National Association of Greeting Card Publishers, Appellant, v. the United States Postal Service, Appellee,united Parcel Service of America, Inc., et al., Intervenors.national Association of Greeting Card Publishers, Petitioner, v. United States Postal Service, Respondent,united Parcel Service of America, Inc., et al., Intervenors.associated Third Class Mail Users and National Easter Sealsociety for Crippled Children and Adults v. United States Postal Service, Appellant,postal Rate Commission et al., Intervenors.state of Maine et al., Appellants, v. United States Postal Service, Appellee, 569 F.2d 570 (D.C. Cir. 1976)

Concurring Opinion filed by Circuit Judge MacKINNON.

PER CURIAM:

These three cases, consolidated for consideration on the merits, raise a full range of substantive and procedural challenges to a series of orders of the United States Postal Service ("Postal Service" or "USPS") issued pursuant to the Postal Reorganization Act of 1970 ("Act"), 39 U.S.C. § 101 et seq., for the purpose of implementing certain increases in postal rates and fees, either temporarily or on a permanent basis.¹  In Nos. 75-1856, 75-1857 the National Association of Greeting Card Publishers ("NAGCP") case we review the permanent rates that were in effect from September to December, 1975. In Nos. 75-2227, 75-2228 and No. 75-2238 the Associated Third Class Mail Users ("ATCMU") and State of Maine cases, respectively we review the temporary rates that were in effect from December, 1975 to July 18, 1976. Viewed together these cases prompt us not only to decide the individual merits of each claim but also to consider the Postal Service's overall progress to date in adapting to the Act's special, and quite demanding, ratemaking requirements. We bring to this task our prior experience in interpreting the complex procedures by which postal rates and fees are set under the Act.² 

While each case before us offers its own unique theory for invalidating the rates or fees it challenges, all three cases require an understanding of the ratemaking procedure prescribed in the Act.

Briefly put the Act created the Postal Service, "an independent establishment of the executive branch of the Government of the United States,"³  which is directed by an eleven member Board of Governors ("Board") composed as follows: nine presidentially appointed "Governors"; the Postmaster General, who is the "chief executive officer of the Postal Service"⁴  and is appointed by the Governors; and the Deputy Postmaster General, who is appointed by the Governors and the Postmaster General.⁵  Some powers are conferred on the Governors as distinct from the Board.⁶  The Act also created the independent, five member Postal Rate Commission ("Commission") which is charged with submitting to the Governors, upon request, "recommended decision(s) on changes in a rate or rates of postage or in a fee or fees for postal services."⁷ 

The ratemaking procedure prescribed by the Act may be summarized as follows. The Postal Service submits to the Commission a formal request for new rates or fees, which request may be accompanied by suggestions for rate adjustments which the Postal Service deems suitable.⁸  The Commission must provide an opportunity for a hearing on the record and, at the conclusion of this proceeding, must transmit its recommended decision to the Governors.⁹  The Governors then may approve the decision and order it into effect, or allow it to take effect under protest while seeking judicial review or Commission reconsideration, or reject it and have the Postal Service resubmit the request for reconsideration and a further recommended decision in which event the further recommended decision may, under limited circumstances, be modified by the Governors and put into effect as modified.¹⁰  An aggrieved party who appeared in the Commission proceedings may appeal the "decision of the Governors to approve, allow under protest, or modify the recommended decision," and the reviewing court "may affirm the decision or order that the entire matter be returned for further consideration, but the court may not modify the decision."¹¹ 

To avoid any prolonged disruption to the Postal Service's financial integrity which compliance with this elaborate procedure might cause, the Act also provides for the implementation of temporary increases in rates or fees. If the Commission "does not transmit to the Governors within 90 days after the Postal Service has submitted, or within 30 days after the Postal Service has resubmitted, to the Commission a request for a recommended decision . . . the Postal Service, upon 10 days' notice in the Federal Register, may place into effect temporary changes in rates of postage (or) in fees for postal service."¹²  A temporary rate or fee, however,

may not exceed the lesser of (1) the rate or fee requested for such class or service, or (2) a rate or fee which is more than one-third greater than the permanent rate or fee in effect for that class or service at the time a permanent change in the rate or fee of such class or service is requested under section 3622 of this title.¹³ 

In addition, if upon judicial review of a decision of the Governors on permanent rates, taken pursuant to 39 U.S.C. § 3628, the court "orders a matter returned to the Commission for further consideration, the Postal Service, with the consent of the Commission, may place into effect temporary (rates or fees)."¹⁴  Finally, judicial review of temporary rates or fees may be sought in the district court.¹⁵ 

To date three ratemaking proceedings have been initiated under the Act. The first proceeding (docket no. R71-1), which may be identified by its establishment of permanent 8 cent first class rates, began when the Postal Service submitted a request on February 1, 1971. Temporary rates were put into effect May 16, 1971, and on June 29, 1972, the Governors approved the Commission's recommended decision and ordered permanent rates put into effect. On appeal pursuant to 39 U.S.C. § 3628 this Court affirmed the Governor's order. Association of American Publishers, Inc. v. Governors of the United States Postal Service, 157 U.S.App.D.C. 397, 485 F.2d 768 (1973) (hereafter cited as American Publishers) .

The second proceeding (docket no. R74-1) established 10 cent first class rates. It was initiated with a request on September 25, 1973; temporary rates were put into effect March 2, 1974; and permanent rates were ordered September 4, 1975, after nearly two years of Commission proceedings. The NAGCP case seeks judicial review of this order pursuant to 39 U.S.C. § 3628.

The latest proceeding (docket no. R76-1), which may be identified by its proposal to establish permanent 13 cent first class rates, began with a request that was submitted September 18, 1975, and was resubmitted December 19, 1975.¹⁶  The ATCMU and State of Maine cases were brought in district court to enjoin implementation of temporary rates based on this request. Following district court orders in which injunctive relief was granted on procedural grounds (ATCMU), but denied on substantive grounds (State of Maine), appeals were taken to this Court. We stayed the district court injunction, and on December 31, 1975, temporary 13 cent first class rates were put into effect.

The first case involves the second ratemaking proceeding conducted under the Act and is before us on NAGCP's petition to review the September 4, 1975 order of the Governors which approved the Commission's recommended decision and ordered into effect the permanent rates there recommended.

In that proceeding the Commission, after receiving the Postal Service's September 25, 1973 request for a recommended decision, assigned Chief Administrative Law Judge ("ALJ" or "Judge") Seymour Wenner, who had presided at the first ratemaking proceeding,¹⁷  to preside at the hearing.¹⁸  Taking part in the hearing, which began June 27, 1974, were some 29 full participants and 17 limited participants.¹⁹  Extensive evidence was taken over some 46 days of hearings, the record being closed on December 20, 1974.²⁰ 

After briefing, issuance of the ALJ's initial decision (May 28, 1975), and two days of oral argument before the Commission, the case was submitted to the Commission, which transmitted its recommended decision to the Governors on August 28, 1975. The Governors' implementing order and this appeal followed.²¹ 

At the outset we are met with the contention that the Commission, at the time it considered and composed its recommended decision, was improperly constituted under the Act and that therefore the actions it took, regardless of their validity otherwise, are without force and effect.

Section 3601 of the Act establishes the Commission and mandates that it be "composed of 5 Commissioners appointed by the President, not more than 3 of whom may be adherents of the same political party." At the time in question three of the Commissioners were members of the Republican Party while one was a member of the Conservative Party of New York State. The claim of improper composition rests in essence on the assertion that these two political parties are "the same political party" within the meaning of section 3601.

No claim is made that the organization of either party is a sham²²  or that one party exercises control over the other.²³  Rather, the heart of the argument is an assertion of sameness predicated on an evaluation of certain similarities in the political philosophies of the two parties. Believing it well outside our proper judicial role to undertake such an analysis, we exercise no jurisdiction and express no views whatsoever on the issue. See Baker v. Carr, 369 U.S. 186, 217, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962); Coleman v. Miller, 307 U.S. 433, 453-54, 59 S. Ct. 972, 83 L. Ed. 1385 (1939).

Furthermore, even were we to assume that the Commission was improperly composed, there is a separate and independent reason why the actions here challenged would still be valid. At least since Ex parte Ward, 173 U.S. 452, 19 S. Ct. 459, 43 L. Ed. 765 (1899), the law has been clear that:

A person actually performing the duties of an office under color of title is an officer de facto, and his acts as such officer are valid so far as the public or third parties who have an interest in them are concerned.

