As UPS and USPS Battle It out in Court, Amazon Is the Subtext

What offers greater benefits to the consumer, government control or the free market?An interesting case is playing out in the US court system that may make you question your initial answer. Last week Supreme Court upheld a previous decision to continue to let the United States Government determine the price USPS can charge for deliveries. The case was brought by one of their biggest rivals, UPS. The United States Postal Reorganization Act of 1970 established a Postal Rate Commission to regulate rates. Part of this agency's purpose was to establish pricing limits that would affect competition. UPS's argument to the court was that USPS was abrogating the requirements set by Congress to maintain a level playing field for package deliveries.

Amazon's Package Delivery Plans

The subtext of this story is Amazon - as they are USPS's biggest customer and arguably the greatest beneficiary of the artificially low prices that they set. Amazon has for some time been slowly building its own delivery business, with clear plans to eventually enter the space in force. The outcome of this court battle could have significant implications for their long-term strategy and the delivery business as a whole. Amazon's foray into the package delivery space began around 2015 with the launching of Prime Now, as well as the purchase of a fleet of 747s and a fleet of trucks. Then, the following year, Amazon completed the purchase of the French 3PL Colis Prive'. Later that year, a bombshell - a secret document leaked from the company detailing a plan, dubbed "Operations Dragonboat," which detailed Amazon's plan to become a full-fledged package delivery company. However, USPS's artificially low prices, as compared to UPS, directly benefits Amazon as 40% of all Amazon packages are delivered through the United States Postal Service. The question is if the low rates continue, could Amazon compete on those prices with their own service? And, why would they want to?

What Happens Next

Relief may be in sight for UPS. President Trump, a big critic of Amazon, had already appointed a task force on postal service pricing which has recently recommended that USPS increase its prices. Unfortunately for UPS, his administration has also urged the Supreme Court to not make any changes to the existing USPS rate scheme. As it stands now, it looks like USPS and Amazon have won the day. How it plays out in the next round of court battles is hard to tell, but the outcome will certainly reverberate well beyond USPS, Amazon, and UPS.