How Much do FedEx and UPS Compete? Check Out This Lobbyist's Dirty Tricks

Implications: FedEx is fighting a major threat to its FedEx Ground business model by opposing any changes to its independent contractor status for thousands of its FedEx Ground workers. The issue strikes at the heart of the business model of FedEx Ground, which at $5 billion is the lone major competitor to $50 billion-a-year UPS's small package operation. The fact that a lobbyist for UPS would compile a highly detailed, 563-page report on the alleged violations of labor law that FedEx is alleged to have committed and then leak it to Ohio government officials shows the depth that each company takes its competitive rivalry. This case has already cost FedEx a $654,000 fine and penalty, which the company is appealing. The question is how much farther will this case go?

Analysis:   Everybody knows UPS and FedEx compete tooth and nail for every pound of freight on its planes, trucks and through its massive operations systems.
  But a little-noticed case involving a tip to Ohio government officials from a UPS lobbyist in Washington that already has cost FedEx more than $654,000 in fines and penalties shows the depth and breadth of the competition between the two small package giants.
  Kenneth Kies, a well-known Washington tax lobbyist whose firm has worked for UPS, compiled the highly detailed, 563-page report on FedEx's alleged violations of independent contractor status for its ground parcel workers. Then he leaked it to Ohio officials, who were stunned by the depth and detail of Kies' report.
  "I was, candidly, surprised by the depth and breadth of information," says Judi Cicatiello, deputy director of unemployment compensation for the Ohio Department of Job and Family Services.
  Well, she shouldn't have been.
  Anybody who has dealt with corporate officials from either company knows the rivalry holds no bounds. If one company does something, the other is quick to respond, either by shooting it down through unnamed sources in the press or by other competitive means.
  When UPS bought Mail Boxes Inc., FedEx followed by blowing its money by buying Kinko's. When UPS needed an LTL trucker for its heavy freight demand and bought Overnight Transportation, FedEx soon followed by buying Watkins Motor Lines. And on and on and on...
  The only difference between the companies is size and union affiliation. UPS is more than a $50 billion enterprise and is the largest employer of Teamsters, with more than 260,000 union members in its fold. FedEx, which is half-a-century younger than 101-year-old UPS, is staunchly union-free and quite proud of it. It also is barely half the size of UPS at $36 billion, but growing.
  Subsequently, that Ohio Job and and Family Services unit delivered the fine to FedEx, which it is appealing.
   UPS spokesman Norman Black is declining comment, as well he should. There simply is not enough Dramamine in North America for Black to take to avoid getting dizzy spinning this little number.
  FedEx officials, privately, are outraged by the affair. But its spokesman, Maury Lane, was tepid in his criticism of his company's major competitor.
  "I think if a competitor is providing that kind of information, then we should be able to respond and so far, we haven't," he told the Columbus, Ohio, dispatch.
  Oh, there's no question that FedEx will respond. It just may not be in print or on the air.
  FedEx's response will likely come in the competitive market place, by stealing one or likely more of UPS's major competitors. Word on the street is that North Carolina-based Lowe's Hardware is not terribly happy that UPS Freight (the former Overnite unit) is now a Teamster company.
  One might just get the hint that FedEx Freight, one of UPS Freight's major competitors, might just be paying a visit to Lowe's corporate office and increasing its discount if Lowe's drops UPS in favor of FedEx.
  Just asking...