United States ex rel. Doss v. Lindsley, 148 F.2d 22, 23 (7th Cir. 1945), cert. denied, 324 U.S. 863, 65 S. Ct. 866, 89 L. Ed. 1419 (1945); see United States v. Krueger, 319 F. Supp. 225, 226-27 (N.D. Ill. 1970). In short, the remedy for improper composition is not invalidation of the Commission's action through indirect challenge, but rather removal of the allegedly disqualified Commissioner by way of direct attack.²⁴  See, e. g., Ryan v. Hershey, 445 F.2d 560 (8th Cir. 1971), cert. denied, 404 U.S. 1004, 92 S. Ct. 565, 30 L. Ed. 2d 557 (1971); United States v. Chaudron, 425 F.2d 605 (8th Cir. 1970), cert. denied, 400 U.S. 852, 91 S. Ct. 93, 27 L. Ed. 2d 89 (1970); United States v. Brooks, 415 F.2d 502 (6th Cir. 1969), cert. denied, 397 U.S. 969, 90 S. Ct. 1003, 25 L. Ed. 2d 263 (1969).²⁵ B. 39 U.S.C. S 3622

On the merits the case focuses on 39 U.S.C. § 3622, the section of the Act which sets forth the cost and noncost considerations that the Commission must take into account in setting rates. The "most concrete"²⁶  of these, and only one of the subsections which deals expressly and exclusively with cost factors,²⁷  is subsection 3622(b) (3) which establishes

the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type.²⁸ 

In response to section 3622 the Commission developed for this proceeding, and the Governors adopted by their order, a two-step process for allocating among the classes of mail all the costs of operation. While each step will be described more fully below,²⁹  the Commission's approach may be summarized at the outset as follows. The Commission sought as its first step to identify and allocate to each class of mail those costs which in its view indisputably were the result of providing that particular service. A rate floor for each class of mail, see note 58 and accompanying text infra, was thus established by "attributing"³⁰  a portion of the total costs on the basis of "cost variability" an approach which evaluates changes in costs as a function of changes in output volume. As its second step, in order to take into account the noncost factors of section 3622, the Commission then judgmentally "assigned" all the remaining costs on the basis of demand factors designed to determine "what the traffic will bear" in each class of mail.³¹  Under this "inverse elasticity rule" approach, final rates evolved by assigning all the unattributed costs to the various classes of mail in inverse proportion to the relative elasticity of demand for each class; i. e., those classes of mail in which increases in rates hypothetically would cause lesser decreases in patronage were made to shoulder larger portions of the unattributed costs, while those with greater elasticity of demand were burdened with smaller markups above their attributed costs. Petitioner advances separate arguments to dispute each element of the Commission's approach.

1. Commission's Approach to Subsection 3622(b) (3) and ALJ's Alternative Approach.

a. Attribution. The premise of the Commission's approach to attribution is its belief that cost variability is the only proper indicator of causation. As the Commission explains,

if a particular cost varies with a change in volume units, we infer that the cost is caused by such change and can be attributed to the class or service experiencing the change.

From volume variability, therefore, we can infer, and thereby establish, the causation that we seek. And by establishing minimum rates based on variable costs, we assure ourselves, the public, and Congress that no class has cross-subsidized any other class.³² 

The basic principles of this cost-of-service approach have remained unchanged since the Commission first adopted cost variability as its attribution methodology in the initial rate proceeding.³³ 

The touchstone of the cost variability approach is the Commission's concern that causation be measured as accurately as possible that within the bounds of available data, all elements of approximation or estimation be excluded.

(W)e believe that causation is both the statutory and the logical basis for attribution. Where an analysis based on causation cannot be made because data are lacking, we will do better to acknowledge that fact and press for a better data base than to construct an "attribution" on a basis not contemplated by the statute.³⁴ 

The stricture of this approach and the unavailability of complete data led in the first two rate proceedings to recommended decisions which, by the Commission's own account, did not attribute to each class all the costs that likely were the result of providing the particular service.³⁵  In the first proceeding attributable costs were set at 49% Of total costs. In the proceeding here under review the Commission, after revising upward the Service's proposal to attribute only 45.1% Of costs, recommended that 52.5% Of all costs be attributed.³⁶ 

b. Assignment. The Commission used demand theory to assign all the remaining, unattributed costs (47.5%). An understanding of the Commission's approach requires an initial familiarity with the concept of demand elasticity. Simply put, the demand for a product is said to be elastic if lowering its price by a specific percentage leads to a greater percentage increase in the volume sold, or if raising its price by a specific percentage leads to a greater percentage reduction in its volume.³⁷ 

Elasticity of demand forms the cornerstone of a demand theory (or "value-of-service") approach to apportioning costs. Such an approach seeks to minimize the impact that an increase in rate will have on services with positive demand elasticities by "impos(ing) on the services in relatively inelastic demand . . . higher surcharges, over and above marginal costs, than would be imposed by any rule of apportionment based exclusively on cost relationships."³⁸ 

The Commission has developed, and used in both the first and second rate proceedings, a specific formulation of demand theory what it calls the "inverse elasticity rule" as a guide in assigning unattributed costs. Under this rule final rates are derived by assigning to the various classes of mail different markups (above attributed costs) in inverse proportion to the relative elasticity of demand for each of the classes. It is the Commission's position that generally by using demand factors, and specifically by testing its recommended rates against the inverse elasticity rule, it "can assign costs in a manner that fully takes into account the noncost factors of the statute."³⁹ 

The Commission acknowledges that all classes of mail are basically insensitive to price increases, and that demand in each class, at least at present and reasonably foreseeable rates, is technically inelastic that is, a rate increase in any class of mail will necessarily generate an increase in revenue albeit at reduced volume.⁴⁰  Generally demand theory is used to minimize the impact that a rate increase otherwise would have on products that are demand elastic. The Commission posits, however, that despite the high degree of inelasticity that presently prevails among all classes of mail, demand theory is nonetheless proper in postal ratemaking since it may be based on relative demand elasticities (or, more accurately, relative inelasticities). Accordingly, in the instant proceeding the Commission purported to develop a ranking of relative price sensitivity among the classes of mail and, based on this ranking, sought to establish the "optimum rate for each mail class and service," which it defined as "that rate which maximizes the volume of mail while recovering all the related attributable costs and making some contribution to the fixed overhead, so that in the end total costs are recovered."⁴¹ 

c. Alternative approaches. In recommending its attribution/assignment methodology to the Governors, the Commission rejected entirely the initial decision proposed by Administrative Law Judge Wenner and instead stood by the approach it first developed in the inaugural rate proceeding. In that proceeding ALJ (then Chief Examiner) Wenner severely criticized both the Commission's use of cost variability as its approach to attribution⁴²  as well as the Commission's reliance on the inverse elasticity rule as a guideline for assigning all the remaining costs.⁴³  However, constrained in that proceeding by the minimal cost data presented, the unavailability of alternative methodologies, and the "presumptions that surround an initial effort to formulate rates," the ALJ as well as this Court left undisturbed the Commission's initial use of cost variability and demand theory.⁴⁴ 

When presented in the instant proceeding with the same approach, essentially unchanged, ALJ Wenner determined that the presumptions noted earlier no longer prevented full review.⁴⁵  Adopting and refining alternative methodologies advanced by various parties to the proceeding,⁴⁶  and using only the data provided in the Service's own submission, the ALJ proposed to the Commission an entirely different approach to attribution/assignment under which the ALJ attributed some 70.6% Of costs and assigned the remaining costs primarily in accordance with cost-of-service rather than value-of-service principles.

