USPS Brief in PRC Worksharing Litigation

Case: 10-1324 Document: 1292961 Filed: 02/11/2011 Page: 1
Oral Argument Has Not Been Scheduled

_____________________
No. 10-1324
_____________________
IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT
_____________________
UNITED STATES POSTAL SERVICE,

Petitioner,
v.
POSTAL REGULATORY COMMISSION,
Respondent.
_____________________
On Petition for Review of an Order of

the Postal Regulatory Commission
_____________________
BRIEF OF THE UNITED STATES POSTAL SERVICE

_____________________
MARY ANNE GIBBONS

Executive Vice President & General Counsel
Of counsel:
R. ANDREW GERMAN MICHAEL J. ELSTON*
Managing Counsel, Pricing Office of the General Counsel
& Product Development United States Postal Service
United States Postal Service 475 L'Enfant Plaza, SW
475 L'Enfant Plaza, SW Washington, D.C. 20260
Washington, D.C. 20260 (202) 268-7432
Attorneys for the United States Postal Service
FINAL BRIEF:
FEBRUARY 11, 2011 *Counsel of Record
CERTIFICATE AS TO PARTIES,
RULINGS AND RELATED CASES
A. Parties, Intervenors and Amici
Petitioner in this matter is the UNITED STATES POSTAL SERVICE.
Respondent in this matter is the POSTAL REGULATORY COMMISSION
(“PRC”).
This is a petition for review of agency rulemaking. Numerous persons and
entities filed comments in the agency’s docket but did not seek to intervene in the
proceedings.
The NATIONAL POSTAL POLICY COUNCIL moved for leave to
intervene in this review proceeding, and this Court granted the motion.
B. Ruling Under Review
The ruling under review is the PRC’s Order Number 536 dated September
14, 2010, in Docket No. RM2009-3.
C. Related Cases
This matter has not previously been before this Court or any other court.
Petitioner’s counsel are unaware of any related cases pending in this Court or any
other court.
i
TABLE OF CONTENTS
Certificate as to Parties, Rulings and Related Cases ..................................................i
Table of Authorities ..................................................................................................iv
Glossary.....................................................................................................................vi
Jurisdictional Statement .............................................................................................1
Standing......................................................................................................................1
Statutory Provision (39 U.S.C. § 3622) .....................................................................2
Statement of the Issues...............................................................................................6
Statement of the Case.................................................................................................7
Statement of the Facts ................................................................................................8
Summary of the Argument.......................................................................................12
Argument..................................................................................................................15
I. The Postal Service has flexibility to set rates for market-dominant

products subject to limited statutory restrictions, including a
statutory limitation on the amounts of four specific workshare
discounts: presorting, prebarcoding, handling and transportation of
mail. In its order, the PRC asserted authority to regulate
nonworkshare characteristics of mail pursuant to its authority to
regulate workshare discounts. Thus the PRC exceeded its statutory
authority by concluding that it could regulate nonworkshare mail
characteristics under the statutory limitation on workshare discounts..........15
A. Standard of Review .............................................................................15
B. Analysis ..............................................................................................16
ii
TABLE OF CONTENTS
(continued)
II. Establishing a worksharing relationship between two types of mail

for the purpose of calculating a workshare discount requires a
benchmark and a discounted variant of the benchmark where the
difference between the two prices is the costs avoided by
worksharing. Under the PAEA, mail “products” are defined as
having either different cost or market characteristics, and thus the
difference in price between two products cannot be limited to costs
avoided by worksharing. The PRC’s conclusion that the workshare
discount provisions apply between products is contrary to law,
arbitrary and capricious. ................................................................................25
B. Analysis ..............................................................................................25
III. Establishing a worksharing relationship between two types of mail

for the purpose of calculating a workshare discount requires a
benchmark and a discounted variant of the benchmark where the
difference between the two prices is solely the costs avoided by
worksharing. Single-Piece First Class Mail and Presorted First
Class Mail are distinct products that have different cost and demand
characteristics beyond the costs avoided by worksharing. Thus the
PRC’s conclusion that a worksharing relationship exists between the
two products is contrary to law and arbitrary and capricious....................... 36
B. Analysis ..............................................................................................36
Conclusion ...............................................................................................................47
Certificate of Compliance ........................................................................................49
Certificate of Service ...............................................................................................50
Addendum (Table of Contents) ...............................................................................51
iii
TABLE OF AUTHORITIES
CASES
*Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984)............................... 15-16
Assoc. of Data Processing Serv. Orgs. v. Board of Governors

of the Fed. Reserve Sys., 745 F.2d 677 (D.C. Cir. 1984) ........................25, 36
Mail Order Assoc. of America v. USPS, 2 F.3d 408 (D.C. Cir. 1993) ......................8
Mobile Communications Corp. v. FCC, 77 F.3d 1399 (D.C. Cir. 1996) ................17
Nat’l Credit Union Admin. v. First Nat’l Bank & Trust Co.,
522 U.S. 479 (1998).......................................................................................15
S. Cal. Edison Co. v. FERC, 195 F.3d 17 (D.C. Cir. 1999) ....................................15
STATUTES
5 U.S.C. §706...............................................................................................15, 25, 36
*39 U.S.C. § 102(6) ...........................................................................................30, 34
39 U.S.C. § 201..........................................................................................................8
39 U.S.C. § 3622..................................................................................................1, 33
39 U.S.C. § 3622(a) .........................................................................................9
*39 U.S.C. § 3622(b)..............................................9, 19, 22, 31-32, 34, 44-45
39 U.S.C. § 3622(c) .......................................................................................28
39 U.S.C. § 3622(d)........................................................................... 27-28, 33
* Authorities upon which we chiefly rely are marked with asterisks.
iv
TABLE OF AUTHORITIES
(continued)
*39 U.S.C. § 3622(e) ............................. 7, 10, 12, 16-17, 19-22, 24-25, 30-35
39 U.S.C. § 3642......................................................................................................33
39 U.S.C. § 3652................................................................................................ 34-35
39 U.S.C. § 3663..................................................................................1, 8, 15, 25, 36
Postal Accountability and Enhancement Act (PAEA), Pub. L. No. 109-435,

120 Stat. 3198 (2006) ................ 9, 11-13, 16, 22, 26-27, 29-34, 41, 43-45, 47
Postal Reorganization Act of 1970 (PRA),

Pub. L. No. 91-375, 84 Stat. 719 (1970) .........................................................8
LEGISLATIVE HISTORY
Sen. Rep. No. 108-318 (2004) .................................................................................28
DECISIONS OF THE PRC
Op. & Rec. Decision, Docket No. R90-1 (P.R.C. Jan. 4, 1991)..............................19
Op. & Rec. Decision, Docket No. MC95-1 (P.R.C. Jan. 26, 1996) ........................30
Order No. 26, Docket No. RM2007-1 (P.R.C. Aug. 15, 2007) ...............................28
Order No. 43, Docket No. RM2007-1 (P.R.C. Oct. 29, 2007) ....................27, 29, 30
Order No. 66, Docket No. R2008-1 (P.R.C. Mar. 17, 2008)...................................28
Order Reviewing Postal Service Market Dominant Price Adjustments,

Docket No. R2009-2 (P.R.C. March 16, 2009) (Order No. 191) .......... 8-9, 20
v
GLOSSARY
BMM Bulk Metered Mail
Order Order Adopting Analytical Principles Regarding Workshare

Discount Methodology, Order No. 536, Docket No. RM2009-3
(Sept. 14, 2010).
IBI Information-Based Indicia
IMb Intelligent Mail Barcode
PAEA Postal Accountability and Enhancement Act
PCRA Public Cost and Revenue Report
PRA Postal Reorganization Act
PRC Postal Regulatory Commission

Postal Rate Commission (prior to 2006)
vi
JURISDICTIONAL STATEMENT
This petition challenges an order of the Postal Regulatory Commission
(“PRC”) adopting an analytical framework for its review of workshare discounts
pursuant to 39 U.S.C. § 3622(e). This Court has jurisdiction pursuant to 39 U.S.C.
§ 3663. The final order below was rendered on September 14, 2010, and this
petition was timely filed on October 13, 2010. See id.
STANDING
The Postal Service has standing under 39 U.S.C. § 3663 because it is
“adversely affected or aggrieved” by the PRC’s final order adopting analytical
principles regarding workshare-discount methodology. The order substantially
increases the PRC’s authority to review non-workshare rate changes and
undermines the Postal Service’s flexibility to set prices. Any subsequent rule
adopted under the analytical framework will result in decreased pricing flexibility
and unjust and unreasonable rates. This Court can redress these injuries by
granting the petition for review and setting aside the PRC’s conclusions as contrary
to law, arbitrary and capricious.
1
STATUTORY PROVISION
Title 39, United States Code
§ 3622. Modern rate regulation
(a) Authority Generally.— The Postal Regulatory Commission shall, within 18

months after the date of enactment of this section, by regulation establish (and may
from time to time thereafter by regulation revise) a modern system for regulating
rates and classes for market-dominant products.
(b) Objectives.— Such system shall be designed to achieve the following

objectives, each of which shall be applied in conjunction with the others:
(1) To maximize incentives to reduce costs and increase efficiency.
(2) To create predictability and stability in rates.
(3) To maintain high quality service standards established under section
3691.
(4) To allow the Postal Service pricing flexibility.
(5) To assure adequate revenues, including retained earnings, to maintain
financial stability.
(6) To reduce the administrative burden and increase the transparency of the
ratemaking process.
(7) To enhance mail security and deter terrorism.
(8) To establish and maintain a just and reasonable schedule for rates and
classifications, however the objective under this paragraph shall not be
construed to prohibit the Postal Service from making changes of unequal
magnitude within, between, or among classes of mail.
(9) To allocate the total institutional costs of the Postal Service appropriately
between market-dominant and competitive products.
(c) Factors.— In establishing or revising such system, the Postal Regulatory

