PRC: "Postal Service has unduly discriminated against GameFly"

It took almost 2 years, but the US Postal Regulatory Commission just ruled that the US Postal Service "...had unduly discriminated against Gamefly." Gamefly recently complained that the additional postage was costing them $730,000 per month.

From the Order on Complaint filed today by the PRC (the full report is interesting reading, if you're into that sort of thing):

In this latter section, the Commission confirms evidentiary rulings made by the Presiding Officer; finds that GameFly is similarly situated to Netflix and Blockbuster; concludes that Netflix and Blockbuster have been given a number of preferences, including various forms of manual processing coupled with the avoidance of the non-machinable1 Complaint of GameFly, Inc., April 23, 2009 (Complaint).Docket No. 2009-1 Executive Summarysurcharge; and determines that the Postal Service has failed to present adequate and legitimate justifications for these preferences.

[1004] DVDs returned by subscribers to Netflix in its prepaid letter-sized mailers are non-machinable, and are frequently damaged or cause machine jams. DVDs returned by subscribers to GameFly also are damaged from processing on automated letter processing equipment. The Postal Service separates and hand processes a substantial proportion of Netflix’s returns without imposing a non-machinable surcharge. The Postal Service is unwilling to hand process GameFly’s returns causing GameFly to incur an additional ounce charge on its mail, which the Postal Service refuses to waive.

[1005] To remedy this unreasonable preference, the Commission orders the Postal Service to establish two parallel rate categories within First-Class Mail for round- trip DVD mail. One category establishes that DVDs sent as presorted First-Class Mail letters to subscribers will not be subject to the non-machinable surcharge when returned. The other rate category provides that DVDs mailed as First-Class Mail flats to and from subscribers will not be subject to an additional ounce charge.

The PRC order gives the US Postal Service 60 days to comply with the order. 

Comments

[Edward R Murrow]

Non-Netflix customers tax dollars at work providing benefit to Netflix and penalties to Gamefly. Who was that alcoholic ex-postmaster general that Netflix hired and fired? Can't remember his name, but there should be an investigation about any conflict of interest between USPS and Netflix on this topic.

[sukru]

So, US tax payers will pay more to keep Gamefly alive (along with Netflix, and Blockbuster - as far as it goes).

I hope at least this will make Gamefly pass on the saving to the users and increase their service quality.

[Phillip]

Maybe I'm remembering wrong but isn't this entirely based around Gamefly refusing to make their envelopes stand out like the bright red Netflix ones? Which makes it impossible to hand sort like this? Are they going to have to change that?

And I also thought that Netflix does a lot of the sorting and pickup themselves to make things quicker/easier?

[Phillip]

Sorry, just clicked through to the old linked article which quoted the ArsTechnica article I was remembering...

They mention the visual aspect as well as the cardboard sleeve. Do we know if either of those pieces are being addressed here? I'm a bit confused on the categories in 1005.

[Matt Lafferty]

The post office isn't tax supported; it's funded by its internal sales (stamps). I'm made un-jolly that Mr. Murrow didn't check his facts.

[sukru]

Something new I learn today. I thought they would get "breaks" from the government from time to time. But turns out the story is different:

http://usgovinfo.about.com/od/consumerawareness/a/uspsabout.htm

The USPS does get some taxpayer support. Around $96 million is budgeted annually by Congress for the "Postal Service Fund." These funds are used to compensate USPS for postage-free mailing for all legally blind persons and for mail-in election ballots sent from US citizens living overseas. A portion of the funds also pays USPS for providing address information to state and local child support enforcement agencies.

Under federal law, only the Postal Service can handle or charge postage for handling letters. Despite this virtual monopoly worth some $45 billion a year, the law does not require that the Postal Service make a profit -- only break even. Still, the US Postal Service has averaged a profit of over $1 billion per year in each of the last five years. Yet, Postal Service officials argue that they must continue to raise postage at regular intervals in order make up for the increased use of email.

[Seth]

HEY HANK

Every step of the way I said Gamefly had a good case while the media tittered and scoffed.

How do you like them apples?

