USPS v. FLAMINGO INDUSTRIES
When the U.S. Postal Service ended its mail-sack contract with Flamingo Industries, Flamingo sued in U.S. district court. Flamingo claimed the Postal Service declared a "fake emergency in the supply of mail sacks" so it could give no-bid contracts to cheaper foreign manufacturers without allowing U.S. companies to compete for them. Flamingo claimed this violated federal antitrust laws (among other charges). The district court dismissed the antitrust claim reasoning that the federal government is protected by sovereign immunity. The Ninth Circuit Court of Appeals reversed on the antitrust immunity count. It ruled that the 1970 Postal Reorganization Act waived the Postal Service's sovereign immunity and that it could be sued under federal antitrust laws as a "person."
Can the U.S. Postal Service be sued under federal antitrust laws?
Legal provision: Sherman
No. In a unanimous opinion delivered by Justice Anthony Kennedy, the Court held that the U.S. Postal Service cannot be sued under antitrust laws. The Court acknowledged the Postal Reorganization Act may waive the Postal Service's immunity from suit. However, federal antitrust laws (the Sherman Act, for example) do not allow the federal government - of which the Postal Service is a part - to be sued.
Argument of Edwin S. Kneedler
Chief Justice Rehnquist: We'll hear argument now in No. 02-1290, the United States Postal Service v. Flamingo Industries.
Mr. Kneedler: Thank you, Mr. Chief Justice, and may it please the Court:
The Ninth Circuit held in this case that the United States Postal Service may be sued for treble damages under the Federal antitrust laws.
The court of appeals fundamentally erred in this holding.
Throughout the nation's history, postal operations have been carried out by the United States Government itself, pursuant to the express authorization in article I of the Constitution, for Congress to establish post offices and post roads.
As this Court explained in the Council of Greenburgh case about 20 years ago, the furnishing of postal services has historically been regarded as a sovereign function, indeed a sovereign necessity, to promote intercourse among the states and bind the nation together.
Such functions of the United States Government are not regulated by the antitrust laws.
Indeed, more than 60 years ago, in the Cooper Corporation case, this Court held that the United States is not a person for purposes of the antitrust laws.
Although the precise question before the Court in that case was whether the United States could sue as a plaintiff under section 7 of the Sherman Act, the Court noted that the same word, person, is used to describe who may be held liable as a defendant, either in a civil action or in a criminal prosecution.
Justice O'Connor: Mr. Kneedler, in your view, are there any instrumentalities of the United States that you think could be considered a person under the Sherman Act?
Mr. Kneedler: Well, I... I think that there are no instrumentalities that are constituent parts of the United States Government itself that could... that could be held liable.
The word instrumentality is used in a... in a somewhat vague sense, elastic sense, and I think it would be necessary to look at the particular statute to see how much of a governmental character a particular entity has.
Justice O'Connor: Of course, I guess the court whose judgment we're reviewing thought that the change in the structure of the Postal Service affected the nature of that instrumentality.
Mr. Kneedler: It... it... it did, but the... the court of appeals was wrong on that.
First of all, after the... the court of... after the... this Court's Cooper decision, a number of lower court decisions have held, beginning with the D.C. Circuit's decision in the Sea-Land case involving the Alaska Railroad, that agencies of the United States or instrumentalities just like the United States itself is not a person subject to the antitrust laws.
The Ninth Circuit didn't...
Justice Ginsburg: Mr. Kneedler... Mr. Kneedler, but I don't think in that case there was... the question was raised whether the Alaska Railroad was an agent of the United States that would... would carry the immunity of the United States.
Mr. Kneedler: Well, the... the... it was... the Court regarded it as an... as an instrumentality, and in fact the... the Court there recognized that the railroad and the officials of the Government responsible for supervising the railroad could be sued under the APA, and that, therefore, there had been a waiver of sovereign immunity to that extent, and to the extent of allowing injunctive relief.
So the... the Court certainly focused on the question that the Alaska Railroad and those responsible for managing it were part of the United States Government.
Justice Ginsburg: I didn't think it was a contested issue in... in that case.
Mr. Kneedler: It may not have been contested, but it... but it... the Court certainly addressed that question and then went on to hold that as an instrumentality of the United States, the... the railroad was not subject to suit under the antitrust law.
Justice Scalia: Is the Postal Service subject to the Administrative Procedure Act?
Mr. Kneedler: It is not.
It... it... Congress specifically accepted it that there's... in section 410 of the act, there's a very detailed enumeration of the provisions that Congress did want and did not want to be... the Postal Service to be subject to.
But the... the important point for present purposes is that in 1970, when Congress enacted the Postal Reorganization Act, it carried forward the essential governmental character of the Postal Service, just as it had been up until that point.
In fact, section 101(a) of the act says that the United States... and I quote... the United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States.
And then it says, the Postal Service shall have as its basic function the obligation to provide postal services to bind the nation together.
Justice Scalia: So you say it carried forward the... the essential governmental character.
What... what does that consist of?
Doesn't it consist of the nature of the entity, not just... just the... the tag?
It can't just put a tag on it and... and say it has an essentially governmental character.
I thought that the... that the purpose of the reorganization was to make the Postal Service function like a regular business.
Mr. Kneedler: In... in a... in a limited sense.
Justice Scalia: Well, I'll... I'll qualify it.
A regular business, a regular public utility...
Mr. Kneedler: No, I... I...
Justice Scalia: which has... which has certain obligations, yes.
They have to do universal... universal mail service, just as a telephone company has to give universal telephone service.
But on the other hand, the rest of their operations were supposed to be business-like.
Mr. Kneedler: In the... in the description of... of how the Postal Service was to be operated carrying forward, the... the Congress repeatedly referred to the Postal Service as... as a governmental function, a public service to be operated in a business-like way.
But what Congress meant by that was to insulate the Postal Service from the prior political interference that had come up by imposing the duty on Congress to repeatedly raise rates and... and address services.
Justice Scalia: Insulated from the Government.
Mr. Kneedler: Not... but by...
Justice Scalia: You're... you're saying on the one hand it's part of the Government, but on the other hand, what Congress wanted to do was to insulate it from the Government.
Mr. Kneedler: No.
By... by no means insulate it from the Government.
The Postal Service... the governors of the Postal Service are denominated officers of the United States, so the people responsible for the Postal Service are officers of the United States.
Justice Scalia: Are they... are they removable by the President?
Mr. Kneedler: They're removable for cause.
Justice Breyer: For cause.
Justice Scalia: Just like the heads of independent agencies.
Mr. Kneedler: Yes, but... but certainly the other independent agencies like the Federal Trade Commission and agencies like that are part of the United States Government performing a governmental function.
Justice Scalia: Congress never said that they were supposed to operate like a business, which was the purpose of the Reorganization Act.
Mr. Kneedler: Actually, in the... in the text of the act itself, there... there is... there is not an express directive that the Postal Service will be operated like a commercial entity.
What Congress had in mind was to... was to rationalize the internal operations of the Postal Service, but it did not change any of the fundamental ways in which the Postal Service operated.
It... it maintained the postal monopoly, which, under the private express statutes, about 80 percent of the revenues of the Postal Service are... are protected by the private express...
