New study shows anti-competitive practices affecting USPS
While Amazon ostensibly advocates for postal reform, it has engaged in two types of anticompetitive conduct that threaten the solvency of the U.S. Postal Service (USPS) and evidence a desire to extend and perpetuate its dominance over e-commerce. First, Amazon has lobbied to combine mail and parcel delivery under one cost center, thus obscuring the latter’s contribution to institutional costs. Such a policy would allow Amazon to conceal the uneconomic pricing it receives under the Parcel Select program, the USPS ground bulk package “last-mile” delivery service that Amazon and other parcel shippers use. Amazon receives such favorable pricing in the form of special discounts, putting upward pricing pressure on the standard rates for parcels and letters that smaller shippers and individuals pay and placing taxpayers at risk of having to bail out the popular agency when losses occur. Original empirical evidence suggests that Amazon’s lucrative negotiated service agreement (NSA) with the USPS has prompted the latter to attempt to recover any losses on the Amazon deal by raising prices to other customers. Second, Amazon has established a network of distribution facilities in primarily urban locations, leaving USPS to serve the high-cost, largely rural areas—a “cream-skimming” strategy that exploits the Postal Service’s universal service mandate. Further, Amazon’s staunch anti-labor positions and its exploitation of USPS should raise concerns about its motivation for lobbying in favor of Medicare integration. While the transition of postal workers to Medicare and/or postal employee health benefit plan has drawn bipartisan support, the scope of the change remains opaque and its impact on Medicare warrants further analysis. The paper concludes with concrete policy proposals that address and mitigate Amazon’s anticompetitive conduct. In particular, we propose (1) restrictions on special discounts off USPS’s standard parcel rates granted to large shippers that do not reflect legitimate cost savings to USPS; and (2) to maintain any special discount from USPS, a large shipper would be unable to use the USPS for lastmile service on routes USPS deems unprofitable unless fully offset with more lucrative routes in congested areas.