It was recently reported that FedEx had been "systematically overcharging" customers by billing businesses and government offices at higher residential rates. This statement, made by a company sales executive, was revealed in court during a hearing against FedEx. Bank of America, Toyota, and the US Government Passport office are named as the plaintiffs.

    In 2012, FedEx charged a $3.00 surcharge for residential deliveries ($2.55 for home delivery) above and beyond the traditional package shipping charges, similar to airline surcharges for baggage. FedEx customers, who powerlessly agree to this fee, are typically unaware of how often it occurs and the overall impact to their bottom line. Most of their customers trust FedEx is getting it right.

    Is it possible FedEx violated the trust of their customers and overcharged them intentionally? Let's examine the facts. How is this fee determined? The driver decides whether or not to assess the residential fee at the point of delivery. That's right . . . there is no database of addresses in the FedEx billing system classifying residential vs. commercial addresses. UPS utilizes the same imperfect methodology.

    So why doesn't FedEx (and UPS) simply code residential addresses in their billing system just like they do with the delivery area surcharge (DAS) and most other fees? The answer is twofold: healthcare and a broken legal system. FedEx truly wanted to automate the residential calculation but it would have required employees to key in so much data (there are 127 million addresses in the US) it would have likely caused an outbreak of carpel tunnel syndrome exposing them to employee lawsuits. Executives at UPS of course shared the same concern.

    FedEx believes they will be exonerated; the court will understand their dilemma and accept that 100% of the overcharges were errors made by their drivers that coincidentally always favored FedEx.

    If FedEx is found guilty, it may trigger a customer revolt as others discover they too are being bamboozled. Customers will flock to UPS, who will temporarily count its blessings until its newfound customers discover they are equally guilty of playing by the same rules. Then what? There's a duopoly - and consequently little anyone can do about it. Or is there?

    I advise these four steps to reduce or eliminate hidden fees and get control over transportation costs now:

    1 - Engage a 3rd party invoice auditor - immediately. There is no downside. The information you will gather will help you better manage your transportation spend. If your carrier rep complains about you using an auditing service, ignore them.
    2 - Use the USPS. If you are waiting to make the shift to add them to your portfolio of carriers then you are behind the times and probably losing to competition. Every ecommerce company is either using the USPS or considering them. There has never been an issue of hidden fees with the USPS.
    3 - Negotiate discounts on fees or entirely out of your agreement. Many believe this can't be done. That is a misperception.
    4 - Deploy a 3rd party multi-carrier shipping solution. This is the single most important action you can take to help control shipping costs, reduce or eliminate fees, and increase competitiveness now and in the future.

    Collectively these four solutions will help prevent hidden fees, get refunds when they are erroneously assessed, reduce or eliminate the cost of fees entirely and help reduce shipping costs substantially. What are you waiting for?

    In conclusion; UPS is watching closely because they too are at risk. But don't be surprised if FedEx settles behind closed doors, hides the terms of the agreement, and admits no wrongdoing. I can almost guarantee it. This will help protect them from a barrage of lawsuits, further reputation damage, and a loss of hundreds of millions of dollars. I hope this is a lesson learned: Carriers should reconsider greedily increasing profits at the expense and trust of their customers.

    This situation should be a wakeup call to those who believe their interests are being guarded by either of the Dynamic Duo (UPS / FedEx). They're not. Many of their customers will believe both companies would never put their own interests ahead of their customers' needs. They're wrong. There are many more tricks up their sleeves, so stay tuned.

    Relax; it's not a "federal" offense, it's just FedExand UPS!

    Jim LeRose has been a transportation industry consultant for three decades. Formerly with Pitney Bowes, he is Principal of Agile New York, a leading provider of multi-carrier shipping software / shipping cost reduction strategies and CEO/Founder of EcoReturn - a revolutionary ecommerce return solution. Visit: and Contact him at or 888.214.1763.