Justice Scalia: It... it did... it did retain that monopoly and... and the Government's position here is that the Postal Service has the power to extend that monopoly into fields that the Government did not specifically confer upon it, right?
Because the Government's position, as I understand it, is not only that the Postal Service can't be sued under the antitrust laws, but that the... that the Postal Service is not subject to the antitrust laws.
Mr. Kneedler: It is not a person within the meaning of the antitrust laws.
Justice Scalia: So it can... it can go ahead and extend the monopoly conferred by statute beyond the... the narrow context granted by Congress.
Mr. Kneedler: That is not a... that is not a new feature of the... of the Postal Service.
As we point out in our reply brief, quoting this Court's decision in the Emergency Fleet Corporation case, there the Court pointed out, with respect to the Post Office, it said the Post Office has since 1872 competed with bankers through money orders, it competed with savings and loan association through savings accounts, which the Postal Service operated...
Justice Kennedy: Suppose there... suppose there were an actionable violation of the antitrust laws and there was a conspiracy between two private suppliers, and the Postal Service, through some of its high officers, joined that conspiracy.
Would there be any liability, individual liability, on the part of the officers of the Postal Service?
Mr. Kneedler: I... I'm not sure about that.
The Postal Service itself would not be... would not be liable, and I... and I think if the... I guess it depends on what one means by a... by a conspiracy as well, because if the... the Postal Service has brought authority in procurement, for example, to... it's exempt from some of the Federal procurement statutes, but Congress granted it the authority to have its own procurement arrangements.
So if the... if... if a... if the Postmaster General decides on a particular procurement methodology that... that was alleged to be anti-competitive, I don't think that could be fairly characterized as a conspiracy, even...
Chief Justice Rehnquist: Is the private express statute still in effect?
Mr. Kneedler: It is, it is, and that has... that has not been changed, and the Court discussed that in the California Board of Regents case and other... and other decisions of this Court.
Really, the... all the Ninth Circuit relied upon in... in this case was the presence of a sue-and-be-sued clause in the Postal Reorganization Act, which simply says that the Postal Service may sue and be sued in its official name.
There is a... there is virtually no discussion of that provision in the legislative history of the act, and the Ninth Circuit essentially said that because the Postal Service may sue... may be sued in its official name, therefore, it has... its sovereign character has been cast off and it can be sued just like a private party.
That... that analysis is in direct conflict with this Court's decision in FDIC v. Meyer, where the Court reversed a similar determination with respect to the FDIC, saying that the Ninth Circuit had conflated what are two analytically distinct questions.
The first is whether there is a waiver of sovereign immunity.
We do not dispute that there is a waiver of sovereign immunity here under the sue-and-be-sued clause.
But the... the second and critical question here is whether the... the substantive law that the plaintiff relies upon provides an avenue for relief.
In this case, that is the antitrust laws, and Congress has never amended the antitrust laws to make an agency or an entity of the United States Government liable.
After the decision in Cooper... Cooper Corporation, Congress amended the Clayton Act to allow the United States to sue as a plaintiff if it's injured in its business or property, but it did not do that by changing the word person.
It... it explicitly provided a cause of action for the United States as the United States, but it did not, as the D.C. Circuit pointed out in the Sea-Land case, amend the definition of person or otherwise make the United States or its constituent parts subject to the antitrust laws as a... as a defendant.
Justice Scalia: What happens... I'm sorry, go on.
Justice Stevens: Mr. Kneedler, is this... section 201 of Title 39 says, there is established as an independent establishment of the executive branch of the Government of the United States the United States Post Office.
Was that in the statute before the reorganization or is that part of the reorganization?
Mr. Kneedler: That's part of the reorganization.
There was a Post Office Department before that was part of the Cabinet, and what... what Congress wanted to do was to take the post... postal operations out of the Cabinet and put them under... under the Board of Governors, who are officers of the United States but not part of the Cabinet.
And the... the phrase, establishment of the executive branch, is used with respect to other undeniably Federal agencies, as we point out in our... in our brief, the OPM, Office of Personnel Management, the Transportation Safety Board.
And I... I think it's just intended to make clearer that the Postal Service was not to be under the President's direct control, and in fact there were proposals to make the Postal Service a corporation, and Congress emphatically rejected that.
And instead, as President Nixon proposed in... in submitting a proposal to Congress, the Postal Service would be constituted as an agency like the SEC or NASA or the Board of Governors of the Federal Reserve System.
All of those entities are... are performing quintessentially governmental functions that are not subject to the antitrust laws.
Justice Scalia: If I get into a car accident with a... with a postal delivery truck, do I sue the United States under the Federal tort claims?
Mr. Kneedler: Yes, yes, you do.
And... and... it's... it's an important thing to... to be clear about in the Postal Reorganization Act.
Pervasively throughout that statute, Congress treated the Postal Service as a governmental entity.
The torts are subject to the Federal Tort Claims Act.
Justice Ginsburg: Mr. Kneedler, where does the money come to pay the judgment?
Justice Breyer: Is it...
Mr. Kneedler: Out of the... out of the Postal Service fund, but that is a fund in the Treasury.
There's a separate provision...
Justice Ginsburg: But it isn't the general judgment fund?
Mr. Kneedler: No... no, it's... no, it's not, but... but there are other... other situations in which appropriated funds from a particular agency are used to reimburse the judgment fund if there's a particular appropriation set aside for that purpose, so this is not a unique feature of... of the... of the Postal Act.
But if I could also mention, torts are subject to suit against the United States, but with respect to contracts, Congress subjected the Postal Service to the Contract Disputes Act.
The Court of Claims held almost 20 years ago, soon after the act was passed, that the United States itself could be sued under the Tucker Act based on a breach of contract with the Postal Service, because of the close connection between the Postal Service and the United States.
The Postal Service could be sued in district court in its own name under the sue-and-be-sued clause for breach of contract, but the Court of Claims held that... that the United States itself can be sued, and therefore is responsible for the contracts of... of the Postal Service, and it...
Justice Ginsburg: Could the United States sue... bring an antitrust suit as plaintiff on behalf of the Postal Service?
Mr. Kneedler: We... we believe it could.
It would... it would be brought in its own name, but... but the United States... if the Postal Service, just like any other entity, purchased goods, for example, and was a victim of... of a... of a... of an antitrust violation, the United States would be able to sue and... and collect treble damages.
That was the purpose of the Cooper Corporation case, where there was a procurement of tires by a number of different Federal agencies, and Congress authorized the United States to bring a suit to recover for the injuries sustained to Federal agencies generally in that situation.
Justice Kennedy: Under this sue-and-be-sued clause, is it your position that there must always be a Federal statute authorizing the suit before the post office has any substantive liability?
Mr. Kneedler: As a general rule, yes.
There... before the Federal Tort Claims Act was passed, it was assumed that tort claims could be brought against Federal entities that had sue-and-be-sued clauses, although a lot of those were private corporations that were instrumentalities, not... not Federal agencies.
And also with respect...
Justice Kennedy: So the sue-and-be-sued clause does have some substantive force in some other cases?
Mr. Kneedler: It's... it's been... it's unclear because back when they were first put in the... in the statutes, the... the separation of a... the existence of a waiver of sovereign immunity and the existence of a cause of action were... were not separated the way they are today.
