Postal Monopoly Fails to Deliver Competition
Audiences watching horror films know too well that, when the menacing phone call is coming from inside the house, the protagonist is bound to have a bad time. Lawmakers and antitrust regulators should take that lesson to heart when evaluating the government monopolies lurking deep in the halls of Washington, D.C., bureaucracies. The Department of Justice’s Apple and Google investigations are kicking into high gear, resulting in endless legal costs, convoluted theories of harm, and higher prices for consumers. Yet, regulators bemoaning anti-competitive conduct in the private sector refuse to scrutinize far worse conduct by government-run “businesses,” such as the U.S. Postal Service. Armed with an expansive mandate and far-reaching legal immunity, the Postal Service has been able to box out any potential competitors and impose its terms on millions of taxpayers and consumers. It’s time for a new and more competitive approach to postal policy.
Despite what folks at the current Federal Trade Commission (FTC) say, it’s exceedingly difficult for private companies to deliver a knockout blow to all their competitors. The FTC talks about one possible path to monopoly called “predatory pricing,” in which “below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time.” The agency admits this is rare, likely because significant short-term pain outweighs any (hypothetical) long-term gain. But a government agency, such as the Postal Service, with access to tens of billions of taxpayer dollars has little issue undercutting its rivals on “competitive” (i.e., non-monopoly) business lines. Over the past 15 years, America’s mail carrier has greatly expanded its package-delivery operations and kept “last-mile” (post office–to–doorstep) prices low. However, these low prices are simply not reflective of underlying delivery costs.
The excesses of a taxpayer-funded monopoly should be a wake-up call for antitrust zealots at the FTC and DOJ.
According to a 2022 report by the Taxpayers Protection Alliance, the Postal Service is scarcely attributing any vehicle depreciation and network travel costs to packages, even though the agency is in the middle of procuring larger and boxier vehicles specifically designed to accommodate parcels. Strangely, the Postal Service doesn’t attribute any headquarters-related expenses to package deliveries, even though “the IG has issued multiple reports per year specifically analyzing the rise of the package market and [Negotiated Service Agreements] that are likely package specific.” Because parcel prices must cover the costs borne by their delivery, the Postal Service’s suspiciously low cost estimates give the agency legal room to keep prices low.
As a result, economic analysts Dr. Robert L. Shapiro and Isaac Yoder note, “USPS is able to underprice its competitors in parcel deliveries despite its relative inefficiency,” and, thus, “USPS delivers millions of packages for its competitors on a daily basis.” Regulators at antitrust agencies such as the FTC and DOJ should be alarmed that the Postal Service is undercutting competitors via taxpayer subsidies rather than developing better, more efficient operations. But the antitrust apparatus tends to stay away from federally sanctioned operations such as the Postal Service, entrusting oversight to the Postal Regulatory Commission. The commission could try to get the Postal Service to end its pricing shenanigans, but instead it chooses to uncritically endorse the agency’s pricing methodology.
Parcel pricing is just the tip of the iceberg for the agency’s anti-competitive conduct. The Postal Service allows for “extremely urgent” mail to be delivered privately, but this niche has proven narrow. Postal scholars J. Gregory Sidak and Daniel F. Spulber recount, “In a highly publicized incident in 1993, armed postal inspectors arrived at the Atlanta headquarters of Equifax Inc., a large credit reporting company, and demanded to know whether all the mail that it had sent by Federal Express was truly urgent.” Given the mission creep at the U.S. Postal Inspection Service, it’s only a matter of time before inspectors start poking around competitors again.
America’s mail carrier can do its part to encourage a more competitive marketplace. By properly pricing parcels, the Postal Service can deliver on a level playing field with rivals such as United Parcel Service, FedEx, and Amazon. The agency can also resolve to stay out of markets such as money orders and banking to avoid repeating the same mistakes it has made with package pricing. Finally, postal leadership should work with Congress to liberalize the mail monopoly and allow for some letter-delivery competition. The Postal Service can compete with private players in select cities while still maintaining its universal service obligation and profiting off its vast network.
Antitrust regulators’ “usual fixes” of prolonged legal battles and divestitures are often clumsy and would be particularly ill-suited when directed toward a federal agency. But the excesses of a taxpayer-funded monopoly should be a wake-up call for antitrust zealots at the FTC and DOJ. The largest threats to competition lie within Washington, D.C.
David Williams is the president of the Taxpayers Protection Alliance.
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