Legislation passed by Congress in 2006 normally limits rate increases on captive mail products to the rate of inflation as measured by the Consumer Price Index (“CPI”). This restriction, commonly known as the CPI cap, is the primary safeguard for captive mailers from abuse of the Postal Service’s pricing power. The law has an exception-informally known as the “exigency” provision-that allows the Postal Service to impose above-inflation rate increases when the increases are designed to recover losses caused by “extraordinary” or “exceptional” circumstances, and the Postal Service will be unable to provide necessary service without the extra money.

In 2010, the Postal Service proposed to increase its rates of postage on captive mail by several billion dollars annually above the rate of inflation. The Postal Service asserted that above-inflation increases were necessary to recover losses caused by declines in mail volume caused by the 2007-2009 recession.

The Alliance, joined by a handful of other trade associations, organized an industrywide coalition of mailers in opposition to the rate increase. We argued that the law allowed the Postal Service to charge above-inflation rate increases only when necessary to recover losses that were caused by extraordinary or exceptional circumstances. While the 2007-2009 recession might be considered extraordinary or exceptional, most of the Postal Service’s losses appeared to result from the long-term diversion of communications volume from mail to the Internet, and from other long-term or structural causes that were neither extraordinary or exceptional. In late 2010, the Commission disapproved the proposed rate increase. When the Postal Service challenged the decision in the Court of Appeals, the Alliance joined a coalition that defended the decision in court. The Postal Service abandoned the case in late 2011.

The Postal Service filed a new exigent rate increase request in September 2013, this time for a permanent increase of 4.3 percent. The Alliance again took part in a coalition opposing the increase. We argued that the Postal Service had again failed to meet its burden of proof.

In December 2013, the Commission authorized the Postal Service to implement the 4.3 percent increase, but only as a temporary surcharge that must be rescinded once it generates $3.2 billion in extra revenue. (By contrast, making the increase permanent would generate extra revenue worth about $60 billion.) Both the mailers and the Postal Service have challenged the Commission decision in the Court of Appeals. The mailers contend that the Postal Service has failed to justify even the partial increase; the Postal Service contends that the Commission should have allowed the increase to be permanent. The Alliance’s counsel is lead counsel to the mailing industry in the matter.