For example, under the... under the Tucker Act, a plaintiff can bring a breach of contract action against the United States, even though there's no statute that specifically provides a cause of action for breach of contract.
It's thought that... that the reference to contracts in the Tucker Act is a sufficient basis for that, and we...
Chief Justice Rehnquist: Does the Post Office have the power of eminent domain?
Mr. Kneedler: It does, it does, and it has... it... it carries forward the power to investigate postal offenses, to... to... with appropriate authorization, to search the mails.
Justice Breyer: There's a lot of...
Chief Justice Rehnquist: What about... what about inverse condemnation?
Supposing the post office takes property without the ability to pay for it.
Mr. Kneedler: I don't know that the question has arisen, but I... I would assume that a... a suit could be brought against the United States under the Tucker Act on the same theory that I mentioned with respect to a breach of contract by the Postal Service.
Justice Souter: Mr. Kneedler...
Justice Scalia: Don't... before we get off of eminent domain, don't... don't a lot of state public utility entities have the power of eminent domain?
Mr. Kneedler: They... they do, and that...
Justice Scalia: So that really doesn't determine what...
Mr. Kneedler: Well, I... I think it's part of an overall pattern.
Justice Scalia: And they're subject to the Sherman Act, of course.
Mr. Kneedler: Right.
But it's part of an overall pattern.
Congress does not lightly confer the right of eminent domain on... on Federal agencies, but it's part of a general pattern in which the United States... excuse me, in which Congress treated the Postal Service as a... as a governmental entity.
I did want to point out one particular way that illustrates the... the way in which the antitrust laws are unsuitable here.
The precise... this is... this is at bottom a routine... a routine procurement dispute.
And as the Ninth Circuit held in this case, the plaintiffs here had a cause of action, in fact, brought one under the Administrative Disputes Resolution Act that is essentially a bid protest statute.
And there are two features of that statute that are inconsistent with antitrust liability in this setting.
First of all, Congress expressly provided that the standard of review in such an action is the arbitrary and capricious standard of the APA, meaning that the Postal Service, like any other Federal agency subject to that, has to have broad latitude...
Justice Stevens: It seems to me, Mr. Kneedler, this is an argument that you don't have an antitrust violation here, but we're concerned with the problem of whether you had a classic violation, say they agreed with somebody else on the prices they would charge for advertising the Olympics or something like that, where you had a clear... here you don't have it clear.
I think it's arguable whether the alleged violation... but that's not the issue before us.
Mr. Kneedler: Well, except... except to this extent.
In... in virtually every direction you turn, and looking on how... on how disputes involving the Postal Service are handled, you find a governmental dispute resolution mechanism, and that... this was the point about the...
Justice Stevens: But what about a breach of... infringement of patents, for example?
Mr. Kneedler: There's... there's express authorization for suing the United States for...
Justice Stevens: And infringement of copyrights and so forth?
Mr. Kneedler: Same... same thing.
Where Congress has wanted to provide the United...
Justice Stevens: Supposing there was a... one of these antitrust violations that involved abuses of patents in order to extend a monopoly or something like that, that could be a classic antitrust violation.
But you say there are other Federal remedies there?
Mr. Kneedler: There... there might be... there might be remedies under some of the statutes mentioned here.
There... I mean, Congress has expressly subjected the United States to suit under the Lanham Act, under the copyright statute, under... under the trademark laws, under the patent laws, but... and... and then there are these procurement statutes that I mentioned that are applicable in this particular case.
But in this case as well, Congress did not provide for treble damages.
The only monetary relief a plaintiff could get in this procurement situation, as we point out in our brief under the Administrative Dispute Resolution Act, is bid preparation costs, not treble damages.
Chief Justice Rehnquist: What if... what if the Post Office buys a lot of paper from somebody and doesn't pay for it?
What's... what is the remedy of that person on a contract?
Mr. Kneedler: There would be an alternative remedies.
Before the Contract Disputes Act was passed, the Postal Service could have been sued itself in its own name under the sue-and-be-sued clause, or in the Tuck... under the Tucker Act in the... in the Court of Claims.
Now under the Contract Disputes Act, Congress has made that statute applicable to the Postal Service just as it has to other Federal entities.
Chief Justice Rehnquist: And that could be... that sort of an action could be brought under the Contract Disputes Act?
Mr. Kneedler: Yes.
And there is specifically a Postal Service board of contract appeals, just there... as there is a board of contract appeals in... in other agencies.
Justice Souter: Would there be an... some alternative remedy to the antitrust law if the Postal Service decided to use its profits from the monopoly business in effect to subsidize predatory rates in the package delivery business in order to put UPS out of business?
Mr. Kneedler: The way... the way Congress addressed that was to subject the Postal Service to the jurisdiction of the Postal Rate Commission, and all...
Justice Souter: Well, let's assume they go along with it.
They say, okay, we are going to eliminate UPS.
Would there be any alternative claim... source of remedy by UPS to the antitrust laws?
Mr. Kneedler: Well, I would... I would... if the... a decision... it's a complicated mechanism the way the Postal Rate Commission interacts with the Postal Service, but there is a provision for judicial review.
If the Postal Service enters a final decision after... after receiving the input from the Postal Rate Commission, there is a provision for judicial review of that... of determinations of...
Justice Stevens: What would be the...
Mr. Kneedler: rates and classifications.
Justice Souter: What would be the substantive basis for the review?
Mr. Kneedler: Under... under the Postal Reorganization Act, the provisions beginning in... in section 3601 of the act address rate-making and classification, and there are specific standards there that the Postal Rate Commission and the Postal Service must adhere to.
Justice Souter: And... and would it eliminate this possibility of predatory lowing... lowering rates for...
Mr. Kneedler: They... they are designed to.
The... the... the way the... the way the act operates, it specifies that each classification... first... two things: one, overall, the Postal Service rates are to be set at a rate so that they... the income will roughly equal expenditures
And then within each class, Congress has provided the direct and indirect costs of that class are to be allocated to it, along with some... an appropriate portion of the institutional costs, the things that are difficult to... to allocate to any one... any one class.
Justice Scalia: Of course, this only becomes a real problem when the Postal Service turns a profit on its monopoly business, which it has not yet succeeded in doing, has it?
Mr. Kneedler: Well, and... and it's not... over the long term, over the long term since the Postal Reorganization Act, I believe that the Postal Service is within about a billion dollars of breaking even.
There are times when it is in a deficit.
There are times when it is in a surplus, but the statutory goal is that it... that it be roughly equal balance between... between income and expenditures.
Justice Stevens: Mr. Kneedler, can I ask you a basic question I just kind of forgotten that I thought I knew about, but I thought the Postal Service had a monopoly of the business of delivering letters and packages, and that these competing services are only allowed to exist by some special privilege granted by the Postal Service.
Mr. Kneedler: Yes.
That's true for letters, but not for parcel post.
Justice Stevens: But not for parcel, I see.
Mr. Kneedler: Yes.
There's... there's an... the Postal Service adopted an exception to the private express statutes for urgent letters, which... which has allowed organizations like Federal Express to carry letters for urgent delivery.
Absent that exception, they would... that practice would be prohibited by the... by the private express statutes.
But the... the idea that the Postal Service competes with non-Federal entities is not new.