Commission shall take into account—
(1) the value of the mail service actually provided each class or type of mail
service to both the sender and the recipient, including but not limited to
the collection, mode of transportation, and priority of delivery;
(2) the requirement that each class of mail or type of mail service bear the
direct and indirect postal costs attributable to each class or type of mail
service through reliably identified causal relationships plus that portion
of all other costs of the Postal Service reasonably assignable to such class
or type;
2
(3) the effect of rate increases upon the general public, business mail users,
and enterprises in the private sector of the economy engaged in the
delivery of mail matter other than letters;
(4) the available alternative means of sending and receiving letters and other
mail matter at reasonable costs;
(5) the degree of preparation of mail for delivery into the postal system
performed by the mailer and its effect upon reducing costs to the Postal
Service;
(6) simplicity of structure for the entire schedule and simple, identifiable
relationships between the rates or fees charged the various classes of mail
for postal services;
(7) the importance of pricing flexibility to encourage increased mail volume
and operational efficiency;
(8) the relative value to the people of the kinds of mail matter entered into
the postal system and the desirability and justification for special
classifications and services of mail;
(9) the importance of providing classifications with extremely high degrees
of reliability and speed of delivery and of providing those that do not
require high degrees of reliability and speed of delivery;
(10) the desirability of special classifications for both postal users and the
Postal Service in accordance with the policies of this title, including
agreements between the Postal Service and postal users, when available
on public and reasonable terms to similarly situated mailers, that—
(A) either—
(i) improve the net financial position of the Postal Service through
reducing Postal Service costs or increasing the overall contribution
to the institutional costs of the Postal Service; or
(ii) enhance the performance of mail preparation, processing,
transportation, or other functions; and
(B) do not cause unreasonable harm to the marketplace.
(11) the educational, cultural, scientific, and informational value to the
recipient of mail matter;
(12) the need for the Postal Service to increase its efficiency and reduce its
costs, including infrastructure costs, to help maintain high quality,
affordable postal services;
(13) the value to the Postal Service and postal users of promoting intelligent
mail and of secure, sender-identified mail; and
(14) the policies of this title as well as such other factors as the Commission
determines appropriate.
3
(d) Requirements.—
(1) In general.— The system for regulating rates and classes for market-
dominant products shall—
(A) include an annual limitation on the percentage changes in rates to
be set by the Postal Regulatory Commission that will be equal to
the change in the Consumer Price Index for All Urban Consumers
unadjusted for seasonal variation over the most recent available
12-month period preceding the date the Postal Service files notice
of its intention to increase rates;
(B) establish a schedule whereby rates, when necessary and
appropriate, would change at regular intervals by predictable
amounts;
(C) not later than 45 days before the implementation of any
adjustment in rates under this section, including adjustments made
under subsection (c)(10)—
(i) require the Postal Service to provide public notice of the
adjustment;
(ii) provide an opportunity for review by the Postal Regulatory
Commission;
(iii) provide for the Postal Regulatory Commission to notify the
Postal Service of any noncompliance of the adjustment with
the limitation under subparagraph (A); and
(iv) require the Postal Service to respond to the notice provided
under clause (iii) and describe the actions to be taken to
comply with the limitation under subparagraph (A);
(D) establish procedures whereby the Postal Service may adjust rates
not in excess of the annual limitations under subparagraph (A); and
* * *
(2) Limitations.—
(A) Classes of mail.— Except as provided under subparagraph (C),
the annual limitations under paragraph (1)(A) shall apply to a class
of mail, as defined in the Domestic Mail Classification Schedule as
in effect on the date of enactment of the Postal Accountability and
Enhancement Act.
(B) Rounding of rates and fees.— Nothing in this subsection shall
preclude the Postal Service from rounding rates and fees to the
nearest whole integer, if the effect of such rounding does not cause
the overall rate increase for any class to exceed the Consumer
Price Index for All Urban Consumers.
* * *
4
(e) Workshare Discounts.—

