[00:00:02] Speaker 04:
Case number 19-1155, United States Postal Service Petitioner versus Postal Regulatory Commission.

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Mr. Boardman for the petitioner, Mr. Pham for the respondent.

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Good morning.

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Mr. Boardman, would you like to proceed?

[00:00:25] Speaker 01:
Thank you, Your Honor, and good morning to yourself.

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I represent the Postal Service, and we ask that the

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court vacate and remand the Commission's decision in this case.

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The case, of course, concerns the disclosure of confidential Postal Service data with respect to the volume, revenue, cost, and contribution of mail matter coming into this country from abroad.

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That is to say letters, flats, which are large-sized letters like magazines, bulky letters, and packets.

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In weighing

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In determining whether to make this information available to the public without protective conditions, the Commission weighs the injury to the Postal Service as opposed to the public interest in the disclosure.

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In this case, the Commission

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unreasonably determined that the Postal Service would have virtually no injury, and unreasonably determined that the public interest in having this information, again, without protective conditions, was vital.

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Those are... Yes?

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Ms.

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Forman, this is Jezra.

[00:01:47] Speaker 03:
So, based on what you just said now that it was unreasonable, I was wondering if you could just help me understand your Chevron argument

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In the open brief, I was wondering if you were suggesting that 504G3 unambiguously permits only a certain type of competitive abuse, and so therefore the commission's interpretation fails at step one, or are you suggesting instead that it fails at Chevron step two?

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And I guess, you know, do we need to use the Chevron framework here at all?

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You don't have to use the Chevron PAPA framework.

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works as well.

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We're not suggesting that the balancing test is a Chevron step one case.

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We are saying that the Commission's determination of both determinations is unreasonable under those tests.

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Trying to injure it.

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If this data is disclosed publicly, even in an aggregated form by country group,

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The postal service will lose volume, it will lose revenue, and its contribution will decline.

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Now, the commission noted that the private companies don't disclose information at the product level like this, and they concluded that is beside the point.

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It's not at all beside the point.

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In fact, it's axiomatic that companies don't disclose data of this kind because it will adversely impact their bottom line.

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And the same is true here.

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If this is disclosed, our contribution will decline.

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Mr. Boardman, this is Judge Griffith.

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I understood your argument to be that the public interest here is limited to public interest in government abuse.

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Where did that limitation come from?

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That's not the language of the statute, but where does that come from?

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Your Honor, that's not quite our argument.

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What we're saying is that the key phrase vis-a-vis public interest is the government established competing in a commercial marketplace.

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And that key phrase was not defined in the Commission's decision.

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It wasn't even addressed in that context.

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We gave one illustration vis-a-vis government abuse that you raised.

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as how that might be defined.

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But our point is that until the public interest or the scope of the public interest is defined, we cannot determine whether the public interest is important in this case or not.

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Indeed, the commission determination that is vital is wrong, unreasonably wrong, because at this point, the basic underlying problem with these products being financially underwater has been fixed.

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The problem was that the Postal Service could not price the products in a way that would make a contribution, make a margin, make a little profit.

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That was resolved.

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Surely you would acknowledge that the public has an interest in a mail product that's losing millions of dollars a year, right?

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There's a strong public interest in that.

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Particularly when the government is

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undertaking a reform agenda to try and fix that problem, correct?

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The public is interested in it, and our point is that for 20 years it was underwater.

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Why disclose the information now without protective conditions?

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At this point,

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These products have been moved.

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It's a good government at work.

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I mean, I don't know.

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We don't get into policy arguments here.

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But we're to give the Commission a great amount of deference in determining what public interest is here.

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You agree with that, right?

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I do agree that the Commission is entitled to reasonable deference.

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But I also contend that this is not reasonable.

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There is no vital interest in this information.

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at this time except under protective conditions so that our competitors can't use it to undermine our successful markets, our markets where we have a contribution.

