> becomes a race to the bottom and UPS drop their prices

This is competition.

They're not really competing on price but on quality. They make the most money with super urgent deliveries. If they offer later pick up times or earlier guaranteed deliveries, customers will be happy to pay more. And their IT system is crucial for that.

This is how the "passing the savings on to their customers" happens.

And all consumers win. This is the beauty of capitalism, it's how it's supposed to work.

It fails when you get high barriers to entry and company colluding