(1) Definition.— In this subsection, the term “workshare discount” refers to
rate discounts provided to mailers for the presorting, prebarcoding,
handling, or transportation of mail, under subsection (a).
(2) Scope.— The Postal Regulatory Commission shall ensure that such
discounts do not exceed the cost that the Postal Service avoids as a result
of workshare activity, unless—
(A) the discount is—
(i) associated with a new postal service, a change to an existing
postal service, or with a new workshare initiative related to an
existing postal service; and
(ii) necessary to induce mailer behavior that furthers the
economically efficient operation of the Postal Service and the
portion of the discount in excess of the cost that the Postal
Service avoids as a result of the workshare activity will be
phased out over a limited period of time;
(B) the amount of the discount above costs avoided—
(i) is necessary to mitigate rate shock; and
(ii) will be phased out over time;
(C) the discount is provided in connection with subclasses of mail
consisting exclusively of mail matter of educational, cultural,
scientific, or informational value; or
(D) reduction or elimination of the discount would impede the
efficient operation of the Postal Service.
* * *
(4) Report.— Whenever the Postal Service establishes a workshare discount
rate, the Postal Service shall, at the time it publishes the workshare
discount rate, submit to the Postal Regulatory Commission a detailed
report that—
(A) explains the Postal Service’s reasons for establishing the rate;
(B) sets forth the data, economic analyses, and other information
relied on by the Postal Service to justify the rate; and
(C) certifies that the discount will not adversely affect rates or
services provided to users of postal services who do not take
advantage of the discount rate.
5
STATEMENT OF THE ISSUES
products subject to limited statutory restrictions, including a statutory limitation on
the amounts of four specific workshare discounts: presorting, prebarcoding,
handling and transportation of mail. In its order, the PRC asserted authority to
regulate nonworkshare characteristics of mail pursuant to its authority to regulate
workshare discounts. Did the PRC exceed its statutory authority by concluding
that it could regulate nonworkshare mail characteristics under the workshare
discount provisions?
II. Establishing a worksharing relationship between two types of mail for
the purpose of calculating a workshare discount requires a benchmark and a
discounted variant of the benchmark where the difference between the two prices
is the costs avoided by worksharing. Under the PAEA, mail “products” are
defined as having different cost or market characteristics, and thus the difference in
price between two products cannot be limited to costs avoided by worksharing. Is
the PRC’s conclusion that the workshare discount provisions apply between
products contrary to law, arbitrary and capricious?
III. Establishing a worksharing relationship between two types of mail for
the purpose of calculating a workshare discount requires a benchmark and a
discounted variant of the benchmark where the difference between the two prices
6
is solely the costs avoided by worksharing. Single-Piece First Class Mail and
Presorted First Class Mail are distinct products that have different cost and demand
characteristics beyond the costs avoided by worksharing. Is the PRC’s conclusion
that a worksharing relationship exists between the two products contrary to law,
arbitrary and capricious?
STATEMENT OF THE CASE
On March 16, 2009, the Postal Regulatory Commission (PRC) issued Order
No. 192. In Order No. 192, the PRC gave notice of a proposed rulemaking to
examine methodologies for analyzing workshare discounts. (J.A. 1.) In response
to the order, interested persons, including the United States Postal Service (Postal
Service), filed comments with the PRC. (J.A. 1-2.) On August 11, 2009, the PRC
held a public hearing on its consideration of workshare rate design. (J.A. 387.)
After the hearing, the PRC issued its Notice of Inquiry No. 1, which requested that
interested persons address certain questions from the PRC concerning workshare
discount methodology issues. (J.A. 144.) Several interested persons, including the
Postal Service, filed responses. (J.A. 3-4, 282.)
After receiving the comments, reply comments and supplemental comments
of all interested persons, the PRC issued Order No. 536 (“Order”) on September
14, 2010. In the Order, the PRC adopted analytical principles regarding the
methodology used to evaluate workshare discounts under 39 U.S.C. § 3622(e).
7
(J.A. 314-85.) On October 13, 2010, the Postal Service filed a timely Petition for
Review by this Court pursuant to 39 U.S.C. § 3663.
STATEMENT OF THE FACTS
Under the Postal Reorganization Act of 1970 (PRA), Pub. L. No. 91-375, 84
Stat. 719 (1970), the Postal Service became an independent establishment of the
executive branch of the government of the United States. 39 U.S.C. § 201. Under
the PRA, the Postal Service initiated rate changes by requesting a recommended
decision from the PRC’s predecessor agency, the Postal Rate Commission. The
Postal Rate Commission submitted its recommended decision to the Governors of
the Postal Service. The Governors could “approve the recommended decision and
order it placed in effect; . . . allow the recommended decision to take effect under
protest and seek judicial review of it; . . . allow the recommended decision to take
effect under protest and return it to the Commission for further consideration; or
. . . reject the recommended decision and resubmit it to the Commission for further
consideration.” Mail Order Assoc. of America v. USPS, 2 F.3d 408, 414 (D.C. Cir.
1993). Under the PRA, rates primarily were based on the Postal Service’s costs,
and “the Postal Service was entitled to rates that provided sufficient revenues to
cover projected costs in a future test year.” Order Reviewing Postal Service
Market Dominant Price Adjustments, Docket No. R2009-2, p. 1 (P.R.C. March 16,
8
2009) (available at http://www.prc.gov/Docs/62/62705/Order_No_191.pdf) (Order
No. 191).
In 2006, Congress adopted and President George W. Bush signed the Postal
Accountability and Enhancement Act (PAEA), Pub. L. No. 109-435, 120 Stat.
3198 (2006). The PAEA, among other things, greatly narrowed the PRC’s role in
pricing decisions, and the Postal Service now “enjoys a general prerogative to set
rates.” Order at 16 (J.A. 333). It also directed the PRC to develop a modern
system for regulating the rates of market-dominant products, such as First-Class
Mail, “designed to achieve” a statutory list of “objectives, each of which shall be
applied in conjunction with the others.” 39 U.S.C. § 3622(a)&(b). As the PRC has
explained, “[t]he PAEA replaced [the PRA] model with a new process premised in
historical, rather than projected, costs” and establishing “a price cap ceiling on
increases for market dominant classes” of mail. Order No. 191 at 1.
When the Postal Service submitted its planned market dominant price
changes scheduled to take effect May 11, 2009, the PRC concluded that the Postal
Service’s workshare discounts for First-Class Mail and Standard Mail were not
based on the workshare cost avoidance methodologies employed under the PRA.
Order 191 at 19 & n. 14. As a result, the PRC initiated the rulemaking that is the
subject of the Postal Service’s Petition for Review. Id. at 23. The rulemaking was
about what worksharing is and how worksharing should be identified and analyzed
9
under the PAEA. In simple terms, a workshare discount is a discount provided to a
mailer that does something with its mail that the Postal Service ordinarily would
do. By saving the Postal Service from doing that work, the mailer earns a discount
on the postage rate for that mail. For example, when an individual places outgoing
mail in his or her mailbox, the Postal Service is responsible for transporting that
mail from that mailbox all the way to its destination. A large mailer in Seattle
targeting residences in the Washington, D.C. area can save some of the Postal
Service’s costs by arranging its own transportation from Seattle to a designated
Postal Service facility on the East Coast. By doing so, the mailer can earn a
discounted postage rate for that mailing.
As the PRC explained in the Order that is under review, there are “three
pricing standards that are objective, quantitative, and framed in mandatory terms.”
(J.A. 335.) One of those standards is that “[w]orkshare discounts are limited to
avoided costs,” J.A. 335, or, more precisely, workshare discounts may “not exceed
the cost that the Postal Service avoids as a result of workshare activity,” 39 U.S.C.
§ 3622(e)(2).
“Workshare discounts” under the PAEA consist of discounts for four
specific tasks that can be performed by mailers rather than the Postal Service: “the
presorting, prebarcoding, handling, or transportation of mail.” 39 U.S.C. §
3622(e)(1). For example, “[m]ailers can present mail that has been correctly
10
prebarcoded, or the Postal Service can apply barcodes to the mail itself.” (J.A.
291.) Mailers can “dropship mail closer to its destination,” or the Postal Service
can transport the mail all the way from the mailer to the customer. (Id.) All of the
worksharing activities have a common attribute: “the option exists for the function
to be performed by either the mailer or the Postal Service.” (Id.)
The costs avoided by worksharing, however, are not the only reason cost,
demand or pricing differences may exist between two different mail products. As
explained in more detail below (infra pp. 40-41), for example, the costs avoided
through worksharing do not represent the full cost differentials between Single-
Piece First-Class Mail and Presorted First-Class Mail. Against this background,
the Postal Service argued before the PRC that the two products are not in a
worksharing relationship while the PRC has concluded that they are. As both the
PRC and the Postal Service recognize, the analytical principles employed to assess
the legality of workshare discounts have a significant impact on rates charged to
institutional mailers and on the Postal Service’s pricing flexibility.
The Order adopting analytical principles regarding workshare discount
methodology does not isolate factual findings from legal analysis or policy
discussions. Accordingly, additional facts are set forth below in the context of the
arguments to which they relate.
11
SUMMARY OF THE ARGUMENT
In the rulemaking proceeding under review, the PRC expanded the definition
of worksharing well beyond work that can be performed by either the Postal
Service or a mailer. In so doing, it has created a discount tail that wags the pricing
dog. Instead of providing the Postal Service with the pricing flexibility that the
PRC itself has said was a principal goal of Congress in enacting the PAEA, the
PRC has made the workshare discount the force that drives pricing decisions for
one of the Postal Service’s flagship products, Presorted First-Class Mail and, in
turn, restricts the Postal Service’s options regarding other First-Class products.
First, the plain language of the PAEA limits workshare discounts to four
discrete activities: “the presorting, prebarcoding, handling, or transportation of
mail.” 39 U.S.C. § 3622(e)(1). While the PRC has authority to further define
those four specified activities, it does not have authority to add to the list of
worksharing activities. Nonetheless, that is precisely what it has done in its Order
by purporting to regulate, pursuant to its authority under the workshare provisions,
“ancillary workshare characteristics” that have nothing to do with work that can be
performed by either the mailer or the Postal Service and that do not result in any
“avoided costs” for the Postal Service. This Court should set aside the PRC’s
conclusion that it has the authority to regulate nonworksharing activities and mail
12
characteristics pursuant to the worksharing provisions of the PAEA because that
conclusion is arbitrary, capricious and contrary to the plain language of the PAEA.
Second, the PRC incorrectly concluded that worksharing relationships can
exist between and across mail products. By definition, mail products have
different cost characteristics, different demand characteristics or both. In contrast,
a worksharing relationship between two types of mail is predicated on the notion
that the only difference between the two is the costs avoided by a mailer’s
worksharing activity. In other words, there is a benchmark type of mail and a
workshared variant of that type of mail that costs less for the Postal Service to
process. That difference in costs – costs avoided – is reflected in a discount that
may not exceed the costs avoided by the worksharing activity. Contrary to the
PRC’s Order, a type of mail in one product group cannot serve as the benchmark
for a type of mail in another product group because those separate products have
different cost or demand characteristics. Thus separate products have cost
differentials or pricing differentials that are not related to any of the four specified
worksharing activities and do not reflect “costs avoided” by the Postal Service.
Moreover, this conclusion undermines the Postal Service’s pricing flexibility as
well as other objectives of the PAEA, while the PRC did not identify a single
objective of the PAEA that is served by its conclusion. In fact, the PRC suggested
that it could exercise its authority under the worksharing provisions of the PAEA
13
without reference to the objectives of the PAEA. In these circumstances, it is clear
that the conclusion that worksharing relationships can exist between and across
separate mail products is arbitrary, capricious and contrary to the PAEA.
Third, even if a workshare-discount relationship could exist across products,
the PRC incorrectly concluded that there is a workshare relationship between
Presorted First-Class Mail and Single-Piece First-Class Mail. The evidence in the
record does not support the PRC’s conclusion. To the contrary, the evidence
strongly suggests that Presorted and Single-Piece First-Class Mail are
fundamentally distinct types of mail, and it is inappropriate to benchmark one to
the other. According to the PRC, a worksharing relationship exists if benchmark
mail is likely to convert in significant numbers to the workshared variant when the
discount is provided and if workshared mail is likely to revert to the benchmark
type when the discount is withdrawn. The evidence in the record shows that the
historic process of conversion from Single-Piece to Presorted First-Class Mail is
largely over. Additionally, a presort mailer faced with a price increase due to
elimination of the discount is more likely to convert, where possible, to lower cost
and less profitable Standard Mail or to leave the mail altogether. Thus the
conclusion that a worksharing relationship must be maintained between some
unidentified subset of Single-Piece First Class Mail and Presorted First-Class Mail
is arbitrary and capricious, and this Court should grant the petition for review.
14
ARGUMENT

products subject to limited statutory restrictions, including a statutory
limitation on the amounts of four specific workshare discounts:
presorting, prebarcoding, handling and transportation of mail. In its
order, the PRC asserted authority to regulate nonworkshare
characteristics of mail pursuant to its authority to regulate workshare
discounts. Thus the PRC exceeded its statutory authority by concluding
that it could regulate nonworkshare mail characteristics under the
statutory limitation on workshare discounts.
A. Standard of Review
This Court’s review of the PRC’s order is governed by the Administrative
Procedure Act, 5 U.S.C. § 706. See 39 U.S.C. § 3663. The order below thus must
be held unlawful and set aside if, inter alia, it is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The
PRC’s statutory interpretation of the workshare discount provision of Title 39 is
governed by the familiar two-step standard first set forth in Chevron U.S.A. Inc. v.
NRDC, Inc., 467 U.S. 837 (1984). First, this Court must exhaust the “traditional
tools of . . . construction” to determine de novo whether the statute
“unambiguously addresses the matter at issue.” Id. at 843 & n.9; S. Cal. Edison Co.
v. FERC, 195 F.3d 17, 23 (D.C. Cir. 1999). Traditional tools require a court to
examine, inter alia, “the language and design of the statute as a whole.” S. Cal.
Edison, 195 F.3d at 24 (quotation marks omitted); see also, e.g., Nat’l Credit
Union Admin. v. First Nat’l Bank & Trust Co., 522 U.S. 479, 499-503 (1998). If
15
there is ambiguity in the statutory language, a court will ordinarily defer to an
agency’s reasonable construction of that ambiguity. Chevron, 467 U.S. at 843.
B. Analysis
In what can only be described as a remarkably bold attempt to re-write the
PAEA, the PRC concluded that the term “workshare discount” should be construed
to include mail characteristics that do not result from worksharing and do not
involve costs avoided by the Postal Service. That term, however, was fully defined
by Congress as follows:
rate discounts provided to mailers for the presorting,