As I... as I pointed out, the Postal Service began competing with money orders before the turn of the last century, for 50 years have had savings deposits with up to 4 million depositors that competed with savings associations, so and... and it's competed... it went into the parcel post business, the parcel delivery business in 1913 alongside other businesses.
So that... that sort of competition with private businesses has... has occurred since well before the Postal Reorganization Act, and nothing in the Postal Reorganization Act changes the way in which that should be regarded under the... under the antitrust laws.
If the Court has no further questions, I'd like to reserve the balance of my time.
Argument of Harold J. Krent
Chief Justice Rehnquist: Thank you, Mr. Kneedler.
Mr. Krent, we'll hear from you.
Mr. Krent: Mr. Chief Justice, and may it please the Court:
As Justice Scalia noted, Congress launched the Postal Service into the commercial world in 1970, authorizing it to compete in any market of its own choosing, and this new commercial entity fits comfortably within the term, person, under the antitrust laws for at least four distinct reasons.
First, this is unlike any other Federal entity in the fact that the Postal Service has been authorized to decide which markets it wants to compete into.
It's not competing in order to fulfill a specific congressional mission, but rather to compete in order to break even to make money.
Second, Congress has directed the Postal Service enter these markets with scant regulatory oversight.
The APA, the Postal Rate Commission, the Federal acquisition regulations, all do not apply when the Postal Service is acting under its non-monopoly powers.
Chief Justice Rehnquist: You're saying then that the Cooper decision doesn't affect your argument, because the... the Congress has separated the Post Office Department from the... from the executive?
Mr. Krent: That's correct, Your Honor.
And in many other contexts, though, it's clear that this Court has recognized that the Postal Service should be distinct from the United States, the Franchise Tax opinion, the Loeffler decision, and I think the other...
Chief Justice Rehnquist: Well, neither of those are quite in point.
Mr. Krent: Neither are involved in separate cause of action, but both involve this Court's recognition that the Postal Service is not the same as United States and should be treated differently.
Justice Stevens: But what do you do with the statutory language that it's an establishment of the executive branch of the Government of the United States?
Mr. Krent: Well, I think it is an establishment of the executive branch, and it keeps some kind of connection to the United States, and so, for instance, Congress evidently cared about the fact that, given the monopoly given over letter mail, that there would be some tie.
I mean, the... the President cannot, can neither appoint nor discharge the Postmaster General, but yet there is some link between the President and the Postal Service.
Yet financially, the Postal Service is independent.
Chief Justice Rehnquist: There isn't any Postmaster General anymore, is there?
Mr. Krent: Well, there... there is, Your Honor, in terms of the individual who's so-called under the statute the executive official of the... of the United States, and that individual is to... is also a member of the Board of Governors of the Postal Service and is to direct and execute the business operations of the Postal Service.
Chief Justice Rehnquist: How is he selected?
Justice Scalia: By the Board of Governors?
Mr. Krent: Chosen by the Board of... yes, Your Honor.
And I think that, again, Evans is the separation or the insulation of the Postal Service from direct executive branch control.
But financially, as I mentioned, the debts of the Postal Service are not the debts of the United States.
Any kind of... of recovery against the Postal Service does not come from the judgment fund, it comes from the Postal Service fund.
Again, these two things reflect the fact that the budget, as well as the overall financial structure of the Postal Service, is independent.
And... and the fourth reason, Your Honor, of why the Postal Service is a distinct entity is... is the fact that there is a sue-and-be-sued clause that differentiates this case from the Sea-Land case, in which there was no sue-and-be-sued clause.
Chief Justice Rehnquist: It doesn't differentiate though from the Meyer case?
Mr. Krent: No, Your Honor, and indeed, we think though that the... these four factors together amply demonstrate that this is a... there is a congressional intent that the Postal Service be considered a separate, distinct entity that can qualify under the term, person, in antitrust laws.
And indeed, this is not an unadorned sue-and-be-sued clause.
Congress sat and thought about the ramifications of the sue-and-be-sued clause and thought about what specific limitations should be grafted on to the waiver of immunity.
It decided to make sure the Postal Service complied with the Federal Tort Claims Act.
It wanted to make sure that the Postal Service, despite the distinction with the United States, viewed its own... had different venue... had the same venue.
Chief Justice Rehnquist: But Meyer says you have to have something more than a sue-and-be-sued clause, that you have to show that there's a cause of action available.
So a sue-and-be-sued clause itself is not enough for you in this case, don't you agree with that?
Mr. Krent: I agree, Your Honor, and indeed it's the fact that the antitrust laws say that every person should be subject to the anti-competitive measures, or pro-competitive measures, in... in the statutes.
Chief Justice Rehnquist: Well, yes, but the... that was true... they said that in the Cooper case too, that person, and the Cooper Court said, no, the United States is not a person.
Mr. Krent: That's right, Your Honor, but I think the Cooper case must be looked at in the structure of the decision itself, because the Cooper Court was very clear to limit its decision.
It said that person did not equal United States because of the fact that there were other remedies given to the United States explicitly in the act, and indeed, that that conformed to...
Chief Justice Rehnquist: But certainly after the Cooper decision, it was clear that the United States could not be a defendant either, was it not, as well as not be a plaintiff...
Mr. Krent: Well, it didn't matter Your Honor, because there was no waiver of immunity.
Chief Justice Rehnquist: Well, answer my question, will you?
Mr. Krent: I believe that it was clear, because... but, again, I think that nobody tried to avail themselves of that remedy because the United States had not waived its immunity.
But this Court extended the notion of the... of person, and to as broad as possible, including states, including foreign governments, as well as associations and public corporations.
Justice Ginsburg: Didn't the Court say in Cooper, the reason why we're not letting the United States be a person as plaintiff, because if we did that it would follow like the night day that they would be a person as a defendant, and we certainly don't want them to be a person as a defendant?
Justice Kennedy: So that's right in the...
Mr. Krent: Well, we have no quarrel...
Justice Ginsburg: That's right in the opinion.
It's not something subtle.
One of the driving forces for saying they couldn't be... they weren't going to read into the act plaintiff status was that this Court thought that would mean they would be a person for defendant status.
Mr. Krent: I agree that it's in the opinion, Your Honor, but this Court, in Georgia v. Evans, and this Court in Pfizer, made clear to cast the Cooper decision in the light of the fact that it was a narrow decision, predicated not specifically on that point, Your Honor, but rather on the notion that there was an election of remedies, the fact that the United States could sue to seize property under the act, the United States could pursue criminal penalties under the act, and that linguistically, the United States doesn't seem to fit in within the terms, an organization or association existing under the law as the United States.
Chief Justice Rehnquist: Well, the... what, the Postal Reorganization Act was 1970?
Have any other antitrust suits been brought against the Postal Service in that 34 years?
Mr. Krent: Not to my knowledge, Your Honor.
However, the Department of Justice in 1977 and again in 1978, made findings suggesting that the Postal Service was likely to be subject to the antitrust laws.
Chief Justice Rehnquist: That's no longer the position of the department, is it?
Mr. Krent: That's correct.
It was soon after the enactment of the 1970 statutes.