[BP]

@ Pud & Seth

Maybe before you guys get all self-congratulatory you should probably try actually reading the report. While the PRC did find in Gamefly's favor regarding discrimination, their conclusion and following orders to the post office effectively fucked Gamefly in the face.

What is equally as important as the PRC finding the postal service at fault is the fact that they then go on to explain that even with their recommended solutions it is very extremely double plus likely that Gamefly will still incur additional charges.

Moreover, the PRC went all Straw Dog on Gamefly and basically told them that their proposed solutions are fucking retarded and that it isn't the post office's fault that they fail as a business.

The "Remedy" section of the Order is the most revealing of the entire damned thing. This is every bit as much about finding the post office guilty of discrimination as it is about putting Gamefly in their place.

When Gamefly continues to fail as a business following this decision, will either of you step up and admit that, no matter the outcome of this stupid fucking case, it is Gamefly's management that are sinking the company and not overpaying for postage?

Selective fucking quoting guys. Get real.

-BP

[Seth]

Perhaps you should actually read my post.

I said Gamefly had a good case. I never said they had a good business.

Further my previous comments regarding the Gamefly complaint stated that Netflix clearly was receiving preferential treatment and PRC completely agreed.

[BP]

@ Seth

The PRC stated that the post office should not discriminate against any one customer. It also stated that Gamefly contributed to its own discrimination and financial problems. This should not be taken as siding with Gamefly. The PRC makes explicit two things, (1) that all companies which use a specific service (first class) with a specific mail type (DVDs) should receive specific handling (manual) for a specific rate (no additional ounce billing) UNLESS a company does not adhere to any of the PRC's requirements which could lead to additional costs (which they fully expect Gamefly to continue to incur), and (2) Gamefly's complaint may have been valid, but it was the post office that lost, not Gamefly that won. That is an important distinction. Every bit as important as the PRC finding that Gamefly's "solutions" were anything but.

You can spin this however you want but it isn't black and white, it is far more nuanced than that. Gamefly lost because they didn't get the unevenly tilted in their favor playing field that they wanted. The post office wins because they now have a mandate with clear cut defining rules on how to proceed for DVD mailers. Gamefly loses because despite having been found to be discriminated against by the post office they have been found to have been responsible for a large part of their own discrimination. The post office wins because now they can tell Gamefly to pick up their own shit or they pay a higher rate (you did see that part in the Remedies section, didn't you?).

Gamefly had a shit case and are now in an even more shit position than they were before. They might could have taken this to court or argued a case before Congress but now they have absolutely no recourse. All because they had a shit case and made a shit argument.

Anyone who spins this as being anything but a win for the post office is fucking naive. Read between the lines.

-BP

[Seth]

I am reading between the lines and I think you are astroturfing.

[BP]

First you attempt to rub it in Hank's face that you were oh so right and he was oh so wrong and then you accuse me of being a corporate shill?

Yeah dude. Totally got me there. My stock options increase by over 9000 for every letter I type in this thread.

YES

YYYYEEESSSS

I AM NOW RICHER THAN GOD

-BP

[Edward Kmett]

Sukru: so by your own words 0.2% of their revenue comes from the government buying their services to service a niche.

That doesn't sound government supported to me any more than the concrete industry being supported by the Americans with Disabilities act forcing more concrete ramps to be poured to access government buildings with government money.

[Heca]

To me it sounds like the solution will force netflix et al. to move to this new rate along with gamefly. This will end the discrimination and potentionally end with buckets of cash for the postoffice by introducing a new service.

[Jonathan]

i am not sure if this has been answered but your tax dollars ar enot being used.

http://www.usps.com/communications/newsroom/postalfacts.htm

Look under size and scope

[Lee]

1 billion in profit? Sounds like less than a penny per letter annually, and fair in my opinion.
The postal does a good job being mostly self sufficient... Which means limited taxpayer waste compared to most departments.

As for the decision, I believe they were asking for a new pay schedule to make any DVD mailing service on the same level playing field.

[HikingStick]

Concessions to high-volume customers are common in many industries. Netflix, Blockbuster, and Gamefly all send a lot of mail through the system, and they pay for that mail. They're providing a level of volume the Post Office otherwise would not see. They negotiated for their "special treatment" as a way to find a win-win situation for both businesses.