The ALJ's attribution method proceeds from a premise quite at odds with that of the Commission. Whereas the linchpin of the cost variability approach is an abiding concern for the greatest possible accuracy in measuring causation, the ALJ's alternative approach devalues somewhat the interest in utmost accuracy in order to pursue more fully the goal of maximized attribution.⁴⁷  Simply put, the alternative approach relies on cost accounting principles to augment the inferences of causation derived through use of the cost variability theory. Additional attribution results from using distribution keys such as weight, volume and number of pieces of mail to apportion among the postal services affected those cost segments which clearly affect more than one service and which, although not measurably variable on presently available data, are reasonably susceptible to such apportionment. The approach is perhaps best understood by using transportation costs as an illustration of the method as applied.⁴⁸ 

The transportation segment as constructed by the ALJ includes all the costs the Postal Service incurs, both for purchased and self-furnished services, to carry mail from the patron's collection point to the receiving point, including, in addition to salaries, the costs associated with the servicing, maintenance and depreciation of vehicles. It does not include, however, the actual delivery function, i. e., handing the mail to the patron or putting it in the patron's box, which comprises a different cost segment. In the instant proceeding total transportation costs were $2.621 billion, of which the Postal Service attributed only $545 million (21%), characterizing the remaining $2.076 billion as fixed costs subject to judgmental distribution. The ALJ, however, by analyzing the transportation function as being governed by considerations of the weight and cubic volume of the mail handled (as contrasted with the actual delivery function which is more a factor of the number of pieces of mail⁴⁹ ) was able to attribute $2.565 billion (98%), leaving only $56 million subject to discretionary assignment. His reasoning was straightforward:

The cubic volume of mail determines the number and size of the vehicles required which affects the maintenance, fuel and lease costs. The weight of the mail affects the loading and unloading effort and also bears on the needed carrying strength and operational expenses of the vehicle. The cost of drivers varies with vehicle operations.

The cost of the mail carrier's walking (or driving a vehicle) over his route is governed by weight and space. What he can carry in his pouch and his hands is affected by the weight (35 pounds maximum under Postal Regulations) and the size (in cubic volume) of the load; this determines how often he must return to the relay box or to his car. The weight and cubic volume of mail also affects the size of the vehicle he needs (where he has one).⁵⁰ 

The ALJ's method for assigning the remaining costs is also quite opposed to principles underlying the Commission's adopted approach; it proposes complete rejection of the inverse elasticity rule.⁵¹  Under the alternative approach each class of mail bears that portion of unattributed costs equal to its proportionate share of attributed costs unless individual and specific consideration of the noncost factors contained in section 3622(b) requires deviation from the standard markup.⁵² 

2. Requirements of Section 3622. Relying in large measure on the criticism leveled in the ALJ's initial decision, petitioner argues that the Commission's attribution assignment approach is violative of the Act in several respects. Initially petitioner asserts that the Commission's cost variability method is a too restrictive approach for attribution which permits the expense incident to one service to be thrown upon the customers using another service, resulting in unlawful cross-subsidization. See, e. g., Northern Pacific Railway Co. v. North Dakota, 236 U.S. 585, 597-98, 35 S. Ct. 429, 59 L. Ed. 735 (1915). Petitioner also attacks the Commission's reliance on demand theory, and in particular its use of the "inverse elasticity rule," as a means for assigning all unattributed cost, arguing that this approach preserves historical rate differentials and otherwise unduly and unreasonably discriminates against first class mail. See 39 U.S.C. § 403(c).

The foundation of both arguments is the assertion that the Act imposes a special obligation that allocation in accordance with cost-of-service principles be carried out as far as reasonably possible. In American Publishers we found "a strong indication" that Congress intended to impose just such a special obligation.⁵³  In that case, however, in view of "the presumptions that surround an initial effort to formulate rates" we found it unnecessary to go beyond a mere preliminary assessment of the import of subsection 3622(b) (3).⁵⁴ 

In this case, now that the Commission has had some five years of experience with the Act, the formidable task of definitively interpreting subsection 3622(b) (3) may no longer be deferred. We must first determine whether a thorough examination of the statute bears out our earlier assessment whether, in short, the Act requires that special efforts be made to trace all the cost consequences of providing the various services and to allocate costs on this basis to the fullest extent reasonably possible. Only then may we evaluate the Commission's approach for compliance with the Act.

a. Interpreting subsection 3622(b) (3). We begin with the words of the statute. As noted above, subsection 3622(b) (3) requires that "each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type."⁵⁵ 

Three important points are immediately apparent. First, unlike any of the other ratesetting factors contained in section 3622(b), subsection (b) (3) is set forth as a "requirement",⁵⁶  a fact which suggests its special role in the Act's ratesetting scheme. Second, the section uses words which further emphasize its importance by suggesting a substantial breadth to its coverage. For instance, both attribution and assignment are designed to reach "each" of the classes of mail and types of service. Moreover, not only "direct" but also "indirect" postal costs are to be attributed, and thereafter a portion of "all other costs" of the Postal Service are to be assigned. Third, the emphasis throughout the subsection is unmistakeably upon cost-of-service principles. Under the subsection each service must bear the postal costs "attributable to (it)" and in addition must also bear that portion of all other costs "reasonably assignable to (it)" (emphasis added). Thus, the very words of subsection (b) (3) disclose its concern that each class of mail and postal service shoulder all the postal costs that may reasonably be traced to the provision of that class or service.

Giving the statute a plain reading it seems clear that the first of the subsection's dual requirements calls for something more than minimal attribution. Had Congress intended, for instance, that cost variability be acceptable as an exclusive method for identifying attributable costs, it in all likelihood would not have given seemingly equal importance to the attribution of indirect, as of direct, postal costs. Strictly speaking, indirect costs may not be attributed by cost variability, at least not by short-term variability; rather, attribution of such costs as a practical matter necessitates the use to some degree of cost allocation formulae based on accounting principles.⁵⁷  Moreover, the report of the conference committee confirms the view that Congress intended attribution under subsection 3622(b) (3) to extend beyond minimally attributable costs and to include to a significant extent those additional costs which, although not measurably variable and therefore not directly attributable, may nonetheless be determined with reasonable confidence to be the consequence of providing the service.⁵⁸ 

A plain reading also clearly suggests that the other costs of the Postal Service that are to be "reasonably assigned" must also be allocated on cost-of-service principles. That is, after the process of extended attribution is complete, a portion of remaining costs are to be assigned to the various mail classes and postal services to the extent that it can reasonably be determined or estimated that certain classes of service may account for particular costs. As discussed above, a primary theme of subsection 3622(b) (3) is its concern with fully tracing the cost consequences of providing the various services. Legislative history, which is explored more thoroughly below, confirms that this theme pertains as much to assignment as to attribution.⁵⁹ 

One last feature of subsection 3622(b) (3) is disclosed by giving the words of the statute their plain meanings. Congress did not intend that all postal costs be either attributed or assigned. Rather, the statute expressly provides that each class of mail or type of mail service must bear, in addition to its attributable costs, only "that portion of all other costs of the Postal Service reasonably assignable to such class or type" (emphasis added). Thus, some Postal Service costs will exist but will not be "reasonably assignable" to any particular class or type. The other factors enumerated in section 3622 will govern the allocation of these nonattributable and nonassignable costs. This makes good sense. With subsection 3622(b) (3) strengthened from a guideline into the only "requirement" among the eight ratesetting factors listed in section 3622, unless express provision were made for a third category of costs subsection 3622(b) (3) would be susceptible of an interpretation by which all the noncost factors of the remaining subsections could be read out of the Act. The conference report confirms that Congress acted expressly to prevent just such an interpretation.⁶⁰  While clearly the primary purpose of the Act's ratesetting provision is to assure that attribution and assignment in accordance with cost-of-service principles is carried out to the fullest extent reasonably possible, subsection (b) (3) provides at the same time for a residuum of costs to be used to give effect to the noncost factors expressly set forth in the Act.

Legislative history fully supports the plain reading of subsection 3622(b) (3) and reinforces the conclusion that first and foremost the Act requires that special efforts be made to maximize the use of cost-of-service principles in the allocation of postal costs.