And indeed, there are other entities, such as the Tennessee Valley Authority, which has been found to be a person under the antitrust acts, but I think it's... the fact that this is rising, this question arises under the Postal Services is no surprise, because the Postal Service has a roving mandate to decide to go into the business of greeting cards in competition to Hallmark, to go into the fact that it can sell bicycling gear, to go into the market of the package industry, to go into the market of calling cards and compete against AT&T.
There is no other Federal entity to my knowledge which has this kind of roving mandate to make money from Congress, and indeed, it has used this ability...
Justice O'Connor: Well, it's an...
Justice Stevens: It didn't... excuse me... I didn't think it had a mandate to make money.
I thought the statute had ordered it to break even.
Mr. Krent: Well, it has a statute... it... it's... it's a rough balance.
It's unclear whether it's supposed to make a little money or lose a little money.
Justice Stevens: But it... but it's unlike most profit-making institutions that are primarily engaged in trying to make as much money as they can.
Mr. Krent: That is correct, Your Honor, but in the non-postal activities, the only objective is to make money.
Certainly for universal service there are other objectives limiting and challenging the actions of the Postal Service, but with respect to selling bicycling gear or selling greeting cards, the only objective the Postal Service has is to make money, and it has tried to use this power, and indeed, there were surpluses, as mentioned by counsel for the Solicitor General, in several years.
So the Postal Service can be successful at least at times, but other times, of course, especially after 9/11, it has seen hard times.
Justice Souter: But even... even when it is, I take it the object of the money that it makes is essentially to break even, maybe break even and a little bit more, on... on the mail delivery operation, which the statute itself recites as being a sovereign responsibility of the United States.
Mr. Krent: Well, I think that's...
Justice Souter: So, I mean, that's... that's a long way from General Motors.
Mr. Krent: I think it... it's... there is no shareholders, for instance, looking for a profit, but the goal of the Postal Service in these other areas of business, whether it's the package business or the greeting card business, is to make money.
Justice Souter: Well, it is to make money, but it is to make money in order to subsidize a particular activity, and I don't think... maybe I'm missing something... but I don't think there's an indication that there's a mandate there to maximize profits to in... in effect subsidize the rest of the Government.
Mr. Krent: Not... not the rest of the Government at all, because there is a segregated fund.
But it is there to... to make sure that any kind of losses that the Postal Service may sustain in its monopoly business can be overcome by profits generated in the non-monopoly business.
Justice Souter: And that monopoly business is described in the statute as being the discharge of a sovereign obligation of the United States, isn't it?
Mr. Krent: Absolutely.
The... the Congress has been very clear that there is a monopoly business to be... to be pursued here, and the Postal Service is pursuing that.
But that's not what the Postal Service is only about.
The Postal Service is also constructed as a business, and that's what this Court has recognized in Franchise Tax and in Loeffler case, and according to that business principles, is pursuing other tasks as well.
Justice Souter: What is... what is the... what is the organizational form of this business?
It's not a corporation, is it?
Mr. Krent: It's a corporation-like form, Your Honor, and indeed...
Justice Souter: Well, but it's not a separate corporation.
Mr. Krent: That's correct, Your Honor.
I mean, the Postal Service has described itself as a corporation.
Justice Souter: Is it... is it a partnership?
Mr. Krent: It's... it's a board of directors-type organization with the Board of Governors serving as a type of Board of Governors... as a board of directors... and the Board of Governors, as mentioned earlier, chooses the head or the chief executive officer of, or the Postmaster General, of the Postal Service itself.
Justice Souter: But the structure, I take it, is unlike anything that one would find in... in a... in a private profit-making organization.
Mr. Krent: That's correct.
Justice Souter: It's not a corporation, not a partnership.
Mr. Krent: That's correct, Your Honor.
Justice Scalia: I mean, it is... has a distinct structure, but I think that the Congress that launched the Postal Service in the business and suggested that the Postal Rate Commission, the APA, and the Federal acquisition regulations wouldn't apply, would not have wanted then the Postal Service to use any kind of monopoly powers to have a tying arrangement with an entity such as, you know, Emery Air Freight or Federal Express, it wouldn't wanted to have...
Justice O'Connor: Well, why isn't this the kind of policy judgment that we ought to leave to Congress to make explicitly?
The Post Office, as reorganized, has two aspects to it, as you've pointed out effectively, but how it should relate to the Antitrust Act seems to be the kind of judgment that Congress should address expressly.
Isn't that so?
Mr. Krent: I think, Your Honor, that the Congress has already made that judgment by suggesting that the Postal Service have the right to be sue and be sued, suggesting the Postal Service...
Justice O'Connor: Well, I thought we had already discussed that.
I mean, the mere fact that there's a sue-and-be-sued clause is not enough under the Meyer approach to answer the question.
You have to...
Mr. Krent: Sure.
Justice O'Connor: take another step...
Mr. Krent: Right.
Justice O'Connor: beyond that.
Mr. Krent: Sure, Your Honor.
The question is whether or not the Postal Service fits within the term, person.
We know under the antitrust laws, we know that person can be applied to public corporations, as this Court has held.
We know that person can be applied to states, as this Court has held.
We know that person can be applied to foreign governmental entities, as this Court has held.
So the only question is whether this person can also apply to Federal governmental entities, and we think that it's clear that some, but very few, governmental entities would qualify under the term, person.
Justice Scalia: But you... you... you concede that before the Postal Reorganization Act, the answer to the question would be no?
Mr. Krent: Absolutely.
Justice Scalia: So you... you have to... I mean, you're... you're not writing on a blank slate.
You... you have to find enough in the Postal Reorganization Act to change that answer from no to yes, and that's really the burden.
Mr. Krent: I... I agree, Your Honor.
Justice Scalia: Given that the Postal Service was not subject to the antitrust laws before, something so fundamental happened in 1970 that it is now a person under the antitrust law.
That's... that's your...
Mr. Krent: I fully agree with that.
Chief Justice Rehnquist: your burden.
Mr. Krent: I full agree with that, and I think we can discharge that burden if you look at the fact that the Postal Service is financially independent, it's administratively independent, it doesn't have to comply with the pro-competitive measures and the Federal acquisitions regulations, it has a sue-and-be-sued clause.
Justice Scalia: But its employees, are its employees subject to the Taft-Hartley law, or... or... or are they like... like Federal workers?
Mr. Krent: They are the only employees in the entire government to my knowledge that must comply with the Taft-Hartley law, and indeed, Congress specified that it must comply within the law, because it wanted them to act more like a business and not have this restrictures of other organizations within the United States as they... following the fellow labor relations authority, Your Honor.
Justice Scalia: So... so... would... would their employees be members of the American Federation of Governmental Employees or other unions?
Mr. Krent: I believe it's the American Postal Workers Union, Your Honor.
Justice Scalia: Postal workers union?
Mr. Krent: Yes.
So it's a... it's a separate... they're separated again from the Government with respect to labor relations.
And indeed, they are one of the few governmental entities that have signified their own operations under www-dot... dot-com.
All right, they have decided not to become a governmental player.
Justice Scalia: But of course, the Reorganization Act itself specified that they'd be subject to Taft-Hartley, did it not?
Mr. Krent: That's correct.
And that's part and parcel, I think...
Justice Scalia: So why didn't it specify that they would be subject to the Sherman Act?
Mr. Krent: Because...
Justice Scalia: You see, I... I don't think that helps you, I think it hurts you.