prebarcoding, handling, or transportation of mail, as
further defined by the Postal Regulatory Commission.
39 U.S.C. §3622(e)(1). Admittedly, Congress authorized the PRC to further define
the four categories of workshare activities – presorting, prebarcoding, handling and
transportation – but nowhere in the statute did Congress authorize the PRC to add
to the list of workshare discounts. Nonetheless, that is what the PRC has done in
its order. Moreover, it has defined workshare discounts to include characteristics
of mail that have nothing to do with the mailer performing work that the Postal
Service otherwise would have to perform. In other words, the term “workshare
discount” – in the PRC’s view – includes things that involve no sharing of the
Postal Service’s work by the mailer.
16
The plain language of the workshare-discount provision is clear. Section
3622(e)(1) defines worksharing as four distinct activities that, as an option, mailers
may perform themselves and therefore qualify for workshare discounts. These
activities, when performed by mailers, allow the Postal Service to avoid work the
Postal Service would otherwise have done to process or deliver that mail.
The PRC’s expansion of the definition of “workshare discounts” is based on
its erroneous conclusion that “Section 3622(e) makes the Commission responsible
for establishing reasonable definitions of workshare discounts.” (J.A. 361.) The
plain language of the statute, however, does not support this conclusion. Congress
defined workshare discounts to include four specific activities and then authorized
the PRC to further define those four activities – not to add to the number of
worksharing activities. Because Congress has spoken directly to the issue of what
constitutes “worksharing,” no deference is owed to the views of the PRC, and the
rule of statutory construction expressio unis est exclusio alterius (the expression of
one is the exclusion of others) applies despite the administrative context. Mobile
Communications Corp. v. FCC, 77 F.3d 1399, 1404-05 (D.C. Cir. 1996). At some
points in its order, the PRC appears to recognize that its authority is limited to
further defining the “four categories of worksharing activity that are named in
section 3622(e).” (J.A. 359.) But the PRC did not confine itself to that – instead it
has expanded the concept of “workshare” to include mail characteristics and mailer
17
activities that are not listed in the statute and that do not substitute for work
performed by the Postal Service.
The PRC correctly notes that there are other mailer activities that change the
characteristics of the mail presented to the Postal Service for delivery, which in
turn result in cost savings to the Postal Service because those qualities of the mail
make it easier and more efficient to process that mail. But the PRC fails to
recognize that those characteristics, or qualities, do not constitute worksharing with
the Postal Service. Attempting to obfuscate the real issue, the PRC refers to these
as “ancillary workshare characteristics.” (J.A. 360.) The concept of “address
hygiene” is one example of these “ancillary workshare characteristics.” Mailers
that check their mailing lists to make sure the addresses are valid (i.e., use a
cleansed mailing list) provide mail that results in more accurate sorting, cheaper
handling and less undeliverable-as-addressed mail. But, contrary to the PRC’s
conclusion, this is not worksharing because the Postal Service could not perform
the work for the mailer if the mailer chose not to do it. Moreover, good “address
hygiene” on any type of mail – including Single-Piece First Class Mail sent by
individuals on a daily basis – reduces costs for the Postal Service, but no one
suggests that those individuals are entitled to a workshare discount off the price of
a First-Class stamp.
18
Non-worksharing activities undertaken by mailers certainly impact mail
characteristics, which in turn can reduce costs and increase postal efficiency.
These differences in cost can be reflected in price differences between mail with a
given characteristic and mail without that characteristic (e.g., letters vs. flats)
without characterizing it as a “workshare discount.” Long before the PRC’s
expansion of the definition of worksharing beyond things that actually involve
worksharing, those differences in costs were taken into account in pricing through
other means. See, e.g., Op. & Rec. Decision, Docket No. R90-1, at V-225 to V-
231 (P.R.C. Jan. 4, 1991) (reprinted in the addendum) (distinguishing rate
differentials between letters and flats from “traditional worksharing concepts”). In
other words, the Postal Service had the flexibility to recognize and price for such
non-workshare cost savings prior to the adoption of the PAEA, a law that was
meant to improve rather than restrict the Postal Service’s pricing flexibility. 39
U.S.C. § 3622(b)(4).
In its Order, the PRC essentially concludes that all cost differences between
non-workshared mail and its workshared variant reflect worksharing activity. This
is simply not true. Sometimes a cost difference is just a cost difference, not an
avoided worksharing cost or cost passthrough that is subject to evaluation under
Section 3622(e). If it does not involve one of the four specified worksharing
activities – each of which involves the mailer performing work that the Postal
19
Service would otherwise have to do – then it is not worksharing. If it is not
worksharing, the PRC should not be permitted to regulate it under Section
3622(e)(1) as its Order purports to do.
The PRC has already recognized a non-worksharing price differential in
another context, so there is no reason to believe that other non-worksharing cost
differentials cannot be accommodated through non-worksharing price differentials
and the application of the just-and-reasonable-rates standard rather than the rigid
100 percent passthrough limitation of Section 3622(e). For example, within First-
Class Presort automation letter prices, there is a price differential if the barcode
used meets the requirements for “full-service IMb (Intelligent Mail Barcode).”
Essentially, this is a format that allows for additional information to be included in
the barcode, beyond what is needed to sort the mail. As the PRC summarized the
Postal Service’s argument,
the Postal Service contends that the full-service IMb

option will not result in the Postal Service avoiding any
additional worksharing-related costs. Thus it concludes
that the full-service IMb is not worksharing. It argues
that the price is “a policy-based differential to promote
adoption of full service so that the promise of Intelligent
Mail can be more fully and expeditiously realized.”
Order No. 191 at 26 (supra p. 8). The Commission found “the proposed discounts
justified.” Id. at 28. Thus there is no reason non-worksharing cost differentials
20
need to be addressed under Section 3622(e) as if they were worksharing cost
differentials.
The PRC also misses the boat when it apparently concludes that mailers
must be encouraged to alter the characteristics of their mail through a rigid
workshare discount passthrough when that is hardly the case. Taking address
hygiene as an example again, there are reasons why mailers would want to use a
cleansed mailing list rather than an uncleansed mailing list (J.A. 292-93), not least
of which is that use of a cleansed mailing list increases the chances that the
mailer’s mail actually reaches the intended recipient in a timely manner and that
the recipient responds. Other mail characteristics reduce damage to the mail in the
mail stream and speed delivery, and such advantages have nothing to do with costs,
let alone costs avoided by the Postal Service by having the mailer do work the
Postal Service would otherwise do. Id.
The error in the PRC’s approach is plainly demonstrated by the guidelines it
adopted. The PRC explained that “section 3622(e)(1) should be construed to
include the mail characteristics resulting from the four workshare activities named
there, and closely related traits that, in the presence of the named activity” that
“affect the value . . . of the named worksharing activity,” are “practical for the
mailer to alter in response to the discount for the named worksharing activity,” and
“[w]hose cost impact cannot feasibly be isolated from the impact of the named
21
worksharing activity.” (J.A. 363.) In other words, the PRC concluded that the
definition of workshare discounts in Section 3622(e)(1) should be expanded to
include things that are not worksharing activities but “characteristics” that (1)
affect the value of a worksharing activity, (2) can be altered in response to the
workshare discount for other worksharing activities, and (3) produce a cost impact
that is different from, but cannot be isolated from, the worksharing activity. This
cannot possibly be a legitimate way to define the four specified worksharing
activities – it is an obvious and unwarranted expansion of those terms to things that
plainly are not included within them. It expands the PRC’s authority under the
workshare-discount provision to nonworksharing characteristics that relate to the
manner in which the mailer meets Postal Service specifications and has nothing to
do with work avoided by the Postal Service. This expansion of the PRC’s statutory
authority is at the expense of the Postal Service’s pricing flexibility1 and makes
pricing workshare discounts needlessly complex.
As the Postal Service explained in response to an inquiry by the PRC, the
concept of a workshare discount is not that complicated:
1
As noted throughout this brief, allowing the Postal Service pricing
flexibility is an explicit objective of the PAEA. 39 U.S.C. § 3622(b)(4). The
Postal Service, of course, recognizes that there are limits to its pricing flexibility,
and rightly so. However, when the PRC is adjusting its modern rate system or
interpreting statutory limitations on its design, the PRC’s choice between
alternatives should serve some objective identified in the PAEA if it undermines
another. Here the PRC has identified no objective served by its expansive
interpretation of workshare discounts.
22
Mailers can present mail that has been presorted to the

final sort, or the Postal Service can sort the same mail to
that level itself. Mailers can present mail that has been
correctly prebarcoded, or the Postal Service can apply
barcodes to the mail itself. Mailers can undertake the
handling and transportation necessary to dropship mail
closer to its destination, or the Postal Service can
undertake such handling and transportation itself. In each
instance, the option exists for the function to be
performed by either the mailer or the Postal Service, and
the intended measure of worksharing cost avoidance is
the cost avoided by the Postal Service by virtue of not
having to perform the function already performed by the
mailer.
(J.A. 289.) Under the PRC’s guidelines, simply meeting the prerequisites for a
workshare discount would constitute “worksharing” even though it has nothing to
do with costs avoided by the Postal Service. This approach makes no sense. For
example, a mailing must be compatible with the Postal Service’s automation
equipment in order to receive a discount. As the Postal Service explained,
If the mailer presents a mailpiece [that] cannot be run

