COMPETITION IN THE PACKAGE DELIVERY INDUSTRY HEARING BEFORE THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION SEPTEMBER 9, 2008 Serial No. 110–203 Printed for the use of the Committee on the Judiciary ( Available via the World Wide Web: http://judiciary.house.gov U.S. GOVERNMENT PRINTING OFFICE 44–325 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325 COMMITTEE ON THE JUDICIARY JOHN CONYERS, JR., Michigan, Chairman HOWARD L. BERMAN, California LAMAR SMITH, Texas RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, JR., JERROLD NADLER, New York Wisconsin ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia HOWARD COBLE, North Carolina MELVIN L. WATT, North Carolina ELTON GALLEGLY, California ZOE LOFGREN, California BOB GOODLATTE, Virginia SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio MAXINE WATERS, California DANIEL E. LUNGREN, California WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah ROBERT WEXLER, Florida RIC KELLER, Florida LINDA T. SA´ NCHEZ, California DARRELL ISSA, California STEVE COHEN, Tennessee MIKE PENCE, Indiana HANK JOHNSON, Georgia J. RANDY FORBES, Virginia BETTY SUTTON, Ohio STEVE KING, Iowa LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida BRAD SHERMAN, California TRENT FRANKS, Arizona TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas ANTHONY D. WEINER, New York JIM JORDAN, Ohio ADAM B. SCHIFF, California ARTUR DAVIS, Alabama DEBBIE WASSERMAN SCHULTZ, Florida KEITH ELLISON, Minnesota PERRY APELBAUM, Staff Director and Chief Counsel SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel (II) VerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325 C O N T E N T S SEPTEMBER 9, 2008 Page OPENING STATEMENTS The Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Member, Committee on the Judiciary ................................. 1 The Honorable Lamar Smith, a Representative in Congress from the State of Texas, and Ranking Member, Committee on the Judiciary ......................... 2 WITNESSES The Honorable George V. Voinovich, a U.S. Senator from the State of Ohio Oral Testimony ..................................................................................................... 4 Prepared Statement ............................................................................................. 5 The Honorable Sherrod Brown, a U.S. Senator from the State of Ohio Oral Testimony ..................................................................................................... 7 Prepared Statement ............................................................................................. 9 The Honorable Marcy Kaptur, a Representative in Congress from the State of Ohio Oral Testimony ..................................................................................................... 10 Prepared Statement ............................................................................................. 13 The Honorable Michael R. Turner, a Representative in Congress from the State of Ohio Oral Testimony ..................................................................................................... 15 Prepared Statement ............................................................................................. 17 The Honorable Betty Sutton, a Representative in Congress from the State of Ohio Oral Testimony ..................................................................................................... 18 Prepared Statement ............................................................................................. 20 Mr. David Lee Fisher, Lieutenant Governor, State of Ohio Oral Testimony ..................................................................................................... 22 Prepared Statement ............................................................................................. 25 The Honorable David L. Raizk, Mayor, Wilmington, OH Oral Testimony ..................................................................................................... 32 Submitted Material .............................................................................................. 35 Mr. John P. Mullen, CEO, DHL Express Oral Testimony ..................................................................................................... 70 Prepared Statement ............................................................................................. 73 Mr. Burt Wallace, Senior Vice President of Corporate Transportation, UPS Oral Testimony ..................................................................................................... 87 Prepared Statement ............................................................................................. 89 Mr. David Ross, President, Teamsters Local 224, on behalf of the Pilots of ABX Air Oral Testimony ..................................................................................................... 93 Prepared Statement ............................................................................................. 95 Mr. John Prater, President, Air Line Pilots Association, International Oral Testimony ..................................................................................................... 98 Prepared Statement ............................................................................................. 100 Mr. David A. Balto, Attorney at Law Oral Testimony ..................................................................................................... 107 Prepared Statement ............................................................................................. 109 (III) VerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325 IV Page LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Prepared Statement of the Honorable Sheila Jackson Lee, a Representative in Congress from the State of Texas .................................................................. 141 Prepared Statement of the Honorable Barack Obama, a U.S. Senator from the State of Illinois .............................................................................................. 143 VerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325 COMPETITION IN THE PACKAGE DELIVERY INDUSTRY TUESDAY, SEPTEMBER 9, 2008 HOUSE OF REPRESENTATIVES, COMMITTEE ON THE JUDICIARY, Washington, DC. The Committee met, pursuant to notice, at 2:12 p.m., in room 2141, Rayburn House Office Building, the Honorable Steve Cohen (acting Chairman of the Committee) presiding. Present: Representatives Conyers, Delahunt, Cohen, Johnson, Sutton, Gutierrez, Sherman, Wasserman Schultz, Smith, Coble, Goodlatte, Chabot, Keller, Issa, Forbes, King, and Jordan. Staff Present: Perry Apelbaum, Staff Director and Chief Counsel; Anant Raut, Majority Counsel; Brandon Johns, Majority Staff As- sistant; Sean McLaughlin, Minority Chief of Staff and General Counsel; and Stewart Jeffries, Minority Counsel. Mr. COHEN. This hearing of the Judiciary Committee will come to order. The proposed agreement between the package delivery compa- nies, UPS and DHL, whereby UPS would provide DHL with all air transport for DHL packages, raises a number of concerns. First, does this proposed agreement violate the Federal antitrust laws? I fully expect the witnesses from DHL and UPS will tell us that there is no need to be concerned because nothing has been finalized yet. Each has huge teams of lawyers working on the language of their agreement, but we are worried about it. Any transaction in which one of the package delivery company’s entire air service is provided by a competitor must be viewed with a heavy dose of skepticism. It is incumbent upon the contracting parties to satisfy us that it would not be anticompetitive. What specific terms are being incorporated into this agreement to allay our concerns? Second, what will be the impact on Ohio workers? The City of Wilmington and the State of Ohio invested a considerable amount of time and resources in providing DHL with a first-class sorting facility. Since 2004, the State of Ohio has offered DHL approxi- mately $400 billion in direct and indirect financial assistance and incentives, including tax credits and the construction of a highway bypass. Between the employees of DHL and its two carrier airlines, ASTAR and ABX, nearly 10,000 jobs across 41 counties are at stake. What is going to happen to these people if DHL decides to suddenly leave town? What kind of strain will this put on Ohio so- cial services if 10,000 residents wake up tomorrow without a job? (1) VerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325 2 Third, after this transaction, air transport in the package deliv- ery industry will essentially be consolidated in the hands of two players, UPS and FedEx. When competition increases, consumers win. When competition decreases, consumers absolutely lose. Right now, if you need express delivery of a package, you have four options—FedEx, UPS, DHL or the Postal Service.