Nonprofits To Go To Court In Postal Rate Fight

January 24, 2014       Patrick Sullivan      

Nonprofit mailers reeling from a 6 percent price increase set to take effect on Sunday won’t go down without a fight. The Direct Marketing Association and the Alliance of Nonprofit Mailers have joined with other mailers in filing an appeal at the U.S. Court of Appeals challenging the Postal Regulatory Commission’s (PRC) decision granting the United States Postal Service (USPS) a 4.3 percent exigent price increase.

According to the New York City-based DMA, the two groups have joined with other mailing entities to argue “that the grounds upon which the PRC granted the USPS an exigent increase are faulty and self-contradictory.” The Postal Service applied for the exigent increase to make up for an estimated $2.8 billion shortfall due to the Great Recession. The PRC granted the exigent increase in December, in addition to a standard 1.7 percent increase based on the rate of inflation, making the total Jan. 26 increase 6 percent.

“The Commission’s decision, unless overturned by the court, will gut the only real protection that mailers have,” said Peggy Hudson, DMA’s senior vice president of government affairs via statement. “The 6.0 percent postage increase — three times the rate of inflation — will not help the Postal Service shore up its financial base. It will simply drive mail from the system, which harms the financial viability of both the Postal Service and its business customers.”

Stephen Kearney, executive director of the Washington, D.C.-based Alliance of Nonprofit Mailers, echoed Hudson’s sentiments. “I think it will (backfire),” he said. “The reality is the Postal Service has a monopoly on delivering mail to the mailbox. They’re acting as a monopolist and imposing exorbitant increases. We’re afraid it will exacerbate diversion of mail to the Internet.”

The USPS also appealed the PRC’s decision today, according to Dave Partenheimer, manager of media relations from the USPS. Partenheimer declined to comment on