The 5.5 percent minimum share was set in 2006 when the Postal Accountability and Enhancement Act (PAEA) became law. But because the law was written more than a decade ago, it fails to capture the growing mix of package shipments, especially as a result of e-commerce growth, UPS wrote in a filing last year.
The post office has seen a steady increase in revenue from the Competitive packaging business. In 2008, the Competitive business generated just $8.4 billion, or just 11 percent of the total revenue. By 2017, that part of the business had grown to over $19 billion in sales, approximately 30 percent of the post office's total sales.
To better account for this change, UPS thinks the Postal Service's Competitive business should pay a larger share of the fixed costs — approximately 29 percent.
"The current requirement that competitive products must cover 5.5% of institutional costs is so low and outdated that it is effectively meaningless today," UPS wrote in its filing.
Jim Campbell, a lawyer and consultant who's previously worked with carriers like DHL, said this is fundamentally a "fairness" issue. When the post office is involved in both a monopoly and competitive market, it's only fair that the competitive side cover a "reasonable share" of overhead costs, he said. The post office, for example, doesn't pay property and real-estate taxes and is exempt from certain fees like registration fees and parking tickets.
"In order to be fair to the people that are competing in the competitive market, Congress said the PRC has to assign a reasonable proportion of the costs to the competitive products as a whole," Campbell said. "It's fairness to the competitors and the customers."
Amazon, meanwhile, wants to keep the share at 5.5 percent, or even eliminate it entirely. In one of its filings last year, Amazon wrote that the higher minimum would provide "no benefits to mailers, shippers or consumers," and that it's not a necessary requirement to "level the playing field" between the Postal Service and private carriers.
Indeed, the post office has been steadily increasing the cost contribution of Competitive products over the past three years, far exceeding the 5.5 percent minimum requirement. In 2017, it jumped to 23 percent, the PRC disclosed in its annual report last week, up from 2015's 13.3 percent and 2016's 16.5 percent.
Campbell said there are "respectable arguments" on both sides and there's "no perfect answer" given the complexity of the issue. Still, he cautioned against eliminating the legal minimum because it would give the post office "leeway to cut the prices" if it wanted to.
"It's a matter of what's the appropriate legal minimum, because if the post office crosses the line, the PRC could take action against them," he said.