Mr. Krent: I don't...
Justice Scalia: It... it is a significant feature that... that the... their employees are subject to Taft-Hartley, but that... that is more than answered by the fact that it says so in the Reorganization Act.
Why doesn't it say so about the... about the antitrust laws?
Mr. Krent: Well, I think it's important to think about what the Postal Reorganization Act does say.
When it waives immunity, it makes limitations.
The limitations are that the Postal Service must comply with the limitations in the Federal Tort Claims Act, that it has a different... the same venue provisions as by the United States, and that it has some of the jurisdictional qualities as the United States, though the... so the limitations and ramifications of the waiver are grafted in section 409 very clearly.
There is no other limitation, and I think it's important to realize...
Justice Stevens: Yeah, but there's one... one sticking point that... running through my mind.
The fact that they had to waive the immunity in the sue-and-be-sued clause suggest that they're a sovereign.
Mr. Krent: We agree that they're part of government, Your Honor.
There's never been any kind of question about the fact that the Postal Service is part of the Government.
Justice Stevens: And is a sovereign.
Mr. Krent: And... yes, Your Honor.
And it takes... takes part of the... in the... in the sense that it would have immunity, but for the waiver, clearly because Congress created the entity, and therefore Congress decides whether to waive the immunity.
Justice Stevens: Of course, if you're right, they're subject to criminal liability under the Sherman Act too.
Mr. Krent: Well, so are states theoretically, as well as cities.
I don't think that would ever arise, but that is at least a theoretical possibility and this Court has averted to that in prior decisions as well.
The same thing is true, of course, for cities under...
Justice Stevens: A criminal case with the United States against the United States Postal Service.
Mr. Krent: Well, I don't think that's likely to happen, Your Honor, but I think it's important that this... this waiver allows the Postal Service also to vindicate its own interests, right.
But for this waiver, Postal Service could not go in and sue for any kind of antitrust injuries, and that's not clear.
Chief Justice Rehnquist: But Congress could have said the Postal Service is authorized to sue and omitted the be-sued clause.
It could have done it that way...
Mr. Krent: That...
Chief Justice Rehnquist: in which there would have been no waiver.
Mr. Krent: That's correct, Your Honor.
That would have made this case go away.
But Congress chose not to follow that path, and indeed, if one could think that one launches a... an organization into the commercial marketplace and takes away the constraints of the APA, the FAR, the Postal Rate Commission...
Chief Justice Rehnquist: Well, to say launch into the commercial marketplace, they're basically selling stamps and nobody else is selling stamps.
What kind of a launching is that?
Mr. Krent: Well, I think it's now for the monopoly business, Your Honor, but the launching with... with respect to the package delivery business, the greeting card business, the fact that they are sponsoring Lance Armstrong's bicycling team, these are all the areas in which the Postal Service has decided to venture outside of its mandate, and it's... the danger is allowing the Postal Service to extend its monopoly power into these new fields.
Justice Breyer: Mr. Krent...
But when it goes into all those fields anyway... we've made this point about 15 times... it... it doesn't set the prices it wants.
It sets prices controlled by a commission under a mandate that says it's supposed to break even.
Mr. Krent: No... no... if I understand your...
Justice O'Connor: Isn't that right?
Mr. Krent: That's not right, Your Honor.
In terms of all these different areas, the Postal Rate Commission does not operate whatsoever.
Justice Breyer: It has no... in greeting cards and so forth?
Mr. Krent: No jurisdiction.
The Postal Service...
Justice Breyer: So is it... it... and it's free?
In other words, it doesn't... it isn't... well, you... I thought you answered Justice Souter by saying that they do have an obligation even there to break even overall?
Mr. Krent: Oh, overall, Your Honor, but the Postal Rate Commission has no jurisdiction whatsoever on the Postal Service's actions with respect to greeting cards, bicycling gear, and the package delivery business.
And I think that points out the danger of the monopoly practices.
One could easily see...
Justice Breyer: So if in... in the greeting card business, they decided to go into an agreement with three other companies, Hallmark and Smith's greeting cards, and they were to fix their prices at $14 a greeting card, which seems about right nowadays...
Unidentified Justice: [Laughter]
Justice Breyer: the... the... then under those circumstances, there would be no remedy...
Mr. Krent: That's correct, Your Honor.
Justice Breyer: for the consumer of the stores.
There's no government agency anybody could appeal to?
Mr. Krent: That's correct, Your Honor.
Justice Kennedy: All right.
Justice Breyer: So that's...
Mr. Krent: Absolutely none.
And indeed, if there was a tying arrangement of trying to say, if you want our postal services then you have to buy our greeting cards, to follow your example, no remedy whatsoever there as well, so that all these kinds of fear of predatory pricing, tying arrangements, monopolistic prices, the... there's a danger...
Justice Scalia: Well, but there... there wouldn't be a remedying as the Postal Service, but I assume you could sue American Greetings and Hallmark and whoever else had conspired with the Postal Service.
Mr. Krent: You might, unless it was a tying agreement, Your Honor.
If it was just the universal, unilateral action of the Postal Service with a tying arrangement, there would be no remedy.
Justice Scalia: If it was unilateral action, they'd be...
Justice Stevens: We won't sell you any stamps unless you buy our greeting cards?
Mr. Krent: You never know.
One never knows.
Justice Stevens: It might happen, I suppose.
Justice Ginsburg: Mr. Krent, can we go back to Sea-Land, where I thought that the first point made in that decision was indeed as a result of the change in the APA that Alaska Railroad could be sued for injunctive relief.
The Court said, yeah, they could be sued like any person, not for damages, but for injunctive relief.
And then it said, but this is the question of whether Congress authorized them to be a defendant in an antitrust case is a totally discrete question, it has nothing to do with the waiver of sovereign immunity.
Mr. Krent: Well, indeed, that... that's right, Your Honor, and indeed, the difference in... in Sea-Land is the fact that the Alaska Airlines never had a... never had to argue that they were separate from the United States.
Their argument was that the United States could be sued for its proprietary activities under the Sherman Act.
They didn't argue that they were a distinct entity, so they never said that... there was no... they agreed that there was no sue-and-be-sued clause, and so that whole argument that we're making in this case was never even raised in Sea-Land.
Justice Ginsburg: Well, I'm... from the Court's point of view, it... the Court made as a threshold determination that the railroad could be sued for equitable relief, so it could be sued.
And then it says, but that doesn't answer the question, we have to determine whether there is a claim, any claim under the antitrust laws, and on that the Court relied on Cooper.
Mr. Krent: That's correct, Your Honor, because of the Court's holding that the Alaska Airlines did not qualify under the term person under the antitrust laws.
And it's our contention, because the Postal Service is not structured anywhere like the Alaska Airlines, because it's... Alaska Airlines did not have a separate budget, the Alaska Airlines could not sue and be sued, the Alaska airlines had to comply with the APA, unlike the Postal Service, that the Postal Service is a person, whereas the Alaska Airlines and the SBA and the Department of Commerce and HUD would not be persons under the antitrust law.
So it's a very narrow argument predicated on the structure...
Justice Breyer: Eleven people running this, nine of whom were appointed by the President of the United States, I take it that's your...
Mr. Krent: I'm sorry...
Justice Breyer: I take it that the directors are appointed by the President of United States, almost all of them.
