Court Appears to Favor Allowing Large Postal Service Price Hikes

A federal court on Monday expressed skepticism toward an argument from large-scale mailers that the U.S. Postal Service should not be able to raise its rates well above inflation, potentially dealing a significant blow to customers fighting the change. 

A price increase that upped regular, First-Class mail by 6.8% and package services by 8.8%—unprecedented in size in recent years—went into effect at the end of August, but mailers are still fighting against the underlying authority postal management used to institute the hikes. The Postal Regulatory Commission created a new system last year that enabled the unusually sizable increases and the biggest users of the Postal Service have been fighting it ever since.  

A coalition of groups representing the mailers argued before the U.S. Court of Appeals for the D.C. Circuit on Monday that the commission's new pricing structure violated federal statute. A 2006 law required USPS to maintain a pricing cap, its attorney said. Lawyers for USPS and PRC countered that Congress explicitly tasked the commission with evaluating how the inflation-based caps were working after 10 years and authorized it to create a new system if things were not going well.  

David Tatel, one of three judges on the panel hearing arguments on Monday, said “the biggest problem” he had with the mailers’ argument was the statute “so clearly gives the commission more power” after the first 10-year period to create a system of its choosing. 

“That’s what bothers me about your argument,” Tatel said. “I can’t get around it.”

USPS and the regulatory commission have noted Sen. Susan Collins, R-Maine, who wrote the 2006 bill, said on the Senate floor at the time that the legislative language marked a compromise that allowed the postal regulators after 10 years to “adopt an alternative system” to replace rate caps. The commission ultimately tied rates to what it identified as USPS’ two biggest cost drivers. The new system allows USPS to raise rates commensurate with declining mail volumes and the mandatory payments the agency must make toward benefits for future retirees. Ayesha Khan, the mailers’ attorney, suggested Collins misspoke in 2006 and lawmakers did not intend to give the Postal Regulatory Commission that discretion. 

“It defies complete common sense” that Congress would allow the inflation-based price cap to expire, Khan said. 

Judith Rogers, another judge on the panel, did not appear to find that argument persuasive. 

“Isn’t that pure speculation on your part?” Rogers asked. “If the commission finds the current system is not working, then it has the authority to adopt a new system.” 

Also working against the mailers is the defeat the court has already handed them. They have twice sought a stay to block the recent price hike, but both times the court rejected the request.

David Belt, the Postal Service’s attorney, took his argument even further, suggesting the regulatory commission should allow the mailing agency to institute a one-time rate hike to “reset” the baseline that would influence future increases. Belt requested the court remand the case back to the regulators to allow such an increase to take place. 

“These adjustments are not sufficient to achieve financial stability," he said. "USPS cannot be financially stable unless it’s covering its costs." 

Postmaster General Louis DeJoy has called higher rate increases a key part of his plan to turn USPS’ finances around within 10 years. DeJoy previously promised to use his authority to raise rates above inflation "judiciously," but predicted USPS would generate between $35 billion and $52 billion over the next decade by raising prices. The Postal Service announced last month it would raise prices between $0.25 and $5.00 per package during the holiday season, depending on the product and its weight. The higher prices are slated to be in effect from October 3 through December 26 and would affect both individuals and commercial entities using the mail system.

The court will now issue a ruling in the coming weeks. Tatel indicated this would not be the end of the line for the case, suggesting at one point Khan would have to take her argument to the Supreme Court.