After Supreme Court Ruling, Where Won’t The Post Office Compete Next?

Issue Brief

Imagine an enormous company – an organization with the largest workforce of any U.S. company except Wal-Mart. Yet it doesn’t pay taxes, ignores SEC guidelines, and sells fraudulent products to consumers. It has a complete monopoly in its own industry and makes predatory raids into others. Now imagine that the Supreme Court declares this company can’t even be sued in a court of law.

Well, guess what? This organization exists. It’s your friendly Postal Service.

In the high-profile case of US Postal Service v. Flamingo Industries, the Supreme Court recently ruled that because USPS is a government agency, it cannot be sued under federal antitrust law – even when it acts in ways that would be illegal for a private enterprise.

The details of the case aren’t especially exciting. An Illinois mail sack producer accused USPS of violating antitrust laws when it terminated their contract. But the implications of the ruling against Flamingo are enormous. By declaring that USPS cannot be sued under anti-trust law, the Supreme Court reaffirmed what postal management seems to have forgotten: USPS is a government agency, not a private company.

Government agencies can’t be sued under monopoly laws. But if the Postal Service is, in fact, part of the government, what’s it doing competing with tax-paying private companies? The Flamingo ruling is a clear sign that USPS needs to return to its core mission of delivering letters.

If other government agencies decided to tap into the private sector, then couldn’t the Social Security Administration have its own professional cycling team? Or the FCC sell cut-rate Internet access on the side? This is exactly what the Postal Service does. It is engaged in all sorts of costly private-sector activities that have nothing to do with its core mission.

It’s now fairly common knowledge that USPS spent over $40 million sponsoring Lance Armstrong. But most people would be surprised to learn that it has also spent millions on pro football, golf and baseball – including over $3.6 million on the New York Yankees. With its absolute lock on first-class mail, the Postal Service hardly needs to be hustling additional business in sports arenas.

And why is the Post Office in the dime-store business of selling T-shirts, teddy bears, coffee mugs, phone cards and framed artwork? What will it start selling next – ice cream bars to neighborhood children?

USPS should also stop competing with private companies such as FedEx and UPS in the parcel business. To compete against these more efficient organizations, the Postal Service abuses its privileged monopoly power by pricing first-class stamps artificially high to help subsidize trucks and other equipment it uses to deliver express mail and packages.

In other words, consumers are paying more than they need to for regular mail, and the price keeps going up. The President’s Commission on USPS declared last year that “rate increases have become the first cure for the fiscal woes of the Postal Service, not the last.”

In addition to these subsidies, USPS has many other unfair advantages. It doesn’t have to pay taxes or even parking tickets, and is free from most financial transparency regulations. The Flamingo judgment tilts the playing field even further to USPS’s advantage. Now that the Postal Service can’t be sued under anti-trust law, it will be able to do even more damage to consumers and legitimate private business – while raising the costs for anyone who uses the mail. This should not be allowed to happen. The Flamingo ruling sends a clear message: It’s time to rein in this runaway government agency.