TOG Inc. v. United States Postal Service, 2013 U.S. Dist. LEXIS 93598, Civil Action No.

12-cv01946 (D. Colo. July 3, 2013). Prepared by Carrie Amezcua of McDermott Will & Emery LLP. In TOG Inc. v. United States Postal Service, the District of Colorado held that the United States Postal Service (USPS) was immune from the antitrust laws for activities relating to a system and related supplies used by private entities that contract with the USPS to provide postal services. This case addressed a relatively uncommon claim of immunity from the antitrust laws. The plaintiffs, private entities who operate as Contract Postal Units (CPUs), brought several antitrust claims against USPS, private entity Innovations Group Inc. (IGI) and its principal owner. The antitrust claims included tying (including conditioning the sale of a product on the condition that defendants do not deal with competitors), monopolization, and attempted monopolization. Plaintiffs contract with the USPS to provide postal services and are contractually required to use a USPS-provided weighing, rating and metering device known as the Contract Access Retail System, or CARS. CPUs are also contractually required to purchase blank label rolls for use in CARS from USPS-certified sources. Defendant IGI is the only source for these blank label rolls, and according to the plaintiffs, charges supracompetitive prices. Defendants argued they are immune from antitrust laws under the Supreme Courts decision in United States Postal Service v. Flamingo Industries. Ltd., 540 U.S. 736 (2004) and the Postal Accountability and Enhancement Act (PAEA). In Flamingo, the Supreme Court held that the USPS was not a person as defined by the antitrust laws and therefore is not subject to those laws. Flamingo, 540 U.S. at 748. Two years later, Congress enacted the PAEA, which partially superseded Flamingo by making the USPS a person under the antitrust laws [t]o the extent that the Postal Service . . . engages in conduct with respect to any product which is not reserved to the United States under section 1696 of title 18. 39 U.S.C. 409(e). Section 1696 of Title 18 prohibits the private delivery of stamped mail, establishing the USPSs monopoly for mail delivery. Starting with a brief history of the postal service going back to the American Revolution, the District Court held that, as a matter of law, the items that plaintiffs complained they were required to purchase, including the CARS system itself, are not products because they lack a distinct market characteristicthey are not marketed or offered to the public and the USPS does charge a rate for them. But rather, the CARS system and supplies are ancillary to postal services that encompass the delivery of letters and similar material. Accordingly, because the CARS system and related materials are not products, the waiver of immunity by the PAEA does not apply. The Court further held that even if the CARS system and related materials could be considered products, they nonetheless fall within the USPSs statutory monopoly on postal services and conduct related to them is beyond the reach of antitrust laws even after the PAEAs enactment. The District Court granted the USPSs motion to dismiss and denied IGIs motion as moot.
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