Friday, August 24, 2012

Postal discount to direct mailer OKd; newspapers going to court, say watchdog role threatened

UPDATE, Nov. 20, 2015: Valassis did no mailings that qualified for the special discount and will pay USPS a $100,000 fine as a result. "Valassis couldn't come up with the advertisers," NNA President Chip Hutcheson said. "There is a moral to this story that every parent knows: don’t play favorites in the family."

The Postal Regulatory Commission has voted 4 to 1 to support to a U.S. Postal Service plan to give a discount to a prominent direct mailer, a move that struggling newspapers say will probably reduce an important income stream for them. For background, click here.

Under the service's three-year deal with Valassis, the company will get a discount on additional pieces sent. Ruth Goldway, the commission’s chairwoman, acknowledged that newspapers were upset with the proposed deal, but said that the discount given to Valassis would not give the company an unfair advantage. “The Commission understands that both newspapers and the Postal Service are experiencing declining revenues as new technologies based on the Internet grow in popularity," she said. "Today’s decision affirms that fair competition between these two important institutions is consistent with the law.”

The Newspaper Association of America, representing most dailies, said it was “stunned” by the decision and would take it to court. (Read more) National Newspaper Association President Reed Anfinson, publisher of the Swift County Monitor-News in Benson, Minn., said the association of weeklies and small dailies was "deeply disappointed" in the commission’s analysis.

"The commission begins with the presumption that having a federal enterprise competing head-on with the newspaper industry is a good thing, but it does not explain how any business can be on a level playing field when competing with its own government," Anfinson said. "The mailing contract with Valassis is an unfair deal in which the principal result is to drive down the advertiser’s prices and not necessarily to bring any new mail volume to the Postal Service. What the commission does not explain is why this goal is in the best interest of either newspapers or the Postal Service. Nor does it take seriously the arguments raised by many that this deal will force more newspapers out of the mail and create a net loss for the Postal Service after the deal kicks in."

Anfinson took issue with the commission's view, as he described it, that there is no "problem with the Postal Service’s draining revenues from news-gathering organizations. Somehow it seems to believe the centuries-old mailing category for periodicals created by Congress is able to equal out the harm from contracts like this one. . . . We know that in thousands of communities around this nation that newspapers remain the most vigorous watchdog of government as well as the primary source of community news."

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