Vigorous competition has made many types of day-to-day communication better and more convenient, as seen with overnight delivery, faxes, email, and electronic bill payment. But the Postal Service’s legal monopolies deny the mail-using public the opportunity to benefit from similar improvements. In December, when the U.S. Supreme Court hears U.S. Postal Service v. Flamingo Industries, it will have an opportunity to take one significant step toward changing that.
In fact, the Postal Service is insulated from competition by more than just its legal monopolies. It pays no federal, state, or local taxes, is exempt from most forms of regulation, from antitrust to parking tickets, and can borrow money at minimal cost from the U. S. Treasury.
But the Postal Service also enjoys this preferential treatment when it enters markets outside of its legal monopolies, placing private-sector competitors (that hire workers and pay taxes) at a severe disadvantage. For example, its overnight delivery and pre-paid calling card services compete against companies that cannot avoid taxes and regulations or borrow at subsidized rates.
As a result of Flamingo, the Postal Service may soon have one of its immunities revoked. Flamingo Industries, an Illinois producer of mail sacks, filed suit against the Postal Service after it terminated the company’s contract and instead purchased mail sacks from a Mexican firm. The company claimed the Postal Service’s actions were an effort to suppress competition, and the Ninth U.S. Circuit Court of Appeals upheld its right to sue for a violation of antitrust laws. The Supreme Court will be ruling on whether the Service is subject to antitrust laws when acting outside the fulfillment of its monopoly-protected universal service requirement.
There has already been significant momentum in that direction in recent months. This summer, the Presidential Postal Commission recommended that Postal Service activities be restricted to core “essential” postal products. In his testimony to the Commission, Deputy Postmaster General John Nolan even went so far as to suggest that for those products and services outside of that core business, “a requirement to pay taxes and adhere to other regulations should be considered.”
When the Postal Service steps outside its legal monopolies, it should play by the same rules as its competitors. With Flamingo, the Supreme Court has an important opportunity to ensure that will be the case in the future. Ideally, postal consumers would be best served if all carriers and couriers answered to stockholders and competed on a level playing field devoid of excessive regulation. Until then, the Postal Service should be made to operate under the same rules imposed on its competitors.
Michael F. Cannon is Adjunct Scholar and Don Soifer is Executive Vice President of the Lexington Institute.
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