ASK AUGELLO

By William J. Augello, Esquire

Question: What Can Green Do for You?

Answer: A The recent announcement that 170 Con-gressional leaders wrote to the Federal Maritime Commission in support of United Parcel Service?s application to exempt it from the prohibition against non-vessel-operating carriers? (NVOCC) confidential contracts with shippers on ocean cargo movements prompted this play on UPS? current TV advertising slogan.

It has become quite apparent that UPS has built one of the most effective lobbying forces in the nation and is using its unlimited bankroll to get whatever it wants in Congress. The current project is designed to use its clout in Congress to intimidate the FMC to grant it an exemption from the Ocean Shipping Reform Act, thus permit UPS to have secret NVOCC1 rates with shippers (as it may have for its ground and air traffic). Other NVOCCs have now filed similar applications, but without the support of 170 Congressmen, there is no guarantee that the FMC will grant other NVOCC?s applications.

UPS? current power play to give it a competitive advantage over the entire NVOCC industry is reminiscent of its lobbying efforts and strategy used when Congress deregulated the trucking industry in 1994. UPS convinced Congress that it should deregulate truck rates on intrastate truck rates, routes and services at the same time it deregulated interstate trucking operations. What the shipping community did not realize, however, was that by doing so shippers lost the ability to use all state laws that may affect UPS? rates, routes or services. It is called a ?preemption,? which means that federal law preempts or ?trumps? state law. In effect, it means that injured parties may not sue UPS under state consumer protection laws permitting damages for bad faith bargaining, deceptive trade practices, emotional distress, pain and suffering, etc. or recover punitive damages. This preemption is so egregious that there are two bills pending in Congress that would grant household goods shippers the right to use these state laws when suing movers for the loss of or damage to their personal belongings, but even if enacted, they would not apply to parcel express shipments.

Unfortunately, due to UPS? lobbying, there now are no restraints on their rate practices on ground shipments. Rates no longer need to be reasonable or even non-predatory. This protection from antitrust laws needs to be revisited by Congress someday in light of UPS? virtual monopoly over parcel express traffic.

The recent announcement that UPS will be using the U.S. Postal System to make its deliveries to residences in rural areas is the latest expansion that will threaten the growing ?consolidator? industry that specializes in serving bulk mailers to residences. UPS is reported to be slashing discounts to bulk mailers and therefore eliminating competition from consolidators. Once eliminated, guess what happens to the rates on this traffic?

Under current law, there does not appear to be any remedy for competitors (such as there was when UPS was found to have used unlawful competitive practices against competitors in the Seattle retail delivery market back in 1971). A reading of that federal court decision reveals UPS? marketing strategy at that time, but it does not appear to have changed much except to have intensified. UPS has expanded its operations far beyond retail store deliveries, beyond ground parcel express package deliveries and far beyond transportation: it is now into 100-weight shipments, cargo insurance, financing, custom house brokering, package stores, logistical services, auditing, NVOCC operations, domestic and global air freight, etc. Furthermore, it does not appear to be satisfied with a customer?s business from any one of these areas ? it usually pressures customers to give it all of their business in every one of these areas by imposing high volume commitments as a condition for obtaining discounted rates. Once committed to using UPS exclusively for all of these services, shippers will discover the true meaning of ?monopoly.?

Decades from now, historians will need to tell us whether this octopus (that spreads green ink) has been good for the nation.

William J. Augello is an adjunct professor at the University of Arizona. If you have questions relating to your parcel operation, feel free to contact him by email at williamaugello@comcast.net or you can call him at 520-531-0203.