The United Parcel Service is very concerned that you might be paying too much for a postage stamp.
If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set. According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs.
UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough.
As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products. UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs.
Then the Postal Service will to have to raise the prices of the products that UPS competes with, which will put UPS in a better competitive position and increase its profits. UPS doesn’t really care that some USPS customers are paying too much for postage. UPS cares about UPS.
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