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Federal Register / Vol. 86, No. 227 / Tuesday, November 30, 2021 / Proposed Rules the parcel delivery market has experienced a significant increase in demand, particularly over the last 5
years, due to the growing prevalence of e-commerce. Order No. 4963 at 512.
This has led to steady increases in revenue and profit for all competitors in the market, as well as growth in competitive volumes and market share for the Postal Service. Id. In light of the changes described above, Order No.
4963 adopted a dynamic formula-based approach to determining the appropriate share and adopts related rule changes.
Id. at 1929.
However, Order No. 4963 was appealed by the United Parcel Service, Inc. and later remanded to the Commission for further consideration by the United States Court of Appeals for the District of Columbia Circuit. United Parcel Serv., Inc. v. Postal Reg. Commn, 955 F.3d 1038 D.C. Cir. 2020. The court identified two major aspects of Order No. 4963 for the Commission to clarify on remand.
First, the court found that the Commission had not adequately explained how the statutory phrases direct and indirect postal costs attributable to a particular competitive product through reliably identified causal relationships and costs . . .
uniquely or disproportionately associated with any competitive products can coincide. Id. at 1041, 1049. Second, the court found that in focusing narrowly on costs attributed to competitive products under 39 U.S.C.
3633a2, the Commission failed to discharge its responsibility under 39
U.S.C. 3633b to consider . . . the degree to which any costs are uniquely or disproportionately associated with any competitive products. Id. at 1042, 1049 emphasis in original.
As part of Order No. 6043 and to provide necessary background concerning the issues identified by the court, Chapter IV of the Order details the evolution of postal costing. The current cost attribution methodology is designed to facilitate the attribution of costs to products to the greatest extent feasible. See Section IV.A.1. The Commission discusses the nature of institutional costs and why they cannot be allocated any further. See Section IV.B.4. With respect to Competitive product regulation, the Commission explains how section 3633, as implemented by the Commission, functionally results in a series of interrelated price floors. See Section IV.B. The price floor required by 39
U.S.C. 3633a2, which requires each Products, January 3, 2019, at 412, 114170 Order No. 4963; see 84 FR 537 January 1, 2019.

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Competitive product to recover its product-level attributable costs, is included in the calculation of the price floor under 39 U.S.C. 3633a1, which requires the recovery of both productand group-level attributable costs for Competitive products collectively. See Section IV.B.23. This is because incremental costs 2 currently form the basis for both cost attribution and testing for cross-subsidization of Competitive products by Market Dominant products. See id. Therefore, the price floor under paragraph a1 is currently equivalent to the total attributable cost of Competitive products collectively, which includes both individual product-level incremental costs as well as group-level costs that are incremental for Competitive products collectively. See id.
Chapter V discusses the regulatory scheme for Competitive products and amplifies the Commissions interpretation of 39 U.S.C. 3633a3
and b. Based on the PAEAs text, context, and structure, and as confirmed by its history, the purpose of the appropriate share provision is to ensure fair competition in the market for competitive postal services by protecting against any possibility that prices for the Postal Services Competitive products despite covering their attributable costs, might nevertheless be anticompetitively priced as a result of the Postal Services institutional costs being jointly incurred by Market Dominant and Competitive products. See Section V.B. The Commission concludes that the primary focus of the appropriate share provision is to protect competition rather than to ensure a particular level of institutional cost coverage. See id.
The Commission clarifies that the uniquely or disproportionately associated standard appearing in 39
U.S.C. 3633b is broader than the reliably identified causal relationship standard for cost attribution under 39
U.S.C. 3631b, such that the latter standard can be viewed as a subset of the former. See id. The Commission also, as directed on remand, considers the uniquely or disproportionately associated standard as applied to all accrued costs, which includes both attributable and institutional costs. See id. To rise to the level of being uniquely or disproportionately associated with any competitive products as contemplated by 39 U.S.C.
2 Incremental costs are the variable and fixed costs that would be eliminated if a product or group of products were discontinued, or, equivalently, the total cost caused by the product or group of products. See Section IV.B.2.

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3633b, the costs relationship with the product or products must be distinct uniquely associated or out of proportion compared to the costs relationship with other products or groups of products disproportionately associated. See id.
Chapter VI applies the Commissions interpretation to all relevant circumstances, resulting in the Commission electing to maintain the dynamic formula-based approach to determining the appropriate share.
Under 39 U.S.C. 3633a3, the prices set for Competitive products must be marked up high enough to generate revenue above and beyond the costs attributable to Competitive products at the individual product and group level in order to also cover an appropriate share of the Postal Services institutional costs. See Section VI.A.1.
The price floor set by 39 U.S.C.
3633a3 is made up of the appropriate share of institutional costs, as determined by the Commission, plus the attributable cost of Competitive products collectively. See id. Thus, this price floor set by 39 U.S.C. 3633a3 is higher than both of the price floors set by 39 U.S.C. 3633a1 and a2. See id. Because all attributable costs are already included in the Competitive product price floor under 39 U.S.C.
3633a3, the Commission declines to further account for them as part of the appropriate share. See id. Doublecounting such costs would be economically unsound and would undermine the Postal Services ability to effectively compete. See id.
The Commission applies the uniquely or disproportionately associated standard to all of the Postal Services accrued costs. See Section VI.A. The Commission has analyzed the degree to which any costs are uniquely or disproportionately associated with any competitive products, 39 U.S.C.
3633b, and found there are no costs other than those that also meet the definition of attributable costs that can be identified to be uniquely or disproportionately associated with any competitive products. 39 U.S.C.
3633b; see Section VI.A.1.
The nature of the residual costs which remain in the institutional cost category is such that the relationships between such costs and specific products or groups of products are not discernible or quantifiable. See id. There is no method to identify a portion of institutional costs as associated with Competitive products that would not be arbitrary and capricious. See Section VI.A.2.
Moreover, employing arbitrary cost allocation methods would seriously
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