Association: USPS Deal Moves Inserts Out of Newspapers

ARLINGTON, VA—On behalf of its member newspapers, the Newspaper Association of America (NAA) filed its initial brief in its lawsuit against the Postal Regulatory Commission (PRC) regarding that agency’s August 2012 decision to approve a negotiated service agreement between the U.S. Postal Service (USPS) and Valassis Direct Mail. The lawsuit is being heard in the U.S. Court of Appeals for the District of Columbia Circuit.

Under the agreement, USPS granted Valassis Direct Mail discounts of 20 percent to 34 percent on new mail pieces containing advertising from national retailers of durable and semi-durable goods. Through these discounts, the NAA maintains the USPS has given one company a price incentive to move advertising inserts out of newspapers delivered to consumers’ homes. Advertising inserts, the NAA contends, comprise a critical revenue stream that supports the original reporting done by local newspapers in service to their communities.

In its brief, NAA notes that the commission’s decision is both contrary to law and arbitrary and capricious, because it does not consider the “impact of the agreement on competitors to the Postal Service, on competitors of its NSA partner, and mail users in general.” When it enacted the Postal Accountability and Enhancement Act, Congress codified commission precedent establishing that assessing “unreasonable harm to the marketplace” requires evaluating and weighing harm to competitors of the Postal Service’s negotiated service agreement partner.

NAA argues that the commission “interpreted ‘unreasonable harm to the marketplace’ to require only that the Postal Service is not pricing its products below cost.” NAA states that “even though the Postal Service has the burden of ‘assuring an adequate record’ on the issue of ‘unreasonable harm to the marketplace,’ ” the commission did not require the Postal Service and Valassis to identify relevant markets in which the agreement will be implemented so that it could provide a proper analysis.

NAA further argues that in assessing whether the pact with Valassis will improve the net financial position of the Postal Service, “the commission ignored comments showing that newspapers in major markets pay the Postal Service millions of dollars to distribute total market coverage products with advertisements from national retailers.” NAA emphasizes that in order to cuts costs in response to the service agreement, the “diversion of these total market coverage products to private delivery could quickly outweigh any new revenue from Valassis.”

"The Postal Regulatory Commission’s Public Representative had it right when he said in comments to that agency that this NSA is a lose-lose proposition for both the newspaper industry and the Postal Service,” NAA President and CEO Caroline Little said.