Campaign Against Rival Could Haunt FedEx

June 10, 2009
By Stephanie Clifford, NY Times


The word bailout has gone from descriptive to derogatory.

The FedEx-sponsored Web site

BrownBailout.com

(brown is both U.P.S.’s color and nickname) says that U.P.S. is “quietly seeking a Congressional bailout designed to limit competition for overnight deliveries.” Along with a “bailout-o-meter” showing U.P.S.’s revenue, and a spoof of a U.P.S. commercial, the site includes statements like, “This is a bailout, plain and simple, and the American people won’t stand for it.

The real issue here is not government-supplied cash for U.P.S., but the labor laws under which U.P.S. and FedEx are classified.

The House recently approved a bill that reclassified a FedEx division, making it easier for unions to form there, and FedEx is fighting that legislation as it goes to the Senate. In effect, FedEx is claiming that passage of the bill would be a bailout for U.P.S. by hampering a competitor.

FedEx’s casting of a labor-law dispute as a bailout has raised ire at U.P.S. and at the Teamsters union, which said on Tuesday that it planned to respond with its own public relations campaign.

Some advertising experts said FedEx was putting its own brand at risk by so aggressively attacking a competitor and accusing U.P.S. of taking a federal bailout.

“Hinging so much of this — even the site itself and the URL name — to a bailout brings some pretty significant risks,” said Scott Elser, a partner in LaunchPad Advertising, which is not working with either company. “It’s arguably one of the most controversial terms that you can define in politics today. They draw you there based on that, and you don’t have to surf very long to realize that this is clearly not a bailout as most consumers and business people would define it, which is writing a check to a troubled business.”

“It’s a little bit of a bait and switch,” Mr. Elser said, which “has the ability to potentially harm their brand.”

FedEx is objecting to a provision in a Federal Aviation Administration reauthorization bill that the House passed in May. The legislation would classify nonairline employees from FedEx’s Express division, which makes overnight deliveries, under the National Labor Relations Act rather than the Railway Labor Act, which currently governs Express as well as airlines and railroads. The reclassification would make it easier to unionize the division, since N.L.R.A. unions are allowed to form at a company’s individual sites; under the railway act, unions need national support from a majority of a company’s workers.

U.P.S., which is heavily unionized, is governed under the N.L.R.A. And it has been lobbying to get its competitor’s Express division classified under that act.

“FedEx is appearing to spend millions of dollars to try to convince Congress that a FedEx driver delivering a package is different from a U.P.S. driver delivering a package,” said Malcolm Berkley, a U.P.S. spokesman.

Mr. Berkley said it was a competitive issue for U.P.S. “FedEx Express uses the fact of the labor law it is currently under inappropriately as a lever when talking to U.P.S. customers, particularly when we’re negotiating our contracts,” he said.

FedEx’s labeling of the legislation as a bailout was wrong, he said.

“There’s clearly no way we’re seeking a bailout. In fact, what we’re doing is working to eliminate an earmark that has been given to FedEx for some years,” he said.

Executives from the Teamsters, which represents 240,000 U.P.S. workers, also said the bailout campaign was misleading.

“It is just the height of hypocrisy for them to allege that there is a bailout of their competitor, when in fact, it’s the company, it’s FedEx, who has benefited from this misclassification of their workers,” said Ken Hall, international vice president and director of the package division at the Teamsters. “It’s laughable to think that they would portray this as some bailout. This is simply leveling the playing field.”

While Mr. Berkley said U.P.S. was not planning a campaign in response, the Teamsters would, Mr. Hall said.

“Particularly, it’s going to be a grass-roots and an educational program to make sure that those folks in Congress truly understand the issue.”

FedEx, meanwhile, has been arguing that the different classification makes sense, since its roots and ways of doing business are different from those of U.P.S. “Our company and U.P.S. are fundamentally different companies,” said Maury Lane, director of communications at FedEx. “They aren’t and shouldn’t be regulated the same way.”

As for the bailout characterization, “that piece of legislation only helps one company while hurting a main competitor — if that’s not a bailout, we’re going to have to redefine the word,” he said.

Late last year, FedEx’s chief executive, Frederick W. Smith, signaled the company would fight hard against any potential legislation.

“We’ve said repeatedly that it is extremely bad public policy,” Mr. Smith said in a conference call with investors. “We would hope that provision would not see the light of day.”

Labor experts differed on the companies’ positions. Karen E. Boroff, the dean of the Stillman School of Business at Seton Hall University, said she found FedEx’s arguments persuasive. “FedEx absolutely has a right to be concerned about tiny little bargaining units interrupting the flow of their delivery,” she said. And, she said, workers doing similar jobs were often classified under different labor laws. But James J. Brudney, a law professor at the Moritz College of Law at the Ohio State University, said that FedEx Express’s classification was “a historical anomaly.”

“From the workers’ point of view, it seems unfair,” he said.

Advertising executives who reviewed the Web site said that it did some things very well.

“I give them credit for inventiveness,” said Steve Centrillo, a principal at A-Team Advisors, a consultant to advertising agencies that is based in New York.

Pinning the problems on U.P.S. rather than on unionization helped FedEx avoid sticky labor relations questions, he said.

But, Mr. Centrillo said, the use of bailout was “the most questionably ethical thing on the site.

“It’s taking a word that is extremely loaded right now, and implying that somehow, the government is writing a check to U.P.S., which is clearly not the case.”