Discrimination in postal ratemaking in favor of certain preferred classes of mail and to the great disadvantage of first class mail has long been a part of our postal system. As early as 1913 the Supreme Court, in Lewis Publishing Co. v. Morgan, 229 U.S. 288, 303-304, 33 S. Ct. 867, 870, 57 L. Ed. 1190 (1913), recognized that Congress designed its postal rate structure to discriminate among classes of mail, conferring "pecuniary advantages of great consequence" upon certain classes of mail, always at the expense of first class, based "upon the conceptions of Congress as to how far it was wise for the general welfare to give advantages to one class not enjoyed by another." This practice, increasingly more formalized through the years, continued until the time of the Postal Reorganization Act.⁶¹ 

In seeking postal reform through the 1970 Act it was a central and express aim of both Houses of Congress to end the abuses of this practice to get "politics out of the Post Office."⁶²  Congress realized that the result of this purposeful discrimination the setting of rates for some classes of mail well below that necessary to recover the costs of providing the service⁶³  was symptomatic of the political process. Debate over the Act discloses that Congress was well aware of the extent to which the availability of preferential rates, and the political nature of postal ratemaking in general, attracted lobbyists into the ratesetting process and invited the abuses that not infrequently result from their influence.⁶⁴  A major thrust of the postal reform effort therefore was to minimize this attraction of lobbyist influence by severely curtailing the broad discretion that had characterized prior ratesetting procedures and served to shield abuses of the system.⁶⁵ 

The two Houses advanced different approaches for solving these problems. The Senate passed a bill that would have abolished all rate preferences, phasing in the expected rate increases over five and ten year periods to cushion the impact of the elimination of preferential treatment.⁶⁶  The House Bill, on the other hand, would have written into law the preferences then existing by providing that "the preferential rates accorded these categories of mail will not be changed except by Congress, unless the Congress fails to appropriate funds sufficient to cover the revenue foregone because of the rate preference."⁶⁷  Moreover, the two bills differed significantly in the guidelines they prescribed for distributing postal costs to set postal rates: while both proscribed discrimination,⁶⁸  the Senate Bill required a reasonable allocation of all costs, including institutional costs,⁶⁹  whereas the House Bill provided only that each class of service would bear "at least those costs demonstrably related to (it)."⁷⁰ 

These differences were subjected to conference bargaining. In exchange for the retention of enumerated preferences, the House accepted the Senate's standards for allocating costs.⁷¹  Moreover, the standards of the Senate Bill, which in any event were more stringent than those proposed in the House Bill, were further strengthened at conference and expressly made applicable to all classes of mail (§ 3622(b) (3)) including the preferred classes (§ 3626). Subsection 3622(b) (3), which is the only 3622(b) ratemaking subsection which was not taken verbatim from the Senate Bill, was originally only a guideline that the Commission, in determining rates, consider "operating costs, the amount of overhead, and other institutional costs of the Postal Service properly assignable to each class of mail or type of mail service."⁷²  But when it emerged from conference this guideline had become "the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type."⁷³  See note 59 supra.

It is quite apparent from this history that the conference committee amendments to subsection (b) (3) were designed to reemphasize the severe limitations that the Act places upon the Service's ability to set rates other than in strict accord with cost-of-service principles. Prior to the Act the Service enjoyed broad discretion in the allocation of postal costs, a discretion which in the past had made the setting of postal rates susceptible to political bartering and the frequently abusive influence of lobbyist efforts. We are persuaded that the conference committee amendments, which apparently were insisted upon by the Senate conferees in exchange for the major concession of retaining certain preferential classes of mail, were intended to clarify the extreme degree to which the Act restricts that prior, and quite problemful, discretion. In view of this it would be anomalous to construe subsection 3622(b) (3) as permitting a grudging use of cost-of-service principles which, by expanding the residuum of costs subject to discretionary allocation, simply preserves the potential for continuing the very same discriminatory treatment that the Act so clearly intended to remedy.

Subsection 3622(b) (3) provides, in short, that the Postal Rate Commission must first of all attribute to each mail class or postal service all postal costs which may reasonably be determined, through variability theory as well as through other reasonable inferences of causation, to be the consequence of providing the service. It must then distribute among the mail classes and services that significant portion of all remaining costs of the Postal Service that may reasonably⁷⁴  be assigned to each on the basis of best available cost-of-service estimates. The residuum of costs is subject to discretionary allocation in accord with the noncost factors set forth in the Act.

b. Compliance with the Act. In deciding whether the Commission's adopted ratemaking approach complies with the requirements of the Act we are not unmindful that the scope of our review is limited. Absent a specific statutory command to the contrary our task is simply to ensure that the Commission has followed proper procedures, that it has considered the relevant and excluded the irrelevant, and that its ratemaking order has produced no arbitrary result.⁷⁵  As we said in American Publishers, however, we must also be assured that the Postal Service has not "flouted a statutory command."⁷⁶ 

The overriding feature of this case is the express mandate of subsection 3622(b) (3) that all reasonable efforts be made to trace the cost consequences of providing each mail class or service and to allocate postal costs on that basis to the fullest extent possible. In specifically requiring that the Commission endeavor to maximize the use of cost-of-service principles, Congress deliberately went beyond the general ratemaking requirement that rates be fair and equitable.⁷⁷  It is the Commission's duty therefore to respond faithfully and not grudgingly to this plain command of the statute, and it is equally our duty to carefully scrutinize responses to this particular aspect of the Act's overall ratesetting scheme and to reject efforts that fail to comply with this special requirement⁷⁸  efforts which, in short, flout the express command of the Act.

(1) Attribution. There is no contention in this case that cost variability is an invalid starting point in the attribution of postal cost⁷⁹  all the parties before us employ it to some extent. The issue rather is whether the Commission's reliance on cost variability, to the virtual exclusion of other considerations, is insufficiently responsive to the Act's express concern for extended attribution.⁸⁰ 

Our task, of course, is not to prescribe an acceptable percentage level of attribution.⁸¹  Nor are we charged with selecting from among alternative approaches available to the Commission the one approach which we deem most responsive to the underlying purposes of the Act. We are an appellate court, not an agency possessed of developed expertise. We look to the design of the Commission's approach not to substitute our judgment for that of the agency, but only to determine whether the Commission's adopted method falls unconscionably short of the statutory requirements.

As noted above, the Commission acknowledges that presently incomplete data preclude full attribution under its cost variability approach.⁸²  It insists, however, that utmost accuracy in the measurement of causation must prevail over all else.⁸³  In our view this allegiance to the goal of greatest possible accuracy fatally flaws the design of the Commission's adopted method since at present the Commission's goal may be obtained only by substantially disregarding the Act's express concern for extended attribution.

The Commission suggests, however, that it had no choice but to continue to rely on its cost variability methodology since each of the alternative approaches presented to it failed to meet the requirement that agency action be nonarbitrary and the product of reasoned decisionmaking.⁸⁴  We are unpersuaded. Attribution methods such as those used in the alternative approaches are not infrequently employed in agency ratemaking. E. g., Domestic Passenger-Fare Investigation, Phase 9-Fare Structure, C.A.B., Order No. 74-3-82, Docket No. 21866-9 at 32 (March 18, 1974); Domestic Service Mail Rate Investigation, 47 C.A.B. 310, 312-14, 339 (1967); Reopened Pan American Mail-Rate Case, 35 C.A.B. 540, 546-47 (1962); Area Rate Proceeding, 34 F.P.C. 159, 192-93 (1965); Atlantic Seaboard Corp., 11 F.P.C. 43, 56 (1952); Mississippi River Fuel Corp., 4 F.P.C. 340, 353 (1945). Moreover, they have been upheld by the courts. See Permian Basin Area Rate Cases, 390 U.S. 747, 88 S. Ct. 1344, 20 L. Ed. 2d 312 (1968); Colorado Interstate Gas Co. v. Federal Power Commission, 324 U.S. 581, 65 S. Ct. 829, 89 L. Ed. 1206 (1945); see also Commonwealth of Pennsylvania and New York State Department of Transportation v. Interstate Commerce Commission, 175 U.S.App.D.C. 263, 535 F.2d 91 (1976); Payne v. Washington Metropolitan Transit Comm'n, 134 U.S.App.D.C. 321, 340-41, 415 F.2d 901, 920-21 (1968).

