Abolishing the Letter-Box Monopoly

The Criterion Journal on Innovation Vol. 1:401

78 Pages Posted: 23 May 2018

Date Written: 2016

Abstract

The U.S. Postal Service has various statutory monopolies over the delivery of mail in the United States. In addition to selling its reserved products, the Postal Service competes with private firms in the provision of non-reserved products, such as parcels and overnight mail. These statutory monopolies over mail delivery are called the Private Express Statutes, the first elements of which Congress enacted in 1792 and did not fundamentally change in its most recent round of major postal legislation, the Postal Accountability and Enhancement Act (PAEA) of 2006.

However, in addition to benefiting from the protection of the Private Express Statutes, the Postal Service has a separate monopoly over the use of the customer’s letter box. Although a letter box is the customer’s own private property, section 1725 of the U.S. Criminal Code prohibits the deposit of unstamped “mailable matter” in the letter box. The letter-box monopoly raises the cost of delivery for the Postal Service’s rivals in the markets for non-reserved delivery products that fit in the customer’s letter box. United Parcel Service (UPS) or FedEx, for example, may not leave their express letters in the letter box if the recipient is not home. Unless the sender designates that the urgent letter may be left at the door if the recipient is not available, the private carrier will need to attempt another delivery—at obvious cost. The letter-box monopoly also deters vertical integration into the delivery of parcels by high-volume shippers (such as Amazon or eBay) that have large numbers of routine mailings, thereby denying competitors the opportunity to achieve potential efficiency gains and denying consumers the opportunity to share in the benefits from such efficiency gains.

Pursuant to its own regulations, codified in the Domestic Mail Manual, the Postal Service allows private firms to place items in the letter box under one condition: that the items bear the (voided) stamps that the sender would need to include to send the item through the U.S. mail. In other words, the Postal Service sets the price for access to the mailing network at the last stage of the supply chain—the customer’s letter box—at the full price of door-to-door mailing. Because the Postal Service’s competitors would need to bear the full cost of postage in addition to their own cost of delivery to gain access to the letter box, the Postal Service’s access price effectively excludes even efficient competitors from using the letter box.

The letter-box monopoly is unlawful on both antitrust and constitutional grounds. It reduces consumer welfare by increasing the price and decreasing the quantity of letter-box-sized parcels and extremely urgent mail shipped. The monopoly also raises the customer’s costs of receiving mail from the Postal Service’s competitors. Moreover, the letter-box monopoly violates the Due Process Clause of the Fifth Amendment for at least two reasons. First, the Postal Service’s authority to regulate its competitors’ access to the customer’s letter box violates those competitors’ rights to due process. Second, the criminal statute that defines the letter-box monopoly fails by virtue of its vagueness to provide fair notice of the conduct prohibited or sufficiently specific guidelines for its enforcement. In addition, the letter-box monopoly is a per se taking of private property without just compensation by the Postal Service, because the Postal Service physically occupies the letter box with its deliveries to the exclusion of deliveries by other carriers to whom the customer might wish to permit access to the customer’s own private property. That exclusion imposes costs on the customer as well as the private carrier, as the customer who was not at home when the first delivery was attempted will need to wait for the private carrier to attempt another delivery of the parcel or urgent letter—or otherwise bear the risk that the parcel or urgent letter might be stolen if left at the customer’s door.

Keywords: Postal Service, Monopoly, Sherman Act, Antitrust

JEL Classification: K21, K23, L44

Suggested Citation

Sidak, J. Gregory, Abolishing the Letter-Box Monopoly (2016). The Criterion Journal on Innovation Vol. 1:401. Available at SSRN: https://ssrn.com/abstract=2654873

J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

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