given our expert assessment of the economics underlying UPS's proposals, we're not going to do 0%, we're not going to do 30%, we're instead going to adopt a formula that reflects the changing market power and market position of the Postal Service.

[01:23:49] Speaker 02:
Ms.

[01:23:55] Speaker 02:
Sullivan doesn't have any time left.

[01:23:57] Speaker 02:
Why don't you answer any questions?

[01:24:01] Speaker 06:
Thank you for your indulgence.

[01:24:02] Speaker 06:
Just three quick points.

[01:24:04] Speaker 06:
Mr. Shee said that there were uniquely or disproportionately associated costs that the Commission did consider.

[01:24:13] Speaker 06:
And then we watched as he paged through the order from pages 657 to 676, and there were no such costs.

[01:24:19] Speaker 06:
If there were such costs considered, what were they?

[01:24:21] Speaker 06:
What were the disproportionate costs of trucks?

[01:24:23] Speaker 06:
They're nowhere to be found.

[01:24:24] Speaker 06:
Why is that?

[01:24:25] Speaker 06:
Because Judge Edwards and Judge Millett, you're exactly right.

[01:24:29] Speaker 06:
The Commission said on 657, and it said at least a dozen other times throughout the order, the reason we didn't consider any disproportionately or uniquely associated costs under B

[01:24:39] Speaker 06:
is because we already did it under A2.

[01:24:41] Speaker 06:
But we know from this court's prior opinion that can't be true, because as Judge Edwards correctly pointed out, this court said we were leaving inframarginal costs on the table, but they'll be sorted out in the A3 docket, as Mr. Shee promised us at the last argument.

[01:24:55] Speaker 06:
Well, now A3 didn't sort it out.

[01:24:57] Speaker 06:
It left the inframarginal costs that might be disproportionately associated with packages, like bigger trucks, on the table.

[01:25:04] Speaker 06:
And he says, oh, well, market conditions may take care of that, because A3 is just a judgment call.

[01:25:09] Speaker 06:
But market conditions is just one of two statutorily mandated factors in B. You must consider market conditions and disproportionately or uniquely associated costs.

[01:25:18] Speaker 04:
What they say is we've got this formula on here.

[01:25:21] Speaker 06:
And that was my last point, Your Honor.

[01:25:22] Speaker 06:
The formula doesn't do it either.

[01:25:23] Speaker 06:
Market conditions doesn't do it.

[01:25:25] Speaker 06:
The formula doesn't do it either, because the formula, by the government's admission, has nothing in it.

[01:25:30] Speaker 06:
There isn't a single variable there that has anything to do with disproportionately or uniquely associated costs.

[01:25:36] Speaker 06:
It's all about market conditions.

[01:25:38] Speaker 06:
So if you have no input into the formula from the statutorily required disproportionately or uniquely associated cost factor, the formula can't spit out something that conforms with B. And last, A1 doesn't solve it, Your Honor.

[01:25:49] Speaker 06:
I understand Mr. Shee's desire to turn to a different part of the statute than A3 because the Commission so flagrantly ignored its obligations under A3 as expressed in B. But A1 doesn't pertain to products that are jointly

[01:26:03] Speaker 06:
jointly caused costs between market dominant and competitive products.

[01:26:08] Speaker 06:
And most importantly, A1 was not the Commission's answer.

[01:26:11] Speaker 06:
Do I need to invoke Trennery?

[01:26:12] Speaker 06:
If you look at page 657, the Commission said we didn't do the A3B analysis because we did it in A2.

[01:26:19] Speaker 06:
They didn't say we did it in A1, nor could they.

[01:26:21] Speaker 06:
And finally, A1 and A2 together leave on the table, unconsidered by the Commission, nearly half the cost to the Post Office.

[01:26:29] Speaker 06:
Two-thirds of truck costs are not attributed to any product.

[01:26:33] Speaker 06:
You're right, Judge Edwards, it does affect the price floor.

[01:26:35] Speaker 06:
And the reason the price floor matters is Congress said we enacted this statute to ensure fair competition in the delivery of packages where there's finally a private competitor to the monopoly of the post office held in other domains since Benjamin Franklin.

[01:26:47] Speaker 06:
When the Congress said consider fair competition and that the PRC by its own admission leaves out a statutorily required factor, that is arbitrary and capricious.

[01:26:57] Speaker 06:
And I want to be clear on the narrowness of the remand we request.

[01:27:00] Speaker 06:
Mr. Shee was incorrect to suggest that I'm asking you to deliver a proportional different result.

[01:27:07] Speaker 06:
We're not asking that.

[01:27:08] Speaker 06:
The very narrow thing we ask is to send it back to the Commission so they can perform their properly required task of deciding here are the institutional costs,

[01:27:18] Speaker 06:
Let's find an appropriate share, but to get there, we must have a statutorily required input of looking at the disproportionately associated costs of interest.

[01:27:24] Speaker 04:
Do you say there has to be something in the formula, or they just have to talk about it?

[01:27:27] Speaker 04:
No.

[01:27:27] Speaker 04:
They don't have to have a formula at all.

[01:27:29] Speaker 04:
No, but could they go back and go, we looked at it, and we don't think for all these whole bunch of reasons

[01:27:35] Speaker 04:
that it moves our needle and we're sticking with the same formula.

[01:27:38] Speaker 06:
If they come out with that outcome, we might be back saying it's arbitrary and capricious, Your Honor, but at a minimum, you need to remand so that they do their job and they perform the B analysis, which they didn't do because they said they'd done it and they can't have done it.

[01:27:49] Speaker 06:
So we respectfully request a very narrow remand and send it back to do their job under B. Thank you, Your Honor.

[01:27:55] Speaker 02:
All right.

[01:27:55] Speaker 06:
Thank you.