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The statute doesn't say vital interest.

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It says a public interest.

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The commission determined that the public interest here was vital.

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That's why I'm using that phrase.

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We are saying that the public interest is not substantial compared to the

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large injury to the Postal Service.

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The Commission determined that there was almost no injury and therefore that side of the balance was unanimous.

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But on the other side, the public interest was great or vital as I've used and therefore it dominates.

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And I'm saying both of those conclusions are unreasonable.

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It's unreasonable with respect to public interest because not only is the scope of that interest undefined, it is unreasonable because the

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underlying problem whereby the Postal Service could not set prices has been fixed.

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We have now set prices.

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Those prices have gone up.

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We don't need to have this information released so that our competitors on an unlevel playing field can use this to remove our most successful markets from us so that our competitors won't be able to price their similar products in a way that we will lose market share and that we will lose contribution.

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I'm going to refer, in some of my remarks, to the SEAL appendix, but I will do so somewhat elliptically so that those... I have a question for that, Council.

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I wonder if you would just help me here.

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You say the problem is fixed, the service has fixed prices, and now, of course, come July 1 of this year.

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The Commission knows all this.

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And yet, it nevertheless found or concluded that public disclosure was vital.

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Now, other than arguing that this makes no sense, I mean, a really extreme argument and you're not making that, what was the commission really focused on then?

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The commission was focused upon solving the problem that these products had been underwater for some 20 years.

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And the commission moved the small package, for example, from the market dominant side of the equation to the competitive equation.

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And following the presidential memorandum, the Postal Service has the ability to set its own prices at a higher level.

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so that the problem can be fixed.

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The commission wanted to improve the negative contribution.

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Unfortunately, its order to disclose the information cuts against its very goal.

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It will make it, I won't say will lie impossible, but it will certainly make it far more difficult for the Postal Service to solve the problem if this information is disclosed without protective conditions

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because our competitors, as well as foreign posts, will be able to use that information against us in setting their price levels to take away our most valuable product markets and what I would mostly say profits.

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So the commission responds by saying, we don't think that's going to happen to the extent the postal service suggests.

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And it gives some explanation.

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about aggregate data and what can be found.

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And in your reply brief, you say the commission is just wrong.

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Yes, go ahead.

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The commission determined that because there was a high level of aggregation, there would be no damage.

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For example, and this is a hypothetical figure I won't use to seal appendix, suppose that we have a product that has a 15% positive contribution.

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That can be modeled by our competitors and set their own prices.

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And of course, that's an average.

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Some countries might be 17 percent, some might be 16, the average being 15, some might be 14 and 13.

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Competitors will model that and use their prices and come in somewhat lower than 15 and take away our most lucrative markets from us.

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And we won't have the same ability to respond to them because we won't know their cost, we won't know their

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their margins.

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And as the descent points out, the high level of generality with respect to aggregation doesn't really address the cost data by country group and shape, which allows after modeling of e-commerce packets for large markets.

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That is a key point for the Postal Service in correcting the problem.

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Disclosure of that data, however,

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undercuts our ability to do that.

[00:11:18] Speaker 03:
Mr. Wilber, I mean, isn't it a problem?

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I mean, it seems the Postal Service is, you know, talking about its competitive disadvantage if this information comes out.

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But I think one of the concerns is that the Postal Service has been, you know, running a negative contribution for 20 years, which is something a private business couldn't do.

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That would be a loss.

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So the only reason the Postal Service is able to continue to have rates that don't meet the cost is because it is a government entity that can cross subsidize with other products and effectively redistribute across government expenses.

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I mean, isn't that part of the problem?

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And isn't that part of why the statute talks about overseeing this in the public interest?

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First, they can distinguish between the commission overseeing it and the commission releasing unprotected data.

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The information could be released in a protective way so that the public would be able to comment upon its views about this.

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I also note that the Postal Service certainly doesn't like the idea of negative contribution historically.

