Amid antitrust concerns, the Postmaster General has strongly defended the U.S. Postal Service’s controversial plan to form an alliance with FedEx.
On Tuesday, members of the House postal subcommittee, led by Rep. John McHugh (R-NY) questioned whether the USPS, as a quasi-government entity, could run afoul of antitrust laws by entering a deal of such magnitude with a private company.
Postmaster General William J. Henderson said that the proposed alliance would help the USPS increase revenue and cut expenses.
House Judiciary Committee Chairman Rep. Henry Hyde (R-IL), citing the postal service’s lengthy fight to control commercial mail receiving agencies (private mailbox companies), and concerns over the partnership’s effect on job security and related issues, said “we must re-examine the continued viability of the postal service’s potential antitrust immunity if it is to compete against private business.” He asked the Justice Department to take a “thorough” look at the competitive issues raised by the alliance.
Denying there was any “exclusivity” in the alliance with FedEx, Henderson said the service would be willing to talk to UPS or others about a partnership.
Under the proposed partnership, the USPS would use FedEx’s huge fleet of jets to transport Priority and Express mail at low rates. In return the USPS would use its letter carriers to deliver residential FedEx packages weighing up to 70 pounds, but not it’s overnight parcels. In addition, the USPS may sell FedEx products at its retail outlets.
Henderson also said he expects the USPS to lose between $100 million and $200 million in fiscal 2001 citing higher labor costs and loss of income to electronic diversion. He estimated a loss of about $17 billion in first class revenue to increased consumer online bill paying and the electronic mailing of government payments such as Social Security and tax refund checks.
He said the USPS would “have to raise prices or cut to the quick” to stay afloat. The service is seeking to raise postage rates next January by an average of 6.4%. The Postal Rate Commission, which is considering whether to support the increase, reduce it or reject it, is expected to file its recommendation with the postal service’s Board of Governors by the middle of next month. The Postal governors are expected to act on the matter by early December.
The PMG also repeated his support for postal reform legislation to give the USPS more pricing freedoms and the flexibility to provide new products and services.
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