To be sure, the use of average costs must be based on substantial evidence and reasoned findings. See, e. g., Baltimore & Ohio Railroad Co. v. Aberdeen & Rockfish Railroad Co., 393 U.S. 87, 89 S. Ct. 280, 21 L. Ed. 2d 219 (1968). But these alternative approaches, which the Commission labels and tries to dismiss as merely "accounting methods of costing," may not be put aside simply by asserting that "different judgments can produce highly different allocations of common costs, and there is no rational basis to choose one allocation over another."⁸⁵  The mere fact that a different formulation of the same distribution keys would result in a different overall attribution does not necessarily render the methodology arbitrary. In fact, the same criticism can be made of a cost variability methodology. As the Commission itself noted, the longer the time span chosen, the greater the percentage of costs which may be attributed on that basis: "(I)f the inputs are viewed over the extreme long-run . . . attribution would reach 100 percent."⁸⁶ 

The point is that a ratemaking approach may not be disregarded simply because it lacks perfection;⁸⁷  to be acceptable a methodology need only be reasoned, nonarbitrary and permissible under the statute. As Judge Wenner candidly and aptly observed in criticizing his own method, "(d)oubtless more refined methods and judgments will be developed in future cases as more facts are discovered; but a space and weight allocation for transportation is a sound and workable solution to the problem at this stage of postal rate regulation."⁸⁸  Compare Commonwealth of Pennsylvania and New York State Department of Transportation v. Interstate Commerce Commission, 175 U.S.App.D.C. 263, 535 F.2d 91 (1976); Domestic Service Mail Rate Investigation, supra, 47 C.A.B. at 317. The alternative approaches presented to the Commission seem plainly to have been reasonable efforts motivated by a concern for fuller attribution and designed simply to go beyond the inferences of causation presently derivable under a cost variability theory.⁸⁹  We are unpersuaded that the Commission may properly disregard them as unsupported in the record and irrational.⁹⁰ 

We conclude that in the circumstances of this case the Commission's almost exclusive reliance on a cost variability approach to attribution contravenes a primary purpose of subsection 3622(b) (3) and therefore fails to comply with the Act.⁹¹ 

Assignment. The Commission's value-of-service approach to assignment of unattributed costs also fails to comply with a plain requirement of the Act. The Commission clearly misreads the second part of subsection 3622(b) (3). It interprets the "reasonably assignable" costs provision of subsection (b) (3) as wholly unrelated to cost-of-service considerations and directed instead only to the judgmental distribution of unattributed costs on the basis of the noncost factors contained in section 3622(b) and especially the value-of-service consideration of subsection (b) (2).⁹²  As we have explained, however, "reasonably assignable" costs must be allocated in accordance with cost-of-service principles, and it is only residual costs which are subject to discretionary distribution to give effect to the noncost factors.⁹³  We conclude that the Commission's present method for assigning unattributed costs proceeds from a faulty premise in contravention of the Act and therefore must be rejected.⁹⁴ 

We wish to emphasize that our holding with regard both to attributable and assignable costs is narrow. Our duty in this case is not to prescribe any one methodology, and nothing we say here should be taken as approving in advance any particular approach. The selection of one approach from among acceptable alternatives is a matter for agency expertise. We hold only that in the circumstances of this case neither the Commission's reliance on cost variability as the key to attribution nor its use of demand theory as a premise for allocation of unattributed costs complies with the Act because both plainly contravene in different ways the express statutory command that in setting postal rates every reasonable effort be made to employ cost-of-service principles to the fullest extent possible.⁹⁵ 

THE ATCMU AND THE STATE OF MAINE CASES

The remaining cases involve the most recent ratemaking proceeding (docket no. R76-1) and raise challenges, on procedural (ATCMU) and substantive (State of Maine) grounds, to the Postal Service's authority in the circumstances of this case to propose permanent increases in fees for special services and to authorize temporary postal rates to be in effect pending completion of Commission proceeding in docket no. R76-1.

At its September 4, 1975 Board meeting, immediately after the Governors issued the rate order contested in NAGCP, the Board convened and discussed the need for further increases in postal rates and fees. After reviewing the "general magnitude"⁹⁶  of the increases management deemed appropriate, the Board authorized the Postal Service to submit a request for postal rate increases with the Commission by September 19 and further authorized the Service unilaterally to increase "fees for various special services . . . after allowing a period for public notice and comment on the proposed increases."⁹⁷  On September 18, without obtaining Board review of the completed request, the Postal Service filed the rate request with the Commission.⁹⁸  Also pursuant to the Board's directive the Postal Service, on September 19, announced its intention to increase fees for various special services and solicited comments of interested parties.⁹⁹ 

On October 9, the Postal Service published notice that it would impose temporary rate increases on December 28, 1975, in substantially the same amounts as the requested permanent rates, unless by December 18 the Commission had transmitted its recommended decision to the Governors.¹⁰⁰  The proposed increases in fees for special services were scheduled to take effect on January 3, 1976.¹⁰¹ 

On October 29 appellant State of Maine, representing itself and sixteen other states, filed a complaint in district court raising substantive arguments and seeking declaratory and injunctive relief to prevent the Postal Service from implementing the temporary rate increases. (No. 75-2238) Two days later appellee ATCMU filed suit seeking similar relief on procedural grounds against the proposed fees as well as the temporary rates.¹⁰²  (Nos. 75-2227, 75-2228)

On November 7 the Board, noting the complaint filed by ATCMU, met and resolved that the Board action at the September 4 meeting was consistent with the Board's prior practice.¹⁰³  On December 16, however, the district court, in ruling on ATCMU's complaint, concluded that the Postal Service had not complied with the procedural requirements of 39 U.S.C. § 3601 et seq.,¹⁰⁴  as implemented through the Board's Operating Procedures. Accordingly, on the parties' cross motions for summary judgment, the Court, on December 16, entered judgment for appellee ATCMU and enjoined the Postal Service from putting the temporary rates into effect or from implementing the fee increases until it submitted to the Commission an appropriate request and otherwise complied with the requirements of section 3601 et seq. On the same day, in the State of Maine case, the district court denied appellant's motion for preliminary injunction, and on December 18, on appellant's unopposed motion, entered final judgment against State of Maine.¹⁰⁵ 

On December 19 the Board convened a special meeting to take action in response to the injunction entered in the ATCMU case. After reviewing the "specific rates and fees to be requested" as well as "full supporting data and documentation," the Board directed the Postal Service to submit appropriate requests to the Commission.¹⁰⁶  The rate request was resubmitted the same day; the request for changes in fees for special services was submitted January 5, 1976.

Appeals were taken from the district court judgments in both cases. In the ATCMU case appellant Postal Service moved this court for summary reversal or, alternatively, a stay of the district court order pending appeal. At the same time appellant State of Maine sought an injunction of the increases pending appeal. On December 29, 1975, after hearing argument in both cases, we denied State of Maine's request for an injunction, denied the Postal Service's motion for summary reversal, but granted the Service's alternative motion for stay, limiting its effect to the temporary rates. As a result the Postal Service, on December 31, put the temporary rates, including the 13 cent first class rate, into effect. The fees for special services, however, remained subject to the district court injunction.

We will address each case in turn.

A. The ATCMU Case.

On the merits,¹⁰⁷  we will address separately the two distinct issues presented in this case: first, whether the Postal Service is authorized unilaterally to establish fees for special services, and secondly, whether the Postal Service's September 18 request for postal rate increases was validly submitted to the Commission.

1. Proposed Changes in Fees for Special Services. The first issue turns on whether the fees for the kinds of special services at issue in this case¹⁰⁸  are "fees for postal services" within the meaning of 39 U.S.C. § 3622. If so, then they fall within the Commission's jurisdiction and as such may be changed only in compliance with the Chapter 36 procedure of request, Commission hearing, recommended decision, and Governors' order. Appellees contend, and the district court held, that these services would be considered postal services in ordinary parlance and that the fees set for these services have substantial public effect.¹⁰⁹  The court concluded therefore that under the most reasonable interpretation of Chapter 36 of the Act these fees are subject to the Commission's jurisdiction. Appellants argue, however, that the Act meant to continue the distinction drawn under prior postal legislation between postal and special services and that under this distinction the Postal Service retains the authority unilaterally to change the fees for the services here involved, which it denominates special nonpostal services. Without adopting all the reasoning of the district court on this point, we find its interpretation of the Act persuasive and its holding legally correct and adequately supported.¹¹⁰ 

Section 3622 of the Act establishes the Commission's jurisdiction over "changes in a rate or rates of postage or in a fee or fees for postal services."¹¹¹  Other sections of the Act indicate that use of the phrase "fees for postal services" was not inadvertent and was intended to mean something quite apart from "rates of postage." For instance, where a particular section applies only to rates for postage, the phrase "fees for postal services" is omitted.¹¹²  Since the Act provides no specific definition of "postal services," however, we must construe its meaning within the purposes of the Act, looking to legislative history where the words themselves, read plainly, are inadequate. See note 110 supra.

Giving "postal services" a plain meaning, all of the services here at issue may reasonably be so classified. With one possible exception, each clearly involves an aspect in the posting, handling and delivery of mail matter. See note 108 supra. As for the one possible exception money orders it is undisputed that the great majority of these are sent through the mail and that therefore the provision of money orders may itself reasonably be viewed as intimately a part of postal services. Appellants, however, offer a somewhat curious construction of the phrase that would exclude all of these services. They would define postal services to include only a few items such as bulk mailings and use of business reply mail, for which flat fees are charged, and Saturday delivery of mail and home delivery of mail in rural areas, for which no fee at present is charged. They would exclude in general apparently all services not intimately connected with the actual delivery of mail.