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It simply did not have the ability

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to correct it because the UPU set prices, not the postal service.

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Now that we can set prices ourselves, we're going to be in a position that we can correct this.

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And though the public interest does have an interest in that, it's far less significant than it would have been under the old regime.

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Now, I won't say that it's marginal, but it doesn't weigh very heavily on that side of the scale compared to the

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significant level of injury that would be anticipated and would occur were this data released.

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So how many activists are close to arguing the commission wants the Postal Service to fail?

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I don't think they want us to fail.

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They're very responsible people.

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They do the best job, but in this instance, they've made an unreasonable determination.

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And that's why we think the case should be sent back to the Commission for re-examination.

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You know, I will note also that the Commission's rationale for the absence of harm are not just wrong, they're unreasonable.

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I've already discussed the high level of generalization with respect to aggregation.

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But they also say that the new regime will mean that the harm is virtually nil.

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That is almost exactly backwards.

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The new regime will mean that the Postal Service can set prices, but that the disclosure of this data will undermine our ability to compete.

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Our competitors and the foreign posts will have this data.

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but we won't have theirs, they can set their prices in such a way to remove our most lucrative markets.

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The majority also said that there's no harm to the postal service because the data is stale or outdated.

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That is not accurate in any sense of the imagination, and it's unreasonable to say it's not stale when it represents data from the most recent fiscal year,

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It establishes the trends and it conflicts with the Commission's general rule and historical rule to keep this kind of data under seal for a decade.

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Anything further from my colleagues?

[00:15:08] Speaker 01:
Not at this point.

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Thank you, Your Honor.

[00:15:11] Speaker 05:
All right.

[00:15:11] Speaker 05:
Thank you.

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So let us hear from

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Council for Respondent, Mr. Fan.

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May it please the court and good morning.

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Dennis Fan from the Department of Justice for the Postal Regulatory Commission.

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Where there's a difference here in this case, I think, between the Postal Service and the Postal Regulatory Commission is

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the Postal Service's belief that the Commission and the public have no real role in all of this.

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And what I mean is the Commission each year evaluates the financial performance of Postal Service products to assess the Postal Service's financial stability and whether each product is covering its costs.

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In this particular case, the commission already publishes aggregated revenue volume cost and contribution data for each year.

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So what it saw was a need to examine that financial information by country group and by shape to figure out why the Postal Service had been losing tens of millions of dollars annually for two decades.

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And so the Commission put together a compliance analysis of that data, and that compliance analysis reveals the drivers of inbound letterposts poor performance, which has negative market effects.

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And then based on those and the strong public interest, it reasonably

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decided that that public interest outweighed any commercial harms and that's a completely reasonable determination that the commission made.

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I do want to kind of circle back to the public interest to kind of talk about it with a little bit more particularity and I think Judge Rao was asking about this as well.

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You can't really divorce

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this data from the context in which it's being disclosed.

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The commission here is providing an annual report and, you know, the annual report is multiple hundred pages long.

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It analyzes compliance of products,

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It considers harms to the public from noncompliance, and it makes recommendations for future postal service regulatory actions or future commission regulatory actions.

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And those regulatory actions are all on the public docket.

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So, for example, you know, if you go to J392 to 393,

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give some recommendations about what to do with inbound letter post.

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And so what the commission was doing here, it was saying, well, we need a little bit more information about that.

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And what this particular data does, the country group and shape data, is it identifies trends specific to particular shapes,

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in particular country groups about what is causing the negative performance.

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And all of that is in furtherance of this compliance mission.

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It's in furtherance of the mission.

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It's not to harm the Postal Service, but it's in furtherance of the mission for the public, for the commission to figure out how to actually get this product fixed and, you know, fixed correctly.

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And there are, if it doesn't get fixed,

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You know, I do want to specify that there are some really tangible harms.