through the Postal Service’s automation equipment, the
Postal Service would not be incurring any costs to
barcode that piece. It would make no sense, therefore, for
the Postal Service to grant a discount for prebarcoding
such a piece, as no costs would be avoided by the mailer
engaging in that activity under those circumstances. The
costs avoided by prebarcoding must presuppose that the
mailpieces in question can be run through postal
automation equipment, as it is such equipment that would
print any Postal Service-applied barcode.
(J.A. 291.) While designing a mailing to be compatible with the Postal Service’s
automation equipment meets the PRC’s guidelines for mail characteristics
23
governed by Section 3622(e)(1), and it certainly makes processing that mail more
efficient and less costly for the Postal Service, it has nothing to do with allowing
the Postal Service to avoid work it otherwise would do, and there are no “avoided
costs” that can be passed on to the mailer. That is, preparing an envelope so that it
is automation compatible is not worksharing.
The PRC notes that these “mail characteristics” are not listed in Section
3622(e) but claims that their “impact on the value” of a worksharing activity “must
be reflected in the size of the . . . discount if the purpose of the discount is to be
fulfilled.” (J.A. 362.) That simply is not correct. The purpose of the discount is
to allow the Postal Service to pass along to its customers the costs avoided by
having the mailer perform work that the Postal Service would otherwise do. It
does not serve the purpose of the discount to expand its reach to mail
characteristics that have nothing to do with work that the Postal Service would
otherwise have to perform.
Because the guidelines for construing the four explicit types of worksharing
in Section 3622(e)(1) adopted by the PRC exceed the authority granted to the PRC
by Congress and are contrary to the plain language (as well as the explicit
objectives) of the statute, this Court should vacate that portion of the PRC’s order
and limit the PRC’s Section 3622(e)(1) authority to the review of discounts for the
four specified worksharing activities only.
24
II. Establishing a worksharing relationship between two types of mail for

the purpose of calculating a workshare discount requires a benchmark
and a discounted variant of the benchmark where the difference
between the two prices is the costs avoided by worksharing. Under the
PAEA, mail “products” are defined as having either different cost or
market characteristics, and thus the difference in price between two
products cannot be limited to costs avoided by worksharing. The PRC’s
conclusion that the workshare discount provisions apply between
products is contrary to law, arbitrary and capricious.
The order below thus must be held unlawful and set aside if, inter alia, it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2)(A); see also 39 U.S.C. § 3663. An agency action that is
“devoid of needed factual support” may be struck down as arbitrary or capricious.
Assoc. of Data Processing Serv. Orgs. v. Board of Governors of the Fed. Reserve
Sys., 745 F.2d 677, 683 (D.C. Cir. 1984).
B. Analysis
Workshare discounts are “rate discounts provided to mailers for the presorting,
prebarcoding, handling, or transportation of mail.” 39 U.S.C. § 3622(e)(1). Unless a
specific exception applies, a workshare discount may not “exceed the cost that the
Postal Service avoids as a result of workshare activity.” 39 U.S.C. § 3622(e)(2). Thus,
as the PRC explained, the statute contemplates two reference points: a benchmark type
of mail, or base group, and a discounted variant of that mail. (J.A. 336.) The two rates
25
are linked in that the discounted variant provides a mailer with an incentive to do work
that the Postal Service would otherwise have to do, i.e. avoided costs.
Under the new system for rate regulation imposed by the PAEA, the workshare-
discount provisions of the PAEA apply only within products, not across products,
because (as explained more fully below) different mail products, by definition, do not
share the same cost and market characteristics. Thus the price differences between two
products are not limited to “costs avoided,” which means one product cannot serve as
the workshare benchmark for another product. Moreover, if, as the PRC has concluded,
the workshare-discount provisions apply across separate products (such as Single Piece
First-Class Mail and Presort First-Class Mail), the pricing flexibility intended for the
Postal Service under the PAEA is severely undermined.
To understand the current rate-setting system, some familiarity with the prior
system is necessary. Under the rate system in place prior to the adoption of the PAEA,
the Postal Service initiated omnibus rate cases at multi-year intervals as necessary to
maintain financial breakeven. In other words, rates were set in order to cover the Postal
Service’s anticipated costs over a designated period. Workshare discounts, when first
introduced, were based on cost models intended to estimate avoided costs (i.e., an
educated guess) rather than on direct measurement of the cost difference between actual
mail that had been and had not been workshared. Neither the Postal Service nor the
PRC knew how much mail would convert to workshared variants and at what price that
26
conversion would take place. In 2006, Congress adopted the PAEA and made
substantial changes to the rate-setting system that had been in place since 1971.
Over the past two decades, the Postal Service has collected a great deal of data
regarding mail that has and has not been workshared, and workshared products such as
Presorted First-Class Mail – which was originally a variant of Single-Piece First-Class
Mail – have become institutionalized and matured into separate products with their own
cost and demand characteristics. After the adoption of the PAEA in 2006, the PRC
recognized the two as separate products, explicitly deciding that they had different cost
or demand characteristics, when it designated Presorted First-Class Mail and Single-
Piece First-Class Mail as separate products. Order No. 43, Docket No. RM2007-1, ¶
4016 at p. 103 (P.R.C. Oct. 29, 2007) (available at www.prc.gov/Docs/58/58026/
FinalRuleswithTOC.pdf).
Price changes for market-dominant products under the PAEA are now expected
to be an annual occurrence. The overall increase for each class of mail is essentially
capped at the level of inflation. 39 U.S.C. § 3622(d)(1)(A). Price averaging is allowed
within classes to meet the overall cap, but is not allowed between classes. 39 U.S.C. §
3622(d)(2)(A). For First-Class Mail, the whole-integer constraint2 prevents the Postal
2
The “whole-integer constraint” is not mandated by statute or regulation,
but it reflects the very real constraint imposed on the Postal Service by the fact that
many of its customers purchase stamps one at a time. If the price of a first-class
stamp were increased to 44.7 cents, for example, customers would have to buy at
least 10 stamps per transaction. As a matter of customer service, these
27
Service from taking full advantage of the price cap each year, at least with respect to the
price of the First-Class stamp (which today is set at 44 cents). To interpret the
workshare-discount provision to apply between products – such as single-piece First-
Class Mail and Pre-Sort First-Class Mail – will impose an additional constraint that will
make it even harder to obtain the full price increase authorized by law. This is not the
result that Congress intended, which is why the PRC’s conclusion that the workshare-
discount provisions could be applied on an inter-product as well as an intra-product
basis should be set aside.
A prominent goal of the PAEA was to provide the Postal Service with increased
flexibility in pricing, as compared to the prior pricing regime. This is evident both from
the language of the statute and from its legislative history. See, e.g., 39 U.S.C.
3622(d)(4), (c)(7); Sen. Rep. No. 108-318 at 8, 10 (2004). This is not just the Postal
Service’s view. The PRC has also recognized that increased flexibility is central to the
Congressional design of the PAEA. See, e.g., Order No. 66, Docket No. R2008-1, p. 51
(P.R.C. Mar. 17, 2008) (http://www.prc.gov/Docs/59/59312/R2008-1FINAL.pdf);
Order No. 26, Docket No. RM2007-1, p. 78 at ¶ 3070 (P.R.C. Aug. 15, 2007) (“The
revamped ratemaking under the PAEA is designed to achieve various goals, principal
circumstances have constrained the Postal Service from implementing a rate

increase that would result in a First-Class rate involving a fraction of a penny. The
PAEA recognizes this constraint and permits rounding to the nearest whole integer,
but the resulting rate may not cause a class of mail to exceed the price cap. 39
U.S.C. §3622(d)(2)(B).
28
among them are to afford the Postal Service enhanced pricing flexibility. . . .”)
(http://www.prc.gov/Docs/57/57348/RM2007-1FINAL.pdf). In another order, the PRC
stated as follows:
The Commission concludes that one of Congress’s main

