UPS’s Union-Backed War on Federal Express is a Danger to Small Businesses

Thu, Oct 29, 2009

Corporate Cronyism, Corruption, Unions

If you’re a long time reader, you know that we often cite the United States Post Office’s war on USPS and UPS to highlight how Big Government is antithetical to free markets and prosperity.

But recently, UPS has declared war on FedEx, in the form of Union-Driven rent seeking and the outcome of the war will likely affect small business owners and employees.

Lakers vs. Celtics, Red Sox vs. Yankess, UPS vs. FedEx.  Rivalries are good, and in the case of the latter two package delivery companies, a strong rivalry results in better prices, improved innovation, and improved choices, particularly for small businesses.

But Congress is trying to mess with that by “leveling the playing field” through a small provision tucked into the FAA Reauthorization Act of 2009.  The Act, which made it through the house is now in front of the Senate, and essentially changes the rules on labor organization for express package carriers. (See Section 806)

The bill’s sponsor is Minnesota Representative James Oberstar, chairman of the House Transportation and Infrastructure Committee, and co-sponsored by Jerry Costello, from Illinois.  Both of these congressmen receive a large percentage of their campaign contributions from Union organizations, and both have been the recipient of steady generous campaign contributions from UPS and the Teamsters Union (which represents UPS workers).

At issue is this:  FedEx Express (which carries only the overnight and express packages) workforce is governed under the Railway Labor Act, which requires a national vote of employees in order to form a Union.   UPS, on the other hand, is governed under the National Labor Relations Act, which allows for unions to form on a local level.  UPS and its Teamsters Union admit that the fact that FedEx’s workers are not unionized is a “competitive advantage.”  They have therefore used their political clout to get Mr. Oberstar and Mr. Costello to pork-barrel in legislation that would put FedEx Express under the NLRA, and make it possible for local union organization.

Why should you care?

  1. This will drive up the cost to run your small business.  If FedEx workers were to organize, it would assuredly result in a higher cost of business for them. Those additional costs would then be passed on to businesses and consumers that use FedEx.  Even if you use UPS, your costs would go up, because as FedEx raises it’s prices, UPS would not be forced to keep prices down to remain competitive.  Thus resulting in higher overall transportation costs for everyone.
  2. The federal government should not be involved in “leveling the playing field.”  Many small and large businesses in all industries take advantage of competitive positions, through legal loopholes, legislative action, or through strategic partnerships.  If FedEx has found a legal way to have an advantage over a competitor, why should that be taken away?
  3. There are only 2 small package delivery companies in the country (if you don’t count the Post Office (and we don’t)). Taking away competitive advantages results in identical companies, thus creating a duopoly.  With no competitive differences, there would be no incentive for either company to work harder for your business, thus resulting in higher prices, and lower service for small businesses that ship goods.
  4. Do you remember when the Teamsters Union chose to strike in 1997?  If you owned a business then, I guarantee you remember. Small businesses were the ones that suffered the most.  If passed, we could conceivably end up with both FedEx and UPS workers going on strike at the same time.  What would that do for your business?
  5. Organizing as a Union will do nothing for the average FedEx worker.  The next time you shop at a grocery store, ask the clerk at the counter what he gets from being a member of his local Grocery Workers Union.  Or ask your favorite teacher if she is confident that the local Teacher’s Union has successfully secured her a competitive salary.  The UAW is just as much at fault for the failing US auto industry as is poor management. Unions do nothing for average workers except take a piece of their paychecks, and gift an occasional hat or commemorative pin.

In reality, Unions are a thing of the past.  They may have been a necessary part of the development of our laws.  But in today’s economy, they essentially create no net gain for their members and are merely a self serving political entity.  As Veronique de Rugy puts it:

Unions represent an Industrial Revolution–era understanding of labor relations. The modern American movement grew out of an assembly line culture where every product was identical and workers were viewed in a similar way. As that mode of production has declined, so have unions’ relevance and power. 

Call or write your Senator today.  Tell them to stay out of business, and to vote no on the H.R. 915 -FAA Reauthorization Act of 2009.  Click here for a quick and easy email submission tool.

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- who has written 71 posts on Small Business Against Big Government.

3 Responses to “UPS’s Union-Backed War on Federal Express is a Danger to Small Businesses”

  1. Jim Mark Says:

    I have yet to hear how unions, or unionization, will improve the employer’s business via competitive advantage, quality of service, product development, etc. OR how the union or unionization will improve the customer experience. That is the fundamental issue with unions, they are only fcoused on those things that improve the workers experience with no concern for how the market will treat their employer.

  2. Justin Says:

    Additional, it should be noted how FedEx operates differently from UPS. The main reason that the unionized UPS is still competitive with FedEx is because they utilize a single integrated network for air and ground packages. A single UPS driver can deliver and pickup both air and ground packages. FedEx operates two separate networks for air and ground packages including separate hubs, delivery centers and drivers. However, their lower labor costs make up for their lower operating efficiency and economy of scale. FedEx will be forced to raise rates to remain competitive. They may be forced to consolidate their air and ground networks similar to UPS. Five percent annual rate increases is already the norm. Vote no to HR 915.

  3. Patrick Says:

    What is the current status of this situation? I haven’t found anything recent on it.