Appellants fail to provide, however, any reasonable basis for their restrictive construction or any reason whatsoever why it should prevail over a commonsense interpretation.¹¹³  Moreover, section 3621, which provides that "(p)ostal rates and fees shall be reasonable and equitable," applies specifically to "rates of postage and fees for postal services."¹¹⁴  Applying appellants' construction to section 3621 would lead to the improbable conclusion that while Congress was concerned that fees for such comparatively limited services as bulk mailing be fair and equitable, it was not at the same time concerned that fees for the more generally used services of special delivery and certified mail also be fair and equitable.¹¹⁵  Absent a well reasoned explanation, and none has been provided to us, we cannot accept a construction that necessitates such curious results.

In sum, we agree with the district court that a plain reading is the proper reading of section 3622: "postal services" as used there is a generic term and was meant to include all the special services here at issue.

Appellants' arguments based on prior legislation do not convince us to the contrary. It is true that prior to the Act the fees here involved were denominated "fees for special service" and were prescribed by the Postmaster General,¹¹⁶  while postal rates and fees were set by Congress.¹¹⁷  The argument that this distinction was preserved in the Act, however, ignores the fundamental change Congress intended in creating the Postal Rate Commission. More than this the argument rests on a wholly unconvincing construction of scattered sections of the Act.

Appellants argue, for instance, that section 4(a) of the Act, by "transferr(ing) to the United States Postal Service all the functions, powers, and duties of the Post Office Department and the Postmaster General of the Post Office Department,"¹¹⁸  evidences an intent to preserve the distinction and to maintain in the Postal Service unilateral authority to establish fees for special services. But section 4(a) was clearly only a transitional provision designed to assure that there would be no lapse in the rendering of services as the old Post Office Department became the new Postal Service. It taxes credibility to believe that Congress, after devoting an entire chapter of the Act to defining the powers and duties of the Postal Service, would then use such an obscure device to transfer significant additional power.

Reliance on 39 U.S.C. § 404(6) is equally without merit. Section 404(6) vests the Postal Service with power "to provide, establish, change, or abolish special(,) nonpostal or similar services."¹¹⁹  Appellants argue that this, as well as the absence in section 3622 of any specific mention of "special services," establishes its power unilaterally to set fees for those services. But the power to establish, change or abolish certain services does not necessarily include the additional and distinct power to set the fees for those services. And the doctrine that a general powers provision like section 404(6) may not ordinarily override a specific provision such as section 3622 further undermines appellants' position. Cf. Maiatico v. United States, 112 U.S.App.D.C. 295, 301, 302 F.2d 880, 886 (1962).

But most of all, any reasonable examination of the purposes of the Act discloses Congress' implicit design that the distinct functions of service provision and rate adjustment be divided between the Postal Service and the Rate Commission. The expertise of the Postal Service supposedly is in management, and its authority therefore reasonably extends to basic decisions pertaining to the provision of special, nonpostal and other services. The Postal Rate Commission, however, was created specifically to oversee the ratemaking process. Its expertise is in the setting of rates and fees that are fair and equitable, and its authority therefore reasonably extends to all aspects of such decisions, including review of budget estimates, allocation of postal costs, establishment of rates for postage, and, it would seem plainly, the setting of fees for those special services which management decides should be provided.

Finally, legislative history clearly belies the contention that Congress intended to continue the prior authority vested in the Postmaster General to establish fees for special services unilaterally. That prior authority was contained in former section 507. But section 507 was specifically repealed and no analogous provision enacted in its place. Moreover, this repeal clearly was not inadvertent since provisions dealing specifically with section 507 authority were included in the postal reform bill which passed the House¹²⁰  but were deleted from the bill finally enacted.

In short, a plain reading of the Act, its legislative history, and the purposes implicit in the creation of an independent Postal Rate Commission whose members "shall be chosen on the basis of their professional qualifications," 39 U.S.C. § 3601, all support the district court's conclusion that the Commission's jurisdiction extends to all the fees for special services involved in this case. We therefore affirm the district court order as it pertains to the fees involved in this case.

2. Request for Changes in Postal Rates and Fees. The remaining issue whether the Postal Service's request for changes in postal rates was valid when submitted on September 18 turns on quite different considerations. On this issue the jurisdiction of the Commission is conceded. The only question is whether the request, as submitted September 18 or as affected by the Board action taken November 7, met all applicable requirements for proper submission. The district court reasoned that under the Act and the Board's own regulations "the Board must have before it for its consideration at the time it approves the request, the specific rates and fees to be requested."¹²¹  In granting appellee the injunctive relief requested, the court concluded that since the specific rates and fees were not presented to the Board prior to September 18, when the Postal Service submitted the request to the Commission, temporary rates based upon that request could not lawfully be implemented.¹²²  Appellants' contrary arguments do not convince us that the district court's order must be reversed.

Under the Act only the Board has the authority and the power to make requests for recommended decisions on changes in postal rates and fees, which requests must be based on the determination that such changes would be in the public interest and in accordance with the policies of the Act.¹²³  At the time in question here the submission of rate requests was governed by certain Operating Procedures adopted by the Board.¹²⁴  Subparagraph eight of those Procedures enumerates as one matter specifically "reserved for decision by the Board of Governors":

Requests to the Postal Rate Commission for recommended decisions on postal rates and mail classification, and action upon such recommended decisions.¹²⁵ 

Read plainly the meaning of this specifically reserved authority is clear: the Postal Service must obtain the Board's approval of the request it proposes to submit to the Commission. Moreover, absent a clear and authoritative indication to the contrary the reasonable interpretation of this provision is that it is the request itself, not some preliminary study or working paper, that must be submitted for prior Board approval.

Appellants contend, however, that under subparagraph eight the only decision specifically reserved is the threshold determination whether to submit any request at all and that once that decision is made the Service is free to submit a request without first presenting the Board with the specifics of the rate changes it intends to propose or the data in support thereof. An examination of the Operating Procedures as a whole belies appellants' contention.¹²⁶ 

A primary purpose behind adoption of the Procedures was to insure that the Board "obtains the data" upon which to base those decisions "of sufficient importance, in the judgment of the Board, to require Board action."¹²⁷  Two considerations are persuasive evidence that the threshold determination whether to submit any request at all is not such an "important" decision, whereas approval of management's finalized proposal is. For one, the Act itself devalues that threshold decision by requiring that a request be submitted whenever postal expenses substantially exceed postal income.¹²⁸  More than this, the Operating Procedures provide separately that the Board need not initially decide but need only "review, and approve as appropriate," management's determination that there is a "need for rate increases or decreases," a determination which in effect controls the threshold decision whether a request must be submitted.¹²⁹  Unless this separate provision is simply redundant and the Procedures appear too carefully constructed to support that inference subparagraph eight must reserve for the Board something other than simply that threshold decision. In light of the underlying purpose of the Procedures, i. e., to assure the Board the data necessary for decision, the only reasonable interpretation is the very one that a plain reading suggests: prior to submission the Board must review and approve the request itself, including the specific changes proposed by management and the supporting data.