motives in enacting the PAEA was to simplify and expedite
the setting of postal rates. It further concludes that Congress
intended to give the Postal Service wide latitude in designing
specific rates and rate relationships, expecting that the
Commission would alter those decisions only where
disregard of particular statutory standards is clear.
Order No. 43, ¶ 2025 at p. 11 (P.R.C. Oct. 29, 2007) (supra p. 27). Thus the PRC has
implicitly acknowledged that an interpretation of the PAEA that undermines pricing
flexibility should be suspect. Instead of confining itself to altering the Postal Service’s
design of specific rates and rate relationships when they clearly “disregard . . . particular
statutory standards,” the PRC is attempting to expand one of those statutory standards –
the workshare discount – well beyond the statutory language in a manner that
undermines what the PRC itself has concluded was Congress’s intent in enacting the
law. Where, as here, the PRC fails to identify how such an interpretation serves any
other purpose of the law, an interpretation inconsistent with the clear and recognized
intent of Congress should be set aside.
In addition to changing the pricing provisions of the law, the PAEA made
equally substantial changes in mail classification. Congress replaced subclasses of mail
with “products.” Under the prior regime, the PRC held that the establishment of
29
separate subclasses required the showing of differences in both cost and demand. Op. &
Rec. Decision, Docket No. MC95-1, at III-10 (P.R.C. Jan. 26, 1996) (reprinted in the
addendum). In the PAEA, however, Congress enacted language that unambiguously
loosened the new classification criteria. It did so by defining a product as “a postal
service with a distinct cost or market characteristic for which a rate or rates are, or may
reasonably be, applied.” 39 U.S.C. § 102(6) (emphasis added). And while subclass was
the primary level of classification to which the pricing factors were applied before
2006, products are now the primary level of classification under the PAEA. Therefore,
while a failure to establish both cost and demand differences foreclosed treatment as a
subclass prior to 2006, the existence of either cost or demand differences is sufficient
under the PAEA to require treatment as a separate product.
Based on the PAEA’s new definition of product, the Postal Service concluded in
2007 that Presorted and Single-Piece First-Class Mail are separate products, and the
PRC agreed. According to the PRC, Presorted and Single-Piece products “represent
postal services with distinct cost or market characteristics.” Order No. 43, ¶ 4016 at p.
103 (supra p. 27).
The new statutory definition of product hinges on differences in costs or demand.
The determination that two types of mail are different products is relevant to the
application of the workshare discount provisions of section 3622(e) of the new law in
that one product cannot serve as a benchmark for the other without sacrificing the
30
Postal Service’s ability to take into account other costs and demand characteristics.
With different cost characteristics or different demand characteristics, the “discount”
between the two products should not be limited to costs avoided by worksharing as
required by Section 3622(e)(2) – there are other differences in cost and market
characteristics that may require or permit the “discount” between the two products to be
greater than the amount of costs avoided. This, of course, is not really a “discount” at
all (let alone a “workshare discount”) – but a recognition that the two products have
different cost and market characteristics. In other words, one product cannot serve as
the “benchmark” for a lower-priced, separate product. It is only when the cost and
market characteristics of two types of mail are the same that one type can serve as the
workshare-discount benchmark for the type that is discounted due to worksharing.
That is not to say that the PRC plays no role in setting the rates of individual
market-dominant products. As the Postal Service explained at length in its reply
comments to the PRC, the PRC may review the Postal Service’s pricing decisions with
respect to these products through the “just and reasonable” rate schedule objective of
section 3622(b)(8). (J.A. 249-65.) But to expand the workshare provision to apply
across and between separate products does not serve any objective of the PAEA and
serves to place the greatest part of the burden of future rate increases on the most
efficient, highest value mail in the system, as the intervenor will no doubt explain in its
brief. This makes no sense, especially given the clear intent of Congress that the rate
31
system should “maximize incentives to reduce costs and increase efficiency,” “allow
the Postal Service pricing flexibility,” and “assure adequate revenues, including
retained earnings, to maintain financial stability.” 39 U.S.C. 3622(b)(1, 4 & 5).
The Postal Service’s interpretation of the workshare provision serves multiple
objectives of the PAEA, while the PRC failed to identify a single objective served by its
interpretation. Instead, the PRC ignored the fact that pricing flexibility for the Postal
Service was one of the nine explicit objectives of the PAEA, 39 U.S.C. § 3622(b)(4),
and concluded that “there is no need to posit the existence of an overarching standard of
‘pricing flexibility’ that trumps not just the other qualitative standards of the [PAEA],
but its quantitative standards as well.” (J.A. 334-35.) The PRC’s refusal to interpret the
workshare provisions with the objective of pricing flexibility in mind – or any other
objective of the PAEA, for that matter – resulted in a decision that will certainly limit, if
not totally undermine, the Postal Service’s pricing flexibility with respect to one of its
most significant products (Presorted First Class Mail). The Order fails to identify any
other objective of the PAEA that this interpretation serves, highlighting its
inconsistency with the law.
The PRC, through a tortured and mistaken reading of subsection headings,
claims that it can interpret Section 3622(e) without reference to the objectives of the
PAEA. (J.A. 351, 353.) To be charitable, this is a novel approach to statutory
interpretation and rulemaking. Nowhere in its order does the PRC explain how its
32
interpretation furthers any of the objectives of the PAEA. Apparently, the PRC
believes that it can interpret the workshare provision and other “quantitative standards”3
without reference to the objectives of the PAEA because each “requirement” is framed
“in objective terms, in its own self-contained section . . . .” (J.A. 353.)
The PRC is simply wrong. The PAEA’s headings refer only to subsection
3622(d) as “requirements” for the design of the “system for regulating rates and classes
for market-dominant products.” The workshare-discount provision is in a separate
subsection of Section 3622. Even if subsection (d) could arguably be interpreted
without reference to the objectives of the PAEA because Congress described its
provisions as “requirements,” the same cannot be said for subsection (e). There is
nothing in the plain language or structure of Section 3622 that suggests that the PRC
should craft rules regarding workshare discounts without reference to the objectives of
the PAEA.
The PRC’s conclusion that “obtaining separate ‘product’ status on [the list of
products maintained by the PRC under Section 3642] implies nothing about whether
products on that list have, or do not have, a worksharing relationship” (J.A. 339), is also
plainly wrong. If the PRC is doing its job, then the list of products is a list of types of
mail that do not share cost characteristics or market characteristics or both. The PRC
3
The PAEA itself, of course, makes no distinction between quantitative and
qualitative standards.
33
correctly noted that workshare discounts are appropriate only where there is a clear
relationship between a “base group” (the benchmark) and the discount group. This
relationship exists only when both groups share that same cost and demand
characteristics. (J.A. 338.) This is consistent with the definition of a “product” in the
PAEA: “a postal service with a distinct cost or market characteristic.” 39 U.S.C. §
102(6). Thus two “products” within the meaning of Section 102(6) cannot have a
worksharing relationship because, by definition, they do not share the same cost and
demand characteristics.
Thus application of Section 3622(e) to the relationship between separate
products is inappropriate. Instead, the PRC should review the Postal Service’s pricing
decisions with respect to these products through the “just and reasonable” rate schedule
objective of section 3622(b)(8). This approach is required by the statute, as it is the
approach that harmonizes the various elements of Section 3622 and other provisions of
the law into a coherent, workable regulatory scheme. On the other hand, the language
and legislative history of the PAEA demonstrates that Section 3622(e) was not
considered to codify the rate relationship between Single-Piece and Presort First-Class
Mail that existed under the prior ratemaking regime.
The structure of the PAEA’s reporting requirements bolsters the argument that
the worksharing rule does not apply across products. For each workshare discount, the
Postal Service is required annually to provide the PRC with “[t]he per-item cost
34
avoided by the Postal Service by virtue of such discount,” “[t]he percentage of such
per-item cost avoided that the per-item workshare discount represents,” and “[t]he per-
item contribution made to institutional costs.” 39 U.S.C. § 3652(b)(1-3). But this
requirement exists only for “each market-dominant product for which a worksharing
discount was in effect” during the relevant period. 39 U.S.C. § 3652(b) (emphasis
added). The statute does not require any cost information across products. It is illogical
for the PRC to conclude that there are worksharing relationships between different
products (rather than simply within market-dominant products) when Congress clearly
did not contemplate such relationships. If Congress had contemplated workshare
relationships across products, it would have required the Postal Service to provide
detailed cost-avoidance data to the PRC in a different manner.
For all of these reasons, this Court should set aside the PRC’s decision that the
workshare-discount provisions of Section 3622(e) apply between products with
different cost or market characteristics as arbitrary, capricious and contrary to law.
35
III. Establishing a worksharing relationship between two types of mail for

the purpose of calculating a workshare discount requires a benchmark
and a discounted variant of the benchmark where the difference
between the two prices is solely the costs avoided by worksharing.
Single-Piece First Class Mail and Presorted First Class Mail are distinct
products that have different cost and demand characteristics beyond
the costs avoided by worksharing. Thus the PRC’s conclusion that a
worksharing relationship exists between the two products is contrary to
law and arbitrary and capricious.
The order below thus must be held unlawful and set aside if, inter alia, it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2)(A); see also 39 U.S.C. § 3663. An agency action that is
“devoid of needed factual support” may be struck down as arbitrary or capricious.
Assoc. of Data Processing Serv. Orgs., 745 F.2d at 683.
B. Analysis
Even if, theoretically, a workshare-discount relationship could exist across
products, the PRC incorrectly concluded that there is a workshare relationship
between First-Class Bulk and Single-Piece First-Class Mail. In its order, the PRC
acknowledged that the bulk metered mail (BMM) benchmark that it had used for
analyzing whether the pre-sort rates are greater than the avoided costs is
“obsolete.” (J.A. 357.) Nonetheless, it also concluded that there is still some other
unidentified “portion of single-piece mail that is likely to become workshared
given appropriate price incentive.” Id. This conclusion is contrary to the evidence
36
in the record before the PRC and is therefore arbitrary and capricious and should
be set aside.
Presorted and Single-Piece First-Class Mail are fundamentally distinct types
of mail, and it is inappropriate to benchmark one to the other. Doing so would
allow the rigid workshare-discount requirement to become the primary, or perhaps
exclusive, driver of the relative prices between the two products. In other words,
the price difference between the two products could not account for the intrinsic
cost differences between the two products. Specifically, presort mail costs
significantly less to process than single-piece even without considering the costs
avoided through worksharing. Tying the cost of presort to any type of First-Class
Mail and limiting the “discount” for presort to costs avoided would keep the
presort rates artificially high. Doing so will not drive presort mailers to single-
piece; it will drive them out of the mail into less expensive alternatives.
As the Postal Service explained to the PRC, “[w]orksharing in First-Class
Mail has been a fact of life for over thirty years. For the vast majority of
customers, the choice as to whether to retool and redesign processes to enable
presortation and making mail automation compatible was made long ago.” (J.A.
74.) At the PRC’s public hearing in this matter, Robert J. Brinkman, the
representative of one large mailer, explained that after the PAEA, “the basic
structure should be . . . individual products. Each individual product should have a
37
cost based on real data, and from that point the Postal Service should use its
pricing flexibility to maximize its profit.” (J.A. 391.) With respect to the
connection between Single-Piece and Presorted First-Class Mail, Brinkman said he
did not see the connection that the PRC based its order on, explaining that “it’s like
… if Honda goes in to decide whether it’s going to raise the price of a Civic by
$500 or $2000, it doesn’t bump up the price of the Accord to make up for it. It
prices each product separately based on the market characteristics.” (J.A. 392.)
Under the PAEA, that is what the Postal Service is supposed to be able to do. (Id.)
The fact that presort mailers are unlikely to revert to single-piece even if the
presort rate increases materially demonstrates that the two products do not have a
worksharing relationship. Contrary to the PRC’s conclusions in the decision under
review, the evidence before it strongly suggests that it is now unlikely that a
reduction in presort discounts (and corresponding increase in the presort rate)
would result in large quantities of presorted First-Class Mail re-converting to
Single-Piece First Class Mail. Mailers and mail consolidators have invested in
equipment and determined procedures for presorting mail. Unless there were
almost no price difference at all, it seems unlikely that large mailers would
abandon these procedures and choose to send their mail via Single-Piece First-
Class Mail. Instead, increasing the presort rates could cause them to abandon the
38
mail entirely. In its comments to the PRC, the Postal Service provided this
example:
a bank considering mailing notices to cardholders