Mr. Krent: Except for the Postmaster and the Deputy Postmaster.
Justice Breyer: All right.
So nine out of the eleven are appointed.
Are they confirmed by Congress?
Mr. Krent: By the Senate, sure.
Justice Breyer: Yes, all right.
So... and they're represented by the Solicitor General, and their license plates have government on them.
Mr. Krent: Well, I've never seen their license plates, your Honor, but I'm...
Justice Breyer: But, I mean, and... and they say that they're part of the Government, and 80 or 90 percent of what they do is not what private industry does at all and you have remedies against all of it except... under other statutes or powers of review within the Government, except for a small portion, I take it it is a small portion, this greeting card business.
Mr. Krent: Well, we're focusing on the 20 percent we agree...
Justice Breyer: All right, then, so you're... in other words, I thought you were selling them sacks, you wanted to sell them burlap sacks.
Mr. Krent: Well, they're not burlap, but yes, they are...
Chief Justice Rehnquist: Well, whatever they are...
Mr. Krent: they are sacks.
Justice Kennedy: they're some kind of sack.
Mr. Krent: Sure.
Justice Breyer: Aren't they used for mail?
Mr. Krent: They are used for international mail, for third-class mail.
Justice Breyer: All right, so... and they make treaties, by the way, too.
I don't know that General Motors now can make a treaty.
Mr. Krent: I agree with you, Your Honor.
Justice Breyer: All right, so... so it wouldn't help you if we said that in the vast bulk of their business where they have all of these characteristics I just mentioned...
Mr. Krent: Well, I think it would, Your Honor.
Justice Breyer: that it... it would help you?
Justice Kennedy: How?
Mr. Krent: I think it would because I think the argument here...
Justice Breyer: They're selling the sacks for the greeting cards too?
Mr. Krent: I think that what... actually that they probably do, but the... the... the gravamen here is that there was a conspiracy to monopolize the mail sack business, as well as the...
Justice Breyer: Of course there was.
Don't they have a right to monopolize the mail sack business or not?
Isn't there some...
Mr. Krent: No.
Justice Breyer: They don't?
Mr. Krent: We don't believe that's part of the... the monopoly...
Justice Kennedy: Statute.
Justice Breyer: Then why don't you go to the commissions that run them and tell them they can't do it?
Mr. Krent: Well, there... there is a procurement claim pending, Your Honor, but the Postal Rate Commission would not have jurisdiction over the... the mail sack purchase at all, Your Honor.
And so the... the fear is that these kind of... of trade practices that are anti-competitive can go on without any kind of direct restraint.
Certainly there is an overlap between procurement and antitrust, but it's not congruent in that sense.
I think it's helpful to think about what Congress intended by waiving the Postal Service's immunity in the sue-and-be-sued clause.
Clearly it has to apply to something.
There was some point in waiving the immunity of the Postal Service.
We know, for instance, at least I think that the Government has conceded, that the Postal Service is now subject to torts at state law torts.
The... Franchise Tax suggested that the Government...
Chief Justice Rehnquist: Well, I... I thought conceded they were subject to Federal Tort Claims Act?
Mr. Krent: But the waiver was for torts and then the limitation in the waiver said that the procedures of the Federal Tort Claims Act must be applied, but clearly there's a waiver...
Chief Justice Rehnquist: Even though it's a state court action against the Post Office?
Mr. Krent: That's correct, just as it would be in any... for other Federal entity, but, for instance, the...
Chief Justice Rehnquist: So the... the Post Office can be sued in state court then for a... for a state tort?
Mr. Krent: Well, it could be, except for the fact that the... the limitations of the Federal Tort Claims Act apply by virtue of 409.
Chief Justice Rehnquist: Well, that's... that what I thought I asked you a minute ago...
Mr. Krent: Well then...
Chief Justice Rehnquist: and you said something different.
Mr. Krent: Well, I'm sorry if I misunderstood your question, Your Honor, but the... the argument then is that... that in other kinds of cases, such as the state law that said person in the Franchise Task... Tax... whether that... the question is whether that applies to the Postal Service as well, and of course in this Court, upheld the determination that the Postal Service would comply under the term person under the state law as well.
So how far does person apply?
Contract law, tort law, what about the Lanham Act, the trademark case?
Before the recent amendments to the Lanham Act that were mentioned recently, the... all the statute said was that it was applied to persons, and three courts of appeals suggested that even though person could not apply to the United States, person could apply to the Postal Service, by virtue of its distinct status.
Justice Ginsburg: But I thought the Lanham Act, definition written right into the Lanham Act was that a person within the meaning of that act is an organization capable of suing and being sued.
Mr. Krent: Yes, but courts had said that the United States, previous to that, did not fall within the term person, because the person doesn't refer to governmental entities at all.
So there the courts had distinguished...
Justice Ginsburg: It said it with respect to the antitrust law in Cooper, but the Lanham Act defined person differently.
Mr. Krent: But just slightly, Your Honor.
The only difference was the capable-of-being-sued part.
The United States is also capable of being sued.
Justice Ginsburg: But I... I thought that was what was critical, that any organization capable of suing and being sued was within the Lanham Act.
Mr. Krent: But the United States, Your Honor, can also be sued and is capable of suing itself, so I'm not sure that that distinguishes it, and indeed, under that language, courts had held the United States was not liable, and yet the Postal Service had registered trademarks in its own name, the Postal Service had registered copyrights in its own name, even though the United States cannot hold copyrights, and there is an exception...
Justice Ginsburg: But isn't there a good reason for that?
Mr. Krent: Well, I think there is a good reason.
Justice Ginsburg: To stop people from engaging in designed piracy in stamps?
Mr. Krent: And indeed, if that were all that the Postal Service had filed for, I would be... I would be in total agreement with Your Honor.
But the Postal Service had filed for 300, at least 350, I believe, copyrights, books, training manuals, things that have nothing to do with the protection for the legitimacy of... of stamps.
So again, the Postal Office has defined itself through its actions as a person in comparable commercial tort situations.
It's only logical that if a Postal Service in the commercial world, saying that it's not like the United States for copyrights, for trademarks, then it's not like United States with respect to antitrust.
When Congress formed the Postal Service, Your Honors, and it took away the APA, the Postal Rate Commission for these non-monopoly actions, as well as the Federal acquisition regulations, certainly there was a quid pro quo.
If you streamline the operations of the Postal Service, launch it into business, you would expect the private commercial torts in antitrust laws to be the restraint to make sure that the monopoly is not extended to the other kind of operations.
And so I think that Congress' intent is quite clear that the Postal Service is unique, does not partake of the United States, and therefore, just as the Postal Service can be sued in tort law and under the Lanham Act, be it the old Lanham Act, the new Lanham Act, it can be sued under the antitrust laws as well.
The burden, therefore, on the Solicitor General to explain why Congress would have wanted the Postal Service's monopoly to be extended, and why Congress would have wanted the Postal Service to be sue... to be able to be sued and to sue themselves without really being able to take advantage of the opportunity to sue in their own name under the antitrust laws or under trademark and copyright law, et cetera, and why they shouldn't be sued as well.
If there are no further questions, thank you.
Rebuttal of Edwin S. Kneedler
Chief Justice Rehnquist: Thank you, Mr. Krent.