It is clear, moreover, that under this interpretation the presentation made at the September 4 Board meeting fell substantially short of the requirements of subparagraph eight. Indisputably, at the time of that meeting the process of preparing a rate request "was still incomplete."¹³⁰  Indeed, the Board's instructions to management were "that the Postal Service should complete the process of refining its proposed filing with the Rate Commission."¹³¹  And in fact, one day after the Board meeting a Postal Service press release announced that "(t)he exact amounts of the increases to be requested have not been finally determined."¹³² 

We conclude that on the record properly before us the September 4 presentation failed to comply with the plain requirements of the Operating Procedures.¹³³ 

The action taken by the Board at its November 7 meeting does not affect our conclusion. At that meeting, convened specifically "because litigation involving interpretation of the Operating Procedures had been initiated," the Board did not review any data other than that available September 4. Instead, it discussed whether the September 18 submission was consistent with its interpretation of the Operating Procedures and with the Board's prior practice, and it "unanimously agreed that the presentation, discussion, and Board actions at the September 4 meeting, in regard to the proposed request to the Postal Rate Commission, fully satisfied the requirements of the pertinent provision of the Operating Procedures."¹³⁴ 

Despite the presumptions generally surrounding administrative action, the deference due an agency's interpretation of its own regulations will depend at least somewhat on the degree to which it is well reasoned and consistent with prior interpretations and action. E. g., Morton v. Ruiz, 415 U.S. 199, 237, 94 S. Ct. 1055, 39 L. Ed. 2d 270 (1974); see generally, 1 K. Davis, Administrative Law Treatise, §§ 5.03-5.06 (1958 ed. and Supp.1970). Where the words in question, as here, do not require any special competence for their interpretation, a court may well be equally or better qualified to interpret them than is the agency, at least where the agency's interpretation is offered in the wake of litigation which turns on those very regulations.¹³⁵  See Morton v. Ruiz, supra; Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944); State of Delaware v. Bender, 370 F. Supp. 1193, 1204 (D. Del. 1974); cf. McKart v. United States, 395 U.S. 185, 197-98, 89 S. Ct. 1657, 23 L. Ed. 2d 194 (1969).

The interpretation offered here that the Board's September 4 approval of the "general magnitude" of the changes to be proposed in management's not then finalized request fulfilled the Board's obligation under the specific reservation of subparagraph eight seems hardly reasonable and consistent with a plain reading of the Operating Procedures as discussed earlier. See D. C. Federation of Civic Associations v. Volpe, 316 F. Supp. 754, 784-85 (D.D.C. 1970), reversed on other grounds, 148 U.S.App.D.C. 207, 459 F.2d 1231 (1972), cert. denied, 405 U.S. 1030, 92 S. Ct. 1290, 31 L. Ed. 2d 489 (1972). Nor is it consistent with prior practice. To the contrary, minutes of previous Board meetings indicate that both at the time of the first submitted request, which predated adoption of the Operating Procedures, and the second request, which postdated their adoption, the Board reviewed and approved the very request that management proposed to submit to the Commission.¹³⁶ 

We conclude that the Board's action at the November 7 meeting is not a controlling interpretation of the Operating Procedures and does not require variance from the interpretation discussed above.¹³⁷  We hold that the September 4 presentation was inadequate under the Board's then existing rules and that therefore the September 18 request based upon it was defective.¹³⁸ 

Finally, we are unpersuaded that the district court abused its discretion in enjoining implementation of temporary rates until the Postal Service submitted a nondefective request and otherwise met the requirements of 39 U.S.C. § 3641. Contrary to the Postal Service's position, it is not the submission of any request but the submission of a valid request that activates the provisions of 39 U.S.C. § 3641. Otherwise the carefully constructed limitations of 39 U.S.C. § 3641(c) could be easily subverted.

Moreover, appellants' second argument that the district court should have remanded the request and that 39 U.S.C. § 3628 proscribes enjoining temporary rates during such remand is equally without merit. Remand was not mandated, and even if the court in its discretion had chosen that course, injunction pending resubmission would not have been statutorily foreclosed. Section 3628 applies to judicial review of decisions of the Governors, not to the decision of the Board here challenged. Mail Advertising Corp. of America v. United States Postal Service, 148 U.S.App.D.C. 158, 159, 459 F.2d 1182, 1183 (1972). Different considerations govern rates sought to be implemented temporarily prior to public hearing than govern the situation for which section 3628 was designed, i. e., implementation of permanent rate changes after full Commission proceedings. The district court's discretion to order injunctive relief is broad. Appellants have shown no clear abuse. We therefore affirm the district court order as it pertains to rates.

B. The State of Maine Case.

In the final case before us the states, as appellant, contend that the Postal Service's action in implementing the temporary rate increases at issue here, regardless of compliance with procedural requirements, is substantively defective and that the district court erred in denying the requested injunctive relief. Since appellant's arguments parallel those which we already explored thoroughly in NAGCP,¹³⁹  we need not examine them here in detail. Briefly, appellant asserts that the Postal Service's request, upon which the temporary rates rest, once again evidences a too restrictive methodology for attribution of costs, thereby threatening illegal cross-subsidization; that the request also demonstrates continued employment of the inverse elasticity rule for allocating unattributed costs, thereby resulting in rates that unduly and unreasonably discriminate against the users of first class mail; and that the Postal Service's progress toward correction of these defects is too slow, if it exists at all. The district court denied appellant's request for injunctive relief, concluding that the rate-making philosophy and methods adopted by the Commission were "simply not invalid as a matter of law" and that in its instant request the Postal Service applied those standards fairly and diligently. We affirm.¹⁴⁰ 

At the outset we note that our review is quite narrow. The district court has broad discretion to deny injunctive relief.¹⁴¹  Unless appellant carries the heavy burden of demonstrating an abuse of discretion, the order must be affirmed. See United States v. W. T. Grant Co., 345 U.S. 629, 633-34, 73 S. Ct. 894, 97 L. Ed. 1303 (1953).

Appellant correctly asserts that in this most recent request the Postal Service relies on ratemaking principles that differ very little from those which we criticized in American Publishers and which we today hold deficient in NAGCP. The instant rate request evidences that attributable costs are still defined as variable costs, and that allocation of unattributed costs is still dependent on demand factors.¹⁴²  At the same time, however, there is discernable progress toward improving the data base in an apparent effort to reconcile the Postal Service's concern for accurate measurement of causation with the Act's requirement of extended attribution. For instance, in order to develop data useful in attributing nonvariable costs incurred as a consequence of providing more than one but not all classes or types of service, the Postal Service has listed in its present request those fixed costs which benefit a restricted number of classes.¹⁴³ 

Such programs, however, would not seem to remedy all the defects in the cost variability approach that we have analyzed in NAGCP. Nor does it answer our questions regarding the use of demand factors and, in particular, reliance on the inverse elasticity rule in allocating unattributed costs. But these are issues to be faced squarely only on review of the Governors' order in response to the Commission's recommended decision in docket no. R76-1.

The special but limited role that the Postal Service is expected to play in the development of postal ratemaking methodology properly affects our review of challenges to the substantive merit of submitted rate requests. Unlike in American Publishers and the NAGCP cases where we reviewed a ratemaking methodology adopted after full hearings by a Commission which is charged with the duty, and imbued with the expertise, to establish postal ratemaking principles, here we are called upon to examine only the initial step in the process: a request submitted by the Postal Service, as approved by the Board, which understandably is based upon the methodology previously adopted by the Commission.

The Postal Service, after all, does not possess the expertise of the Commission and its request is prepared without the benefit of full hearings. Indeed, it is not required under the Act even to accompany its request with suggestions for the particular rate adjustments it deems suitable.¹⁴⁴  In short, we are wise at this point not to insist that the Postal Service innovate when it prepares a request to submit to the Commission. True, the Postal Service is in a "unique position" to formulate a "fundamental approach" to ratemaking,¹⁴⁵  but it is the Commission which, in the end, carries the primary obligation in ratemaking.

We conclude that the district court correctly held that the Postal Service's primary duty is to apply the Commission's ratemaking philosophy and methods fairly and diligently in preparing its rate request.¹⁴⁶  There is ample support in the record for the court's conclusion that the Service did not apply the Commission's principles incorrectly, arbitrarily, with bias, or with inadequate evidentiary support. In sum, we hold that appellant simply has not carried the heavy burden of demonstrating that the district court abused its discretion in refusing to grant appellant the injunctive relief it sought.

MacKINNON, Circuit Judge, concurring:

In the main I concur in the court's opinion. However, to prevent a possible misreading of the opinion's import with respect to Nos. 75-1856, 75-1857, the National Association of Greeting Card Publishers (NAGCP) case, I add a few words to clarify my views on certain aspects of the court's holding.

The court's analysis of section 3622(b), which "sets forth the cost and noncost considerations that the Commission must take into account in setting rates,"¹  could lead to a construction of the Act which to my mind overly emphasizes the cost allocation considerations of subsection (b) (3), so as to leave the remaining seven subsections, the so-called noncost factors, practically devoid of any real meaning or application.

