FedEx/UPS Fight An Example Of Stupid Congressional Meddling

One rather contentious legislative issue highlighting the abuse of congressional tinkering in private business is about to resurface in the near future, as a Senate vote on the FAA Reauthorization Act, passed with 277 votes in the House of Representatives on May 21 of last year, will be coming soon after being shelved amid the gridlock of the Senate’s attempts to pass Obamacare.

The legislation – or at least the House version of it – is a 268-page morass of legislative gobbledygook that would be too boring to discuss here but for a seemingly-innocuous 200-word provision in Section 806 which (per Congressional Research Services):

Amends the Railway Labor Act to extend coverage only to certain express carrier employees who are in positions eligible for certification under FAA rules and perform duties for such a carrier that are also eligible for such certification. Subjects all other express carrier employees to the National Labor Relations Act.

In English, what this meant was that FedEx, whose delivery drivers are mostly independent contractors and which as the world’s largest airline operates on a completely different business model than UPS does – 85 percent of FedEx’s packages are delivered by air, while a similar percentage of UPS’ packages move via ground transportation – was going to see a switch from the Railway Labor Act to the National Labor Relations Act with respect to its governing legislation. FedEx, under the new regulatory regime, would then find itself awash in a move by the Teamsters to unionize its drivers and force its business model into the same box as Big Brown’s. Of UPS’s 415 employees the majority are union members, while only 5,000 of FedEx’s 280,000 employees – the pilots who fly FedEx’s planes – are unionized.

Reason.TV’s Nick Gillespie sums up the legislative battle in this amusing video:

FedEx didn’t come under the RLA as a goof; that law was put in place in hopes of protecting vital lines of communication and travel against disruption by labor disputes; it governs railroads, airlines and express-delivery services for obvious reasons. The idea that it would be a good idea to take FedEx’s express-delivery operation and move it to the NLRA – FedEx’s ground delivery operation is already governed by the NLRA, as it happens – is one only a union boss or an Alinskyite could love.

Companies regulated under the RLA can only be unionized on a company-wide basis, rather than locally as the NLRA provides. As a result, a local strike in a key facility in an express carrier’s network can cause major disruptions; this is less of a problem for a company like UPS in which the majority of packages are not of the express-delivery variety and there’s more leeway if work stoppages force logistical changes or delivery delays. Of course, that tighter, if more delicate, operation FedEx has built gives it an advantage in productivity over UPS and FedEx is increasingly competitive with UPS on a cost-basis.

So last year, UPS and the Teamsters got together in an attempt to sic Congress on FedEx; UPS because they wanted to force FedEx out of their successful business model and the Teamsters because they wanted a shot at breaking into FedEx’s employees local by local. It worked, at least in the House, but the Senate version did not contain the reclassification provision on FedEx’s drivers.

But hope springs eternal, and now that the Senate is likely unfrozen due to the demise of Obamacare this issue will probably resurface soon. The FAA is operating on a short-term authorization passed by the Senate on a voice vote last month, but that authorization expires on March 31, so unless another patch is passed it’s likely the Senate bill, S. 1451, will come up for a vote within 60 days and the whole thing will go to the conference committee.

And in the conference comes the danger the FedEx provision will make its way back into the bill.

Whether the law does get changed or not, this controversy has become an interesting cautionary tale about what excessive government regulation and the impingement upon the free market will bring about. Last year the two companies spent some $15 million lobbying Congress, FedEx put out a web site decrying UPS and the provision at and the wrangling in the Senate sent lobbyists scurrying after obscure members like Alaska Democrat Mark Begich, whose opinion on this topic would normally be of little or no consequence whatsoever.

UPS has a point in this debate; namely, that a delivery driver is a delivery driver, and members of that profession should be treated the same. But the functional equivalent of what they’re trying to do is use the government to destroy favorable business conditions for their competitors, and that is about as pristine an example of crony capitalism as you’ll find. FedEx has a point in that while the two companies perform a lot of the same services, they’re very different companies given that one is a trucking company which delivers parcels, some of which via express, and the other is an airline which does express delivery, some of which are delivered via ground transportation. And nobody seems to be asking how the American economy, which is under enough strain as it is, would be better off by exploding the business model of a successful firm so as to impose untold extra costs on its customers.

The point here is whether such a Byzantine regulatory scheme, which encourages companies to spend money and effort hip-checking each other into the arms of federal bureaucrats, should exist at all. To the extent the labor policies of FedEx and UPS should be subject to federal regulation in the first place, it’s hard to make a case for essentially criminalizing the business model of a successful company in the midst of a lousy economy – but that’s what the House of Representatives attempted to do.

There may be a happy medium found somewhere between FedEx and UPS and how the two companies are regulated. Casting one of them into the other’s pot as a result of a successful joint lobbying venture between UPS and the Teamsters certainly doesn’t appear to be it.



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