advertising optional new service features is unlikely to
ponder whether to send the notices as Single-Piece or
Presort. The bank is far more likely to consider whether
to send them by mail at all, particularly if many of the
same customers can be reached with the same message
via the Internet. Even if the mail is the preferred method
to reach a customer, the bank is much more likely to
consider whether Standard Mail is the appropriate
substitute for Presorted First-Class Mail, rather than
Single-Piece First-Class Mail.
(J.A. 75.) The Postal Service, however, cannot be indifferent to the choice
between Presorted First-Class Mail and Standard Mail (which generally consists of
advertising mail) because Standard Mail is not as profitable as Presorted First-
Class Mail. In the Public Cost and Revenue Analysis Report for fiscal year 2010,
the unit contribution4 for Presorted First-Class Mail letters is reported at 23.5 cents
while the unit contribution for Standard Mail letters is on 8.5 cents. PCRA Report
Spreadsheet Tab “Cost1” (filed Dec. 29, 2010) (available at
http://www.prc.gov/Docs/71/71348/FY10PublicCRA.xls). When that fifteen-cent
4
Unit contribution is the difference between unit revenue and unit costs, i.e.,
the amount a piece of mail (the “unit”) contributes to institutional costs that are not
attributable to any particular mail product but are nonetheless necessary to
maintain the Postal Service’s operational networks and administration.
39
difference is multiplied by billions of pieces of mail,5 the impact of such a
migration on the Postal Service’s finances is obvious.
Empirical evidence strongly suggests that Presorted First-Class Mail is a
mature product in its own right. Over the past five years, metered and IBI
(information-based indicia) mail – long considered to be the single-piece mail most
likely to convert to presorted (J.A. 368) – has remained remarkably steady at
approximately 36 percent of the volume of Single-Piece First Class Mail. (J.A. 75-
76.) This confirms that the conversion from single-piece to presorted “has
generally run its course.” (J.A. 76.) In other words, the overlap between the
markets for these two types of mail (assuming any overall exists at all) is very
small.
Costs avoided by worksharing form only a part of the cost differences
between the two products. Even now – with the Postal Service substantially
exceeding the 100 percent limit on the workshare passthrough6 – there is a five-
5
The Postal Service reported the volume for Presorted First-Class Mail for
fiscal year 2010 at approximately 43.3 billion pieces. PCRA Report Spreadsheet
Tab “Volume” (filed Dec. 29, 2010) (available from the PRC website at
http://www.prc.gov/Docs/71/71348/FY10PublicCRA.xls).
6
In fact, the current discounts exceed 120 percent. The PRC recognized that
current workshare discounts for Presorted First-Class Mail exceed 100 percent but
decided not to require the Postal Service to “reduce . . . the discounts below their
current levels” (J.A. 357) because it has not yet decided on a new benchmark
(which is the starting point for that calculation).
40
cent difference between the average contribution per piece for the two products.7
If the worksharing discount was encompassing all of the cost differentials between
the two products, and that discount is more than 100 percent, then the contribution
of presorted mail should be less than – not more than – single piece mail.
It makes little sense (and is inconsistent with the PAEA) to impose a rigid
price relationship between single-piece and presorted mail based on only one facet
of the differences in cost and demand between the two. Moreover, it creates
significant practical problems and undermines one of the major objectives of the
PAEA: pricing flexibility. Despite their different cost structures and different
markets, the pricing of these two types of First-Class Mail is necessarily
interrelated because the inflation-based price cap applies to First-Class Mail as a
group. Tying them together significantly reduces the Postal Service’s pricing
flexibility.
Rigid price-design constraints (such as those imposed by the Order) result in
untenable prices and pricing relationships. The Postal Service explained this
problem in detail in its comments to the PRC. (J.A. 77-83.) In short, matching the
stamp prices to the inflation-based price cap is already difficult. Assuming a price
cap of 1.741 percent and a stamp price of 44 cents, the price of a stamp would rise
7
The average unit contribution for Single-Piece First Class letters is 18.3
cents while the average unit contribution for Presorted First Class letters is 23.5
cents. PCRA Report Spreadsheet Tab “Cost1” (filed Dec. 29, 2010) (available at
http://www.prc.gov/Docs/71/71348/FY10PublicCRA.xls).
41
to 44.766 cents if the Postal Service applied the average cap amount directly to the
stamp price. Due to the whole-integer constraint – the bias against requiring
fractions of a penny to buy a First-Class stamp – such a stamp price is untenable,
and the Postal Service has to choose between rounding up or down, and then
adjusting the other First-Class Mail rates, such as Presorted First-Class Mail, to
level the overall increase in First-Class rates to a percentage at or just below the
cap. The assumptions in this example are precisely the numbers faced by the
Postal Service in its most recent Notice of Market Dominant Price Adjustment.
Notice of Price Adjustment, Docket No. R2011-2, p. 3 (filed Jan. 13, 2011)
(available online at www.prc.gov/Docs/71/71550/Notice%20of%20Rate%20
Adjustment.Final.pdf); see also J.A. 78 (setting out similar example).
Using the numbers from the example above, suppose the Postal Service
wanted to round the stamp price up to 45 cents. Then the above-average stamp
price increase would need to be balanced by below-average increases for presorted
mail. The combination of above-average increases in stamps and below-average
increases in presorted mail would necessarily cause an increase in the effective
pricing differential for presorted mail. But this is not permissible. As explained
above, the pricing differential between the two products already exceeds 100
percent of the costs avoided through worksharing. Thus the Postal Service must
42
round down, leaving the price of a stamp at 44 cents and raising the prices of other
First-Class products by more than the rate of inflation.
In this example of a current pricing decision, the PRC’s conclusion in its
Order regarding the relationship between Presorted and Single-Piece First-Class
Mail has the bizarre effect of eliminating the Postal Service’s basic choice between
whether to round up the price of a First-Class stamp to 45 cents or to round down
to 44 cents. As long as the Postal Service’s avoided costs act as a rigid ceiling on
the price differential, it may be impossible to accommodate any increase in that
differential, and the option of rounding up the price of a First-Class stamp is
unavailable to the Postal Service. This is not the pricing flexibility contemplated
by the PAEA.
The negative practical result of the PRC’s insistence in maintaining a rigid
relationship between single-piece and presorted mail can be shown further by the
Postal Service’s most recent notice of price adjustments. To obtain an overall
price increase for First-Class products that matches the price cap, the price of
presorted letters and cards will increase by an average of 1.796 percent, the price
of flats by 5.343 percent, parcels by 3.753 percent, and international mail by 3.974
percent. Notice of Price Adjustment, Docket No. R2011-2, p. 12. By tying the
prices for Presorted First-Class Mail to Single-Piece First Class Mail, the Order
gave no flexibility for the Postal Service to keep the price of Presorted First-Class
43
Mail steady (even though it is the more efficient and more profitable product and
the Postal Service should be encouraging more of it rather than less) without even
more drastic increases in the prices for First-Class flats, parcels and international
mail. Driving up the price of First-Class presorted mail, flats, parcels and
international mail because of an artificial connection drawn between products is
inconsistent with the objectives of the PAEA because it results in an arbitrary
schedule of rates rather than “a just and reasonable schedule of rates.” 39 U.S.C. §
3622(b)(8). It is also a far cry from the “pricing flexibility” that was, according the
PRC, the intent of Congress.
Adding a rigid relationship between some category of single-piece and
presorted mail makes dealing with the price cap substantially more difficult, as the
examples set forth above and in the Postal Service’s comments show. Of course,
the problem can be overcome by the Postal Service lowering rates to stay under the
cap and preserve a 100 percent workshare of avoided costs, or it can pass through
less than 100 percent of avoided costs, but these options could result in less
revenue when inflation and costs are rising. (J.A. 80-82.) Or, as the Public
Representative suggested in its comments and the example above demonstrates, the
Postal Service can use the rest of its First-Class products as a “plug” to fill the gap
between the price cap and the rates for single-piece and presorted mail. But that
“plug” represents more than 20 percent of the entire volume of First-Class Mail.
44
(J.A. 83.) First-Class Parcels alone generated more than $700 million in revenue
in fiscal year 2008. (Id.) These products are too significant to relegate their prices
to the status of a “plug.” Indeed, the necessity of a “plug” reveals the
inconsistency between the Order and the objectives of the PAEA.
These illustrations demonstrate that not only is it impractical to link the rates
for single piece and presorted mail, but it undermines important objectives of the
PAEA. Not only does it inhibit pricing flexibility (39 U.S.C. § 3622(b)(4)), it also
makes it harder to “assure adequate revenues” for the Postal Service “to maintain
financial stability” (39 U.S.C. § 3622(b)(4)), undermines “predictability and
stability in rates” (39 U.S.C. § 3622(b)(2)), and jeopardizes the Postal Service’s
ability to “maintain high quality service standards” (39 U.S.C. § 3622(b)(3)). On
the other side of the ledger, linking the price of presorted mail to single-piece mail
does nothing to “maximize incentives to reduce costs and increase efficiency” (39
U.S.C. § 3622(b)(1)), “reduce the administrative burden and increase the
transparency of the ratemaking process” (39 U.S.C. § 3622(b)(6)), “enhance mail
security and deter terrorism” (39 U.S.C. § 3622(b)(7)), or “allocate the total
institutional costs of the Postal Service appropriately between market-dominant
and competitive products” 39 U.S.C. § 3622(b)(9)). While one could argue that
the PRC’s decision helps to “maintain a just and reasonable schedule for rates and
classification” (39 U.S.C. § 3622(b)(8)) in some narrow way, the PRC did not
45
make that argument, and it is just as easy to show that the decision may result in
unjust and unreasonable rates. As explained above, in certain circumstances the
Postal Service would have to raise prices for the most efficient and profitable mail
in the system to take full advantage of the available room under the price cap.
The PRC – citing no actual evidence in the record – suggests that there is a
“pool of single-piece mail that can be considered amenable to conversion to presort
mail” that is “quite large” merely because that mail is “machinable, homogeneous,
not barcoded but with machine-printed addresses.” (J.A. 368 & n.34.) The PRC
also notes that “[a] significant industry exists for the purpose of seeking out current
users of” such mail “for conversion to presort mail.” (J.A. 369.) But the
conclusion it draws does not follow. If there really is a substantial amount of
single-piece mail that could convert to presort, that industry would have made
headway over the past five years in converting that mail. The data provided by the
Postal Service shows just the opposite: the combined volume of bulk metered mail
and information-based indicia mail has remained a relatively constant percentage
of single-piece mail over the past five years. In other words, that mail is
converting at only a marginal rate, if at all.
The PRC falls back on the conclusion that “[c]lose similarities between the
economic purpose and the functionality of presort First Class Mail and a
substantial minority of Single-Piece First Class Mail indicates[s]” that the two
46
distinct products are “in a worksharing relationship.” (J.A. 371.) Upon closer
examination, however, this rationale appears silly. The PRC’s order states that the
economic purpose of the two products is the same: “secure transmission of
individualized, confidential, time-sensitive messages and documents. The main
uses for both are transactions (bills, invoices and statements) or correspondence.”
(J.A. 367-68.) That description is so broad that it also includes portions of Priority
Mail, Express Mail and, amazingly, e-mail. The fact that all of these types of
“mail” fit the market described by the PRC certainly does not demonstrate that
these very different products are in a worksharing relationship.
In these circumstances, the PRC’s decision that the price of Presorted First-
Class Mail should be tied directly to the price of some to-be-determined subset of
Single-Piece First Class Mail is unsupported by the record evidence, arbitrary and
capricious, and plainly wrong. Accordingly, this Court should set aside that
portion of the Order.
CONCLUSION
For the reasons stated, this Court should grant the petition for review and
remand the matter for the PRC to adopt an analytical framework for applying the
worksharing provision of the PAEA that (a) does not apply the worksharing
provision to activities and mail characteristics that are not one of the four
worksharing activities specified in the statute; (b) does not apply the worksharing
47
provision across separate product groups; and (c) recognizes that neither Single-
Piece First Class Mail nor any subset thereof is in a worksharing relationship with
Presorted First-Class Mail because the two separate products have cost and
demand differences unrelated to any worksharing activities of the mailer.
Dated: February 11, 2011 Respectfully submitted,
MARY ANNE GIBBONS