The Per Curiam opinion overemphasizes the extent to which "reasonably assignable" costs, in addition to "attributable" costs, must be allocated in accordance with cost-of-service principles,²  and further overemphasizes the extent to which the use of cost-of-service principles must be maximized throughout the process of postal rate-setting.³  As a result it is only the "residuum" of costs which, according to the Per Curiam opinion, may "be used to give effect to the noncost factors expressly set forth in the Act."⁴ 

My concern is that the opinion not be read as requiring that practically all postal costs be attributed or assigned to some class of mail or type of service on the "direct and indirect" cost-of-service principles contained in subsection (b) (3), with the result that only an insignificant residuum of costs are assigned in accordance with the seven remaining statutory considerations. In its entirety the controlling section reads as follows:

(b) Upon receiving a request, the Commission shall make a recommended decision on the request for changes in rates or fees in each class of mail or type of service in accordance with the policies of this title and the following factors:

(1) the establishment and maintenance of a fair and equitable schedule;

(2) the value of the mail service actually provided each class or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery;

(3) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type;

(4) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters;

(5) the available alternative means of sending and receiving letters and other mail matter at reasonable costs;

(6) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service;

(7) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged the various classes of mail for postal services; and

(8) such other factors as the Commission deems appropriate.

39 U.S.C. § 3622(b), (84 Stat. 760). A mere reading of this section indicates that Congress intended to vest a substantial discretion in the Commission to recommend rates and fees that are "fair and equitable," that relate to the value of the postal service provided to users, and that consider competition, the effect upon the general public and business interests, the ease of handling certain mailable matter, the simplicity of the entire rate structure and such other factors as the Commission might deem appropriate. But if the Per Curiam opinion regarding section (b) (3) is to be construed as requiring that the attribution and assignment of practically all costs be on a strained cost-of-service basis, these discretionary factors may never have any substantial effect. How could the Commission recommend a rate for a particular class of mail that it found would be "fair and equitable" and would not adversely affect legitimate business interests if practically all the relevant costs were required to be attributed or assigned according to an almost absolute cost-of-service straight jacket? To make the seven discretionary standards meaningful Congress must have intended that there be some substantial volume of costs that are available for assignment.

The proper interpretation of section (b) (3) in the scheme of the Act and the entire section 3622, is at the heart of this problem. To repeat, that subsection provides:

(3) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type.

39 U.S.C. § 3622(b) (3). The first admonition of this subsection is that "each class . . . bear the direct and indirect postal costs attributable (thereto) . . . " (emphasis added). This deals only with direct and indirect postal costs, and it is my view that the attack the opinion makes on "cost variability" as a method of "identifying (these) attributable costs" for direct and indirect expenditures (Per Curiam op. at ---- of 186 U.S.App.D.C., at 586 of 569 F.2d) overlooks the degree of approval that Congress gave to such method when the House Committee stated in its Report that

the attributable provision establishes a floor for each class of mail equal to costs which consist of those costs, both direct and indirect, that vary over the short term in response to changes in volume of a particular class or, even though fixed rather than variable, are the consequence of providing the specific service involved.

H.R.Rep. No. 91-1363, 91st Cong., 2d Sess. 87 (1970) (emphasis added). I would allow the Commission somewhat more leeway in this aspect of their duties to conform to the congressional intent expressed in this quoted portion of the Committee Report.

Next, the Per Curiam opinion states that

"A plain reading (of section 3622(b) (3)) also clearly suggests that the other costs of the Postal Service that are to be 'reasonably assigned' must also be allocated on cost-of-service principles. That is, after the process of extended attribution is complete, a portion of remaining costs are to be assigned to the various mail classes and postal services to the extent that it can reasonably be determined or estimated that certain classes of service may account for particular costs."

Per Curiam op. at ---- of 186 U.S.App.D.C., at 586 of 569 F.2d (emphasis added). While the Per Curiam opinion recognizes that "Congress did not intend that all postal costs be either attributed or assigned," (Per Curiam op. at ---- of 186 U.S.App.D.C., at 587 of 569 F.2d) a strict application of the principles it announces may reduce the amount of remaining costs subject to "reasonable assignment" to such a minor quantity that the application of the other seven standards will be deprived of any substantial impact.

With this background, the opinion attacks the "Commission's value-of-service approach to assignment of unattributed costs (asserting that it) . . . fails to comply with a plain requirement of the Act . . . (holding that) it is only residual costs which are subject to discretionary distribution to give effect to the noncost factors." (Per Curiam op. at ---- - ---- of 186 U.S.App.D.C., at 592 of 569 F.2d) (emphasis added).

This contention results from overemphasis on the single word "requirement" and on the forepart of subsection (b) (3), to the exclusion of the remainder of that subsection and of the other seven subsections and does not even correctly interpret subsection (b) (3). The second provision of subsection (b) (3) states

. . . plus that portion of all other costs of the Postal Service reasonably assignable to such class or type.

This clearly states that a "portion of all other costs of the Postal Service" may be "reasonably assigned," and nothing would be more reasonable than that such costs which were not "direct or indirect costs" of specific classes or types should be assigned according to the remaining seven subsections. Yet the Per Curiam decision expresses a strong opinion that such costs "must be allocated in accordance with cost-of-service principles." (Per Curiam op. at ---- of 186 U.S.App.D.C., at 592 of 569 F.2d; cf. id. at ---- of 186 U.S.App.D.C., at 586 of 569 F.2d). This is an impermissible intrusion into the plain language of the statute, and if subsection (b) (3) is given a "plain reading," it does not require the emphasis on "cost-of-service principles." The Per Curiam claims this result on the basis of the legislative history,⁵  but such intent, if it exists, is very obscure, and legislative history is not properly reached because the statute plainly states that the postal rates recommendations "shall" also reflect the seven other factors enumerated in section 3622. In claiming reliance on legislative history the Per Curiam opinion tries to make too much out of too little. The word "shall" at the forepart of section 3622 is just as mandatory as the word "requirement," in the same section, if not more so, since it applies to the entire section but the Per Curiam opinion overemphasizes the latter and refuses to recognize the former.

The effect of the Per Curiam construction is to read subsection (b) (3) as though it provided:

" . . . (T)he Commission shall make a recommended decision . . . in accordance with . . . (3) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type on cost-of-service principles."

(matter in italics supplied). If Congress had intended a "portion of all other costs of the Postal Service" to be assigned to particular classes or types on such cost-of-service principles it would have so stated in the Act. It did as much in the forepart of subsection (b) (3) when it provided that "each class . . . or type . . . bear the direct and indirect postal costs attributable (thereto)." And in providing for the attribution of all "indirect postal costs" as well as "direct . . . postal costs," Congress pretty well exhausted the postal costs that could properly be assigned on cost-of-service principles.

To construe subsection (b) (3), as the Per Curiam would, to overemphasize cost-of-service assignment, would practically require the Commission to lean over backwards in assigning as many other costs as possible on the same basis as the "direct and indirect postal costs." But Congress did not so enact. Instead, Congress provided only that a "portion of all other costs of the Postal Service (shall be) reasonably assignable to such class or type . . .." (emphasis added). That is an entirely different standard from one expressing a requirement, or even a preference, that such costs "must" be assigned on a cost-of-service basis. "Reasonable" assignments and "must" assignments are partially self-contradictory. If the costs were substantial that were subject to this alleged cost-of-service basis of assignment, practically no costs whatsoever would be left to be "reasonably assigned" in accordance with the other seven standards in subsection (b), i. e., (1) fairness and equity, (2) the value of the mail service, (3) the effect upon the general public and business users, (4) available alternative service, (5) cost reducing preparation of mail, (6) simplicity of rate structure and (7) other appropriate factors. And, as stated above, unless these seven factors are to be practically meaningless a substantial amount of costs must be available for reasonable assignment pursuant thereto. These seven factors embody major principles that substantially affect the public interest and vital segments of our economy, and they should be fully reflected in the rates.

Accordingly, it is my interpretation of subsection (b) (3) that while some of the other costs may be reasonably assigned on cost-of-service principles, Congress did not intend by the present statute that the amount of costs so assigned would be so large as to prevent the Commission from meaningfully incorporating the remaining standards into the postal rate structure.

In my opinion any interpretation of the Act which overemphasizes the role of the forepart of subsection (b) (3), so that the other seven factors are in effect read out of existence, must be rejected as inconsistent with this express requirement of the Act that the Commission's recommended rate decision "shall" be in accordance with the policies of the Act and all the policies stated in the ensuing eight subsections of section 3622. The Per Curiam opinion as I read it does not necessitate any such interpretation.⁶  Therefore, with the exception of these views I concur in the court's opinion.