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The Commission identified at least three and I don't think it's accurate to say that the Commission never interpreted the statute or never interpreted what it meant for a government establishment to be competing in commercial markets.

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The Commission walked through several ways

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in which the Postal Service's role in the commercial markets and the way that it competes in the commercial markets is causing harms in those markets and causing harms to the public.

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And so there's at least three.

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I think the Commission first identified a broader interest about this negative contribution, these losses over two decades, threatening the financial integrity of the Postal Service itself.

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We're not talking about a million dollars here or a million dollars there.

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We're talking about numbers that hover around nine figures every single year.

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The second link to the public interest

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is that there's an interest in not shifting costs to U.S.

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customers.

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And you can find this on JA 650, where the commission talks about it.

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And they call it discriminatory treatment.

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And what that basically means is that domestic mailers right now are paying an unfair burden for the same... Sorry, Your Honor.

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So domestic mailers now are subsidizing foreign mailers.

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They're using the same postal infrastructure, but if foreign mailers aren't paying their fair share, it means that the domestic mailers, the US customers, are the ones who are bearing the cost.

[00:20:05] Speaker 02:
The third interest... Council, how has the completed UPU reforms impacted the commission's order?

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Is it part of the problem solved now?

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So I have a few answers that first, you know, obviously we would consider the commission's order at the time that it was issued.

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The second answer I have is the commission considered the possibility of UPU reforms and it stated quite reasonably that the potential reforms only heightened the public interest in this arena and I don't think

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you know, the postal service should be able to take advantage of the delay in litigation to then say, well, the commission's order post hoc is unreasonable.

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And so I do want to spell out a couple of ways in which there is still an ongoing interest.

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The UCU reforms, just to break this down, they only cover, there are three groups of mail, and this is a little bit specific, but, you know, there's a small letters, large letters, and then a small packet and bulky letters.

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They only cover one of those categories of mail.

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And they only cover that category of mail, the small packets and bulky letters, as to some of the larger countries.

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And so they don't cover them as to every single country across the world.

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And so in reality, what we have is sort of a hybrid system where there's self-declared rates for some things and terminal dues for other things.

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And even where there are self-declared rates, you can see on pages 8 to 9 of our brief, we discussed this, the Commission still has a role in approving those.

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The Commission can say, no, no, no, those self-declared rates wouldn't cover your attributable costs.

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And that's a public

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docket function that the Commission has that the public needs to be able to comment on, to participate on, to try to fix the problem.

[00:22:09] Speaker 00:
And even where there are these sort of terminal due rates remaining as to other products, the Commission also prepares recommendations regarding those products.

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And those are, again, public recommendations

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There's no, and this is all part of the Commission's own public function.

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So in that sense, I don't think it fixes the problem at all.

[00:22:34] Speaker 00:
And I think it only decreases their commercial harms or their claims to commercial harm.

[00:22:42] Speaker 00:
Because I think what the Commission was saying, and I heard opposing counsel mention how the Commission discussed that the data might be stale.

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What the Commission was saying was that

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Now that we're entering a new system where perhaps the postal service has new ways to make money or new ways to price their products, of course the old data is not going to reflect exactly the type of financial market that the new system is under.

[00:23:14] Speaker 00:
And so in that sense, the public interest is still there and the commission found that the public interest was only heightened based on these reforms.

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And the commission also thought that

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those reforms made it so that the commercial harms were far less.

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I do want to mention the third type of harm here because I do think the strength of the public interest is much of what the commission was balancing here and why the balance was reasonable.

[00:23:49] Speaker 00:
The third type of harm might not be totally clear and the postal service doesn't directly address it, but it's about distortions in the trade flow or distorting competition.

[00:23:59] Speaker 00:
And what that means is that because of the artificially low prices for inbound letter post, other mail products can't compete with inbound letter post.

[00:24:11] Speaker 00:
And also, when there's artificially cheap international shipping, that harms domestic shipping and domestic manufacturing.