[Jon]

why the ranting about taxpayers...the postal service is funded by postage not taxes.

[Basic Research IS good]

@ Taxpayer People -

The USPS is not funded by tax dollars. Do at least a LITTLE bit of research before you open your mouth.

http://www.usps.com/communications/newsroom/postalfacts.htm

Or just google "Does the USPS use tax dollars"

Idiots.

[Edward R Murrow]

Whoever is moderating this forum ((Mike?) needs to ensure that the profanity is kept at PG level rather than X rated. I'm all for freedom of speech, but you don't get to yell fire in a crowded movie theater. Make your point without dropping F-bombs, please. I happen to be old school and the locker room language doesn't have to be visible for the ladies and children who read this blog.

[flawed]

Exactly MIKE how much longer do we have to put up with BP??????????????????
I Quote "fucked Gamefly in the face" really?

[Edward R Murrow]

Let me ask folks a couple questions:
1) Since the USPS is exempt from federal taxes, doesn't that make them somewhat taxpayer supported? I'd *LOVE* to be exempt from federal taxation!
2) They have the right to eminent domain, which means they can take property at below market. Doesn't that make them taxpayer supported? Any government property siezed by some agency should scare everyone.
3) The USPS is facing a $238 billion budget deficit over the next decade and they borrow from the government at below market interest rates to cover their deficits. Doesn't that make them taxpayer supported?

I don't want to start a flame war, but folks need to think these systems through from end to end in order to reach the hidden truth.

[Edward R Murrow]

Darn, typo in above post.

Number #2 should read:
2) They have the right to eminent domain, which means they can take property at below market. Doesn't that make them taxpayer supported? Any private property siezed by some agency should scare everyone.

[Anon/B/]

"Whoever is moderating this forum ((Mike?) needs to ensure that the profanity is kept at PG level rather than X rated."

For the record, fuck isn't X rated. It's a PG-13 word, unless it is used repeatedly, then it's rated R.

[BP]

@ Edward R Murrow

I find it extremely disingenuous that a guy who is either Pud - the guy who made his mark on the tech world by running a website called fuckedcompany.com - or links to Pud's website is claiming that profanity is offensive to them.

Don't be a choad, dickhead. Everyone here knows who you are and what you're about. Don't try and get me banned simply because you're unable to make a single prescient point.

-BP

[Seth]

I would like to know how many commenters here have IP addresses located near Los Gatos, CA (i.e. Netflix headquarters).

[Anon/B/]

"I would like to know how many commenters here have IP addresses located near Los Gatos, CA (i.e. Netflix headquarters)."

All of them, even jolly (although I think they keep him in the basement and that's why he is so angry.

[Brian Taylor]

@Edward -- Debates are not immediately flame wars.

1 -- Churches and clergy are tax exempt too, does that mean the state sponsors religion?

2 -- The restrictions on Eminent Domain also apply to the USPS, and that does NOT mean they can take property at below market value. It _ACTUALLY_ reads (In law, check your pocket constitution) fair market value. Which is determined as the rate that would be paid with an unpressured buyer and unpressured seller with full knowledge of all faults and benefits of that specific lot of property. It calculates it based on the highest value application of said property, which may not be the current use.

3 -- There are both set yearly limits, and a maximum dollar amount total that the USPS can borrow from the Federal Government, it's not like they have an infinite lifeline. It is also money that still needs to be paid back, with interest, despite the favorable rate.

So no, all in all I do not consider the USPS to be supported by tax dollars. If they received a set budget from the Government that they did not have to pay back then yes, I would.

[robertw]

I love when an issue like this is mentioned you get those posts about "taxpayer funded" If I could only see how much in federal taxes the people who post about the taxpayer I think it would open many eyes. The post office was given a monopoly position by the government. They are not taxpayer funded and they lose alot of money. Clearly Netflix has better contacts with the senior people at the post office than gamefly. That is what this comes down to. Looks to me like netflix gets preferred treatment.

[Annoyed]

God so many comments based on bad info. You're all pathetic.