Mr. Kneedler, you have six minutes remaining.
Mr. Kneedler: Several points, Mr. Chief Justice.
In addition to the other statutes that I've mentioned with respect to the right to sue, there are a number of other respects in which Congress has treated the Postal Service as a Federal entity.
It's subject to their Freedom of Information Act, the Privacy Act, the Inspector General Act, it's subject to the Federal sector OSHA regulations, and as this Court pointed out in the Loeffler decision, it's subject to the Federal sector Title VII prohibitions, not... it's not treated as a private corporation for purposes of Title VII.
It is subject to the National Labor Relations Act, but this act was passed in 1970 before the Federal sector labor... labor management provisions came in in the Civil Service Reform Act, and as you pointed out, Justice Scalia, that's an express provision subjecting the Postal Service to something that otherwise applies to private entities, but in... but in virtually every other respect, Congress has specified that it would be subject to Federal law.
And in section 409 of the act, with respect to judicial proceedings, Congress specified that the Postal Service would be... would be treated just like the United States, not just with respect to Tort Claims Act, but venue, removal jurisdiction, and representation by the Attorney General.
But the... the most fundamental point, however, to be made is that this is not a situation in which Congress has created a new entity and launched, in that sense, that entity into a private commercial world.
Here, Congress has carried forward the nation's tradition of treating postal services as sovereign functions performed by the Government of the United States.
These are... these are... to the extent they're commercial functions and... and they are unusual commercial functions, the Constitution treats them as... as something of particular interest to the United States Government.
I should point out that with respect to the postal services, all postal services are subject to the jurisdiction of the Postal Rate Commission, not just those that are subject to monopoly, that... that the Postal Service has monopoly control over, Justice Breyer.
So even in those areas in which the Postal Service is subject to competition in... in parcel and express mail, for example, the Postal Service... the Postal Rate Commission... does have regulatory jurisdiction over those...
Justice Kennedy: So greeting cards?
Mr. Kneedler: It does not over greeting cards, but the non-postal functions of the Postal Service constitute less than 1 percent of the revenues of the... of the Postal Service.
We're talking about a very minor aspect of the Postal Service's operations, and the affirmative authorization for the Postal Service to engage in that in section 404(7) of the act is cast in the same terms as the Postal Service's authorization to engage in all the other functions and they're really incidental.
Justice Stevens: But the fact that it's only... the fact that it's only 1 percent means they're only liable under the antitrust laws for 1 percent of their business.
Mr. Kneedler: No, I think... I think it shows that... that... that the predominant character of the Postal Service is as it always has been, and these... these other services are really in most ways incidental to... to postal services like greeting cards and... and that sort of thing.
Justice Stevens: But they're the services that they want to bring suits under.
Justice Kennedy: That's...
Mr. Kneedler: This... this is... this is not... this is not that.
This case is a... is an ordinary procurement dispute that... all Federal agencies engage in procurement and... and...
Justice Scalia: That's the curious thing about this suit.
It actually represents a portion of the monopoly business, of using the monopoly to... to monopolize procurement.
Mr. Kneedler: And in procurement, and in procurement in particular, Congress has treated the Postal Service like all other... all other Federal agencies under the Contract Disputes Act, particularly with respect to the disputes at issue here.
So in the end we believe that, as Justice O'Connor said, this is essentially a policy choice for Congress.
If... if in the current climate the Postal Service is to be subject to the antitrust laws, notwithstanding the fact that it remains a governmental entity, that is a... that is a choice that Congress should make, whether these governmental activities should be regulated by treble damage actions, which was extremely unusual under... under Federal statutes.
And where Congress has chosen to subject the United States to liability under statutes such as this, but not nearly as free-ranging in the patent laws, et cetera, it has done so expressly, and we think 30 years after the passage of the Postal Reorganization Act, that if the... if the Postal Service is now to be subject to the antitrust laws, that is something for Congress to do and not for the courts to try to divine from complete silence in the Postal Reorganization Act or its legislative history on that point.
If there are no further questions.
Justice Scalia: Do they really sell biking gear?
They don't sell biking gear.
Do they sell biking gear?
Mr. Kneedler: I... I'm not sure whether they... I... I don't know whether they sell biking gear.
The fact that they... the fact that they use the Postal Service team in... in... in promoting Postal Service products, I think, doesn't say anything about whether they're subject...
Justice Breyer: They might deliver some mail on bicycles, I mean...
Unidentified Justice: [Laughter]
Mr. Kneedler: It's entirely possible.
Chief Justice Rehnquist: Thank you, Mr. Kneedler.
The case is submitted.
Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 02-1290, United States Postal Service versus Flamingo Industries will be announced by Justice Kennedy.
Argument of Justice Kennedy
Mr. Kennedy: This is a case that requires us to consider whether the United Sates Postal Service is subject to liability under the federal antitrust laws.
And in this case, the Postal Service is the petitionary in this Court and Flamingo Industries, which is a corporation, is the respondent.
At one time Flamingo had been making mail sacks for the Postal Service.
Its contract was terminated at which point the Flamingo sued the Postal Service alleging various violations.
The relevant one here is the allegation that there was a violation of the federal antitrust laws, specifically the Sherman Act.
In the United States District Court, the court dismissed the antitrust’s claims but the Court of Appeals for the Ninth Circuit reversed.
The Court of Appeals said the Postal Service is subject to antitrust liability on certain conditions.
We granted certiorari and we now hold the Postal Service is not subject to antitrust liability, so we reverse the Court of Appeals.
The Postal Service was created by an act that we refer to as PRA.
That is the Postal Reorganization Act of 1971.
The PRA makes the Postal Service an independent establishment of the Executive Branch of the Government of the United States, that is the statutory phrase an independent establishment of the Executive Branch of the Government of the United Sates.
In an earlier decision in this Court, which is entitled Meyer versus FDIC, we said there is a two-step inquiry in cases like this: the first is whether there is a waiver of sovereign immunity against an agency of the government.
If there is, we ask the second question which is whether the substantive prohibitions of the Act in question do in fact apply to an agency of the government.
As to the first step, the PRA does provide that the Postal Service can sue and be sued in its official name.
So, there is a waiver of immunity that makes the Postal Service generally amenable to suit.
Still, there is no liability if the substantive law in question is not intended to reach the federal entity so, we must proceed to that second step.
Our examination of the Sherman Act and our decisions interpreting it lead us to hold that the Postal Service is not subject to antitrust liability.
The Sherman Act applies to persons -- that is the phrase used in the Act -- but the Postal Service is not a person separate and apart from the United States.
Its designation as an independent establishment of the Executive Branch is not consistent with the idea that it is an entity existing outside the government.
Absent an expressed statement from the Congress that the Postal Service can be sued for antitrust violations despite its governmental status, the Postal Service is not subject to antitrust liability, our conclusion is consistent with the nationwide public responsibilities of the Postal Service which has different goals, obligations, and powers form private corporations, and nor thus the fact that the Postal Service has lines of business beyond the scope of its mail monopoly show it is separate from the government under the antitrust laws.
The Postal Service, in both form and function, is not a separate person from the United States.
It is part of the government and does not control by antitrust laws.
The judgment of the Court of Appeals is reversed and our opinion is unanimous.