UPS 2010 Annual Report Download - page 55

Other Matters
We received a grand jury subpoena from the Antitrust Division of the DOJ regarding the DOJ’s
investigation into certain pricing practices in the freight forwarding industry in December 2007.
In October 2007, June 2008, and February 2009, we received information requests from the European
Commission (“Commission”) relating to its investigation of certain pricing practices in the freight forwarding
industry, and subsequently responded to each request. On February 9, 2010, UPS received a Statement of
Objections by the Commission. This document contains the Commission’s preliminary view with respect to
alleged anticompetitive behavior in the freight forwarding industry by 18 freight forwarders, including UPS.
Although it alleges anticompetitive behavior, it does not prejudge the Commission’s final decision, as to facts or
law (which is subject to appeal to the European courts). The options available to the Commission include taking
no action or imposing a monetary fine; the range of any potential action by the Commission is not reasonably
estimable. Any decision imposing a fine would be subject to appeal. UPS has responded to the Statement of
Objections, including at a July 2010 Commission hearing, and we intend to continue to vigorously defend
ourselves in this proceeding. We received an additional information request from the Commission in January
2011, and will respond in due course.
In August 2010, competition authorities in Brazil opened an administrative proceeding to investigate alleged
anticompetitive behavior in the freight forwarding industry. Approximately 45 freight forwarding companies and
individuals are named in the proceeding, including UPS, UPS SCS Transportes (Brasil) S.A., and a former
employee in Brazil. UPS will have an opportunity to respond to these allegations.
We also received and responded to related information requests from competition authorities in other
jurisdictions.
We are cooperating with each of these investigations, and intend to continue to vigorously defend ourselves.
At this time, we are unable to determine the amount of any liability that may result from these matters or whether
any such liability would have a material adverse effect on our financial condition, results of operations or
liquidity.
Health Care Legislation
The enactment of the “Patient Protection and Affordable Care Act” and “The Health Care and Education
Reconciliation Act of 2010” in 2010 will bring significant changes to the U.S. health care system. The legislation
eliminated the tax deductibility of Medicare Part D subsidies for retiree prescription drug coverage; however, this
impact was not material to our financial results. We are evaluating the long-term impacts of this legislation on us.
It is difficult to estimate the impact due to the nature of our workforce, the various years in which certain
provisions become applicable, and the fact that additional regulatory and rulemaking actions will be occurring.
Our current estimate is that we will incur an additional $50 to $65 million of annual expense beginning in 2011
associated with active employee healthcare coverage, which is primarily due to the multiple coverage provisions
of the legislation which require the expansion of dependent coverage to age 26, among other requirements. The
December 31, 2010 accumulated postretirement benefit obligation for the postretirement medical plans increased
by $37 million due to the excise tax associated with the legislation.
Rate Adjustments
In October 2010, we announced that an increase in base rates and changes in our fuel surcharge for package
shipments that took effect January 3, 2011. UPS Ground service rates increased a net 4.9% through a
combination of a 5.9% increase in rates and a 1% reduction in the index used to determine the ground fuel
surcharge. UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select, and international air shipments originating in
the United States (including Worldwide Express, Worldwide Express Plus, UPS Worldwide Expedited and UPS
International Standard Service) increased a net 4.9%, through a combination of a 6.9% increase in base rates and
a 2% reduction in the index used to determine the air fuel surcharge. These rate changes are customary and occur
on an annual basis. Rate changes for shipments originating outside the U.S. are made throughout the year and
vary by geographic market.
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