The Wall Street Journal reports that a task force led by the US Department of the Treasury and created earlier this year at the behest of President Donald Trump “is proposing that the U.S. Postal Service charge more for certain package deliveries, going after Amazon.com Inc. and other online retailers that President Trump has said benefit at the post office’s expense.”

According to the story, “It said the agency should be able to charge market-based prices for mail and package items that aren’t deemed essential services.” And, the task force concluded that the Postal Service “hasn’t priced package deliveries with profitability in mind … The report concludes that the Postal Service isn’t correctly assessing the costs it incurs in delivering packages for companies like Amazon because it hasn’t sufficiently updated its formula to reflect the rapid rise in package volumes and the decline in mail volumes.

The USPS has maintained that “it doesn’t lose money on its shipping contracts, pointing to annual regulatory reviews that show the agency more than covers its costs, as required by regulations.” In fact, it has been pointed out that package deliveries is the one area of the post office’s business that actually is growing. And, the story points out, “the Postal Service is already planning to hit Amazon, FedEx and UPS with significant price increases. The agency has received approval to raise prices on its Parcel Select service between 9.3% and 12.3%, starting early next year. Under that service, large shippers sort packages themselves and deposit them directly into the Postal Service for home delivery.”

The Journal notes that “Mr. Trump has often claimed on Twitter that the Postal Service has given a sweetheart arrangement to Amazon, which he blames for unfairly hurting bricks-and-mortar retailing. Mr. Trump also has clashed with Amazon founder Jeff Bezos over coverage of his administration in the Washington Post, which is owned by Mr. Bezos.”

The Journal also offers some context for the recommendation:

“Higher rates on package services would hit Amazon, which Morgan Stanley estimates relies on the Postal Service to deliver up to 45% of its packages. Analysts have estimated it’s cheaper for Amazon to use the Postal Service than traditional carriers such as FedEx Corp. and United Parcel Service Inc., because the online retailer primarily injects sorted packages into the Postal Service network, paying for only the last leg of delivery.

“FedEx and UPS would also be subject to the higher rates, as they often use the Postal Service for last-mile delivery. The two carriers would likely offset higher costs by passing them on to large shippers, including retailers such as Target Corp. and Walmart Inc. The Postal Service’s parcel rates have long been viewed as a floor for shipping rates. Analysts view higher rates ultimately as beneficial to the carriers.

“The Package Coalition, a group that includes Amazon, the National Retail Federation and several big direct-mail firms, said in a statement it was concerned that the task force’s recommendations would harm consumers, large and small businesses, and rural communities ‘by raising prices and depriving Americans of affordable delivery services’.”

KC's View: If this is a fact-based study based on real numbers and featuring reality-based conclusions, then I have no problem with the idea that postal rates on packages should be increased. However, there clearly are some disagreements with the premise and conclusion (though, to be fair to the Trump administration, I’m not sure the USPS is the best judge of successful business models).

I worry that Treasury may just be evaluating dollars and cents, and not putting its conclusions into a broader social and cultural context. I think one has to remember that the US Postal Service is just that - a service that is designed, however imperfectly, residents of the country. And there are a lot of things that could be adjusted at the USPS, like unreasonable accounting procedures for its pension commitments, that would change the numbers.

I worry a bit that the mentality suggesting these changes is the same one that would argue that e-commerce is “unfairly hurting bricks-and-mortar retailing.” It certainly is hurting traditional retail, but there’s nothing unfair about it. It is called competition.