Executive Vice President & General Counsel
/s/ Michael J. Elston

MICHAEL J. ELSTON
Office of the General Counsel
United States Postal Service
475 L’Enfant Plaza, SW
Washington, DC 20260
(202) 268-7432
michael.j.elston@usps.gov
Of Counsel:
R. ANDREW GERMAN
Managing Counsel, Pricing
& Product Development
475 L'Enfant Plaza, SW
Washington, D.C. 20260
48
CERTIFICATE OF COMPLIANCE
Certificate of Compliance With Type-Volume Limitation,

Typeface Requirements, and Type Style Requirements
1. This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because:
X this brief contains 11,415 words, excluding the parts of

the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii), or
this brief uses a monospaced typeface and contains lines

of text, excluding the parts of the brief exempted by Fed. R. App. P.
32(a)(7)(B)(iii).
2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because:
X this brief has been prepared in a proportionally spaced typeface using

Times New Roman in 14 point , or
this brief has been prepared in a monospaced typeface using

with .

Attorney for the U.S. Postal Service
Dated: February 11, 2011
49
CERTIFICATE OF SERVICE
I hereby certify that on February 11, 2011, the foregoing brief and its
addendum were electronically filed with the U.S. Court of Appeals for the District
of Columbia Circuit by using the CM/ECF system. I further certify that counsel
for the respondent and intervenors are registered as ECF filers and that they will be
served by the CM/ECF system.

MICHAEL J. ELSTON
Office of the General Counsel
475 L’Enfant Plaza, SW
Washington, DC 20260
(202) 268-7432
michael.j.elston@usps.gov
50
ADDENDUM
Table of Contents
Op. & Rec. Decision, Docket No. R90-1,

p. V-225 to V-231 (P.R.C. Jan. 4, 1991) .............................................. ADD 1
Op. & Rec. Decision, Docket No. MC95-1,

p. III-10 (P.R.C. Jan. 26, 1996) ............................................................. ADD 8
51
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6
ADD 7
ADD 8
ADD 9
ADD 10

USPS Brief in PRC Worksharing Litigation

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Case: 10-1324 Document: 1292961 Filed: 02/11/2011 Page: 1

Oral Argument Has Not Been Scheduled

IN THE UNITED STATES COURT OF APPEALS

UNITED STATES POSTAL SERVICE,

On Petition for Review of an Order of

BRIEF OF THE UNITED STATES POSTAL SERVICE

MARY ANNE GIBBONS

A. Parties, Intervenors and Amici

Petitioner in this matter is the UNITED STATES POSTAL SERVICE.

Respondent in this matter is the POSTAL REGULATORY COMMISSION

This is a petition for review of agency rulemaking. Numerous persons and

The NATIONAL POSTAL POLICY COUNCIL moved for leave to

B. Ruling Under Review

14, 2010, in Docket No. RM2009-3.

Certificate as to Parties, Rulings and Related Cases ..................................................i

Table of Authorities ..................................................................................................iv

Jurisdictional Statement .............................................................................................1

Statutory Provision (39 U.S.C. § 3622) .....................................................................2

Statement of the Issues...............................................................................................6

Statement of the Case.................................................................................................7

Statement of the Facts ................................................................................................8

Summary of the Argument.......................................................................................12

I. The Postal Service has flexibility to set rates for market-dominant

A. Standard of Review .............................................................................15

II. Establishing a worksharing relationship between two types of mail

A. Standard of Review .............................................................................25

III. Establishing a worksharing relationship between two types of mail

A. Standard of Review .............................................................................36

Certificate of Compliance ........................................................................................49

Certificate of Service ...............................................................................................50

Addendum (Table of Contents) ...............................................................................51

Assoc. of Data Processing Serv. Orgs. v. Board of Governors

5 U.S.C. §706...............................................................................................15, 25, 36

*39 U.S.C. § 102(6) ...........................................................................................30, 34

39 U.S.C. § 3622(a) .........................................................................................9

*39 U.S.C. § 3622(b)..............................................9, 19, 22, 31-32, 34, 44-45

39 U.S.C. § 3622(c) .......................................................................................28

39 U.S.C. § 3622(d)........................................................................... 27-28, 33

* Authorities upon which we chiefly rely are marked with asterisks.

39 U.S.C. § 3652................................................................................................ 34-35

39 U.S.C. § 3663..................................................................................1, 8, 15, 25, 36

Postal Accountability and Enhancement Act (PAEA), Pub. L. No. 109-435,

Postal Reorganization Act of 1970 (PRA),

Sen. Rep. No. 108-318 (2004) .................................................................................28

DECISIONS OF THE PRC

Order Reviewing Postal Service Market Dominant Price Adjustments,

BMM Bulk Metered Mail

Order Order Adopting Analytical Principles Regarding Workshare

IBI Information-Based Indicia

IMb Intelligent Mail Barcode

PAEA Postal Accountability and Enhancement Act

PCRA Public Cost and Revenue Report

PRA Postal Reorganization Act

PRC Postal Regulatory Commission

This petition challenges an order of the Postal Regulatory Commission

(“PRC”) adopting an analytical framework for its review of workshare discounts

pursuant to 39 U.S.C. § 3622(e). This Court has jurisdiction pursuant to 39 U.S.C.

petition was timely filed on October 13, 2010. See id.

The Postal Service has standing under 39 U.S.C. § 3663 because it is

“adversely affected or aggrieved” by the PRC’s final order adopting analytical

principles regarding workshare-discount methodology. The order substantially

increases the PRC’s authority to review non-workshare rate changes and

to law, arbitrary and capricious.