The Corner

Empowering the Unions to Kill Competition: The Brown Bailout

Some companies compete by trying to be the best. Others try to use the legislative process to penalize their competition. This is what seems to be happening today with what is now commonly referred to as the “Brown Bailout.” Who are the players? UPS, Congress, and Fed-Ex. Who is the big winner? The unions.

Some background:

· Currently, Fed-Ex operates under the Railway Labor Act (RLA), an act instituted to protect those companies that are vital to interstate commerce. This act makes it extremely difficult for employees to unionize, by requiring a unanimity vote for unionization across all employees. The act does provide for alternative methods of dispute resolution.

· UPS operates under the National Labor Relations Act (NLRA) which has allowed its employees to significantly unionize. This has allowed UPS labor costs to increase as their employees unionize.

· Fed-Ex has been allowed governance under the RLA due to the fact that much of its business is air-travel based. 

Now enters UPS. Some lobbying here and there, many donations over the years to Representative James L. Oberstar, (D., Minn.) and here you go, you end up with a FAA Reauthorization Act of 2009, currently in the Senate, that “Revises FAA personnel management system requirements with respect to the mediation, alternative resolution, and binding arbitration of disputes between the FAA Administrator and FAA employees about implementation of proposed changes to the system.”

The result: The act would make it possible for Fed-Ex employees to unionize and strike, effectively raising Fed-Ex’s labor costs significantly.

Read this article by George Will in today’s Washington Post where he makes the case that this story examplifies how much influence the unions have over the White House. And watch this pretty creative response by Fed-Ex. More on that issue here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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