[00:24:20] Speaker 00:
So for example, if shipping something from Angola to California costs something similar to shipping from New York to California, and building a factory in Angola is going to be far cheaper than building a factory in New York.

[00:24:35] Speaker 00:
companies are going to go build factories in Angola.

[00:24:37] Speaker 00:
And that's a harm to the public that the commission is still trying to address, that the commission every single year tries to address.

[00:24:47] Speaker 00:
And that is part of the strong public interest here.

[00:24:51] Speaker 00:
I want to, unless there are questions about the public interest, I do want to mention a few things about the commercial harm.

[00:25:01] Speaker 00:
I think at a high level of

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generalities, what the commission found was that the commercial harms were rested on a series of assumptions about what businesses would do or what

[00:25:18] Speaker 00:
foreign postal operators, what foreign countries would do.

[00:25:21] Speaker 00:
And what the Postal Regulatory Commission said was none of those assumptions really hold water.

[00:25:27] Speaker 00:
The Postal Service has a statutory obligation and a regulatory obligation to describe with particularity the reasons for confidentiality.

[00:25:37] Speaker 00:
It bears the burden of persuasion here.

[00:25:40] Speaker 00:
And the commission said that, well, you haven't come

[00:25:45] Speaker 00:
with the type of proof or with the type of specifics that you would need to show that any of these harms would actually come true.

[00:25:55] Speaker 00:
And there's two kind of big buckets of harms.

[00:25:59] Speaker 00:
One is the harm that other competitors would, in fact, compete with the postal service.

[00:26:06] Speaker 00:
And the other bucket of harms is the harm that foreign countries would enter into treaties with the United States.

[00:26:16] Speaker 00:
As to the harm from competitors, the Postal Regulatory Commission looked at and said, well, if a competitor is really trying to compete with the postal service, what they would need to do is they would need to figure out what mail routes to be competing on.

[00:26:34] Speaker 00:
This data doesn't reveal data about any particular country.

[00:26:37] Speaker 00:
It only reveals it about these four broad country groups.

[00:26:40] Speaker 00:
It doesn't identify locations

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or identities of international or domestic customers.

[00:26:46] Speaker 00:
It doesn't talk about modes of international or domestic transportation.

[00:26:50] Speaker 00:
And there's all sorts of other reasons why the information isn't specific enough.

[00:26:55] Speaker 00:
So if somebody were to say, I want to displace the postal services role in communicating and exchanging letters with, let's say, the Royal Mail in the United Kingdom,

[00:27:09] Speaker 00:
they would need to know from where in the United Kingdom to take those customers and what the cost would be.

[00:27:15] Speaker 00:
But this data doesn't even talk about the international cost to foreign operators in that sense.

[00:27:21] Speaker 00:
And so this data really isn't actionable in that specific way.

[00:27:27] Speaker 00:
The other harm that I do briefly want to get to because the opposing council did mention it is the harm to foreign

[00:27:39] Speaker 00:
the harm in negotiations with foreign countries.

[00:27:42] Speaker 00:
And I just want to mention on this point, both

[00:27:46] Speaker 00:
and also the Postal Service itself conceded in the administrative proceedings that this concern doesn't apply at all to volume and revenue data.

[00:27:55] Speaker 00:
And in fact, in the Postal Service's reply brief, they don't even make any argument as to volume and revenue data generally.

[00:28:03] Speaker 00:
But it's at least the harm in negotiations.

[00:28:07] Speaker 00:
There's a couple of assumptions that the Postal Service just hasn't shown and it hasn't pointed to anything

[00:28:13] Speaker 00:
specific that would give the court assurance that those assumptions are true.

[00:28:18] Speaker 00:
It assumes that the United States is going to go off and negotiate and enter into agreements that puts itself in a worse off position.

[00:28:28] Speaker 00:
The United States doesn't have to enter into any agreements.

[00:28:32] Speaker 00:
And the UPU rates, whether the self-declared rates or the terminal rates, are the default rates that the United States has.

[00:28:41] Speaker 00:
So whenever the United States is going out there in the world and negotiating, it's going out there to put itself in a better position.

[00:28:50] Speaker 00:
The second assumption is that even if somebody suggested that the United States be put in a worse position, that the United States couldn't resist negotiating efforts along those lines.

[00:29:02] Speaker 00:
I mean, the United States isn't a sort of bit actor in the postal world.

[00:29:06] Speaker 00:
It has negotiating power and it has the ability

[00:29:10] Speaker 00:
to self-resist efforts and to negotiate with foreign actors.

[00:29:15] Speaker 00:
And then the third assumption is that whenever these negotiations happen, they're ones in which inbound letter post is something that features heavily.

[00:29:27] Speaker 00:
And that's just not an assumption that's historically held any water.

[00:29:31] Speaker 00:
And the Postal Service, you can see MGA 673 to 675 discusses why other sorts of agreements

[00:29:39] Speaker 00:
are not the ones in which inbound letter post has specifically been the target.

[00:29:44] Speaker 00:
And in fact, usually these agreements are about all sorts of other types of services in which inbound letter post is just one small segment of.

[00:29:53] Speaker 00:
And so for those reasons,

[00:29:57] Speaker 00:
The commission reasonably found that the commercial harms were at flight, and it reasonably found that there was a vital public interest, and it certainly did not act outside the bounds of its discretion in balancing those.

[00:30:12] Speaker 00:
Unless there are further questions, we would ask that the petition be denied.

[00:30:21] Speaker 05:
Any further questions?

[00:30:25] Speaker 05:
Thank you, Mr. Fan.

[00:30:26] Speaker 05:
Council for the Postal Service, Mr. Boardman.

[00:30:33] Speaker 01:
Thank you, Your Honor.

[00:30:34] Speaker 01:
The Postal Service does believe the public has a role in this, somewhat contrary to the Commission's view.

[00:30:41] Speaker 01:
We say in this case, however, one, the importance of the public interest has been decreased because the problem has been fixed.

[00:30:52] Speaker 01:
And further, to the extent of public interest,

[00:30:57] Speaker 01:
services competitive position will not be undermined as opposed to disclosing it without those protective conditions.

[00:31:11] Speaker 01:
Our point with respect to the government established competing in the commercial market is that in order to determine what the public interest is, one must first know the scope of that public interest.

[00:31:23] Speaker 01:
The commission seems to think it's just a general

[00:31:25] Speaker 01:
interest in transparency, yet the language that I just quoted in some way cabins the public interest, and we think the commission was required to address that point.

[00:31:38] Speaker 01:
We do share the view that the UPU rates caused discriminatory treatment, that American mailers were at a disadvantage, and the problem was we were not in a position

[00:31:54] Speaker 01:
correct that because the UPU prices were set too low, but now with the price reasons that have been announced to go into effect in July, that problem will be solved.

[00:32:08] Speaker 01:
The Commission notes that the Postal Service can still resist this situation when its competitors to gain access to this information.

[00:32:20] Speaker 01:
Certainly we could resist it, but the question is

[00:32:23] Speaker 01:
Because what extent can we resist it successfully?

[00:32:28] Speaker 01:
And that goes back to my point that private companies don't release data of this kind because they know you will have an impact upon their bottom line.

[00:32:37] Speaker 01:
And the same thing is going to happen here if our competitors, if foreign operators, I see my time is expiring, if foreign operators gain access to this information.

[00:32:47] Speaker 01:
So we ask that the court vacate the decision and remand the matter to the

[00:32:52] Speaker 01:
commission.

[00:32:53] Speaker 01:
Thank you, Your Honors.

[00:32:56] Speaker 05:
Thank you.

[00:32:57] Speaker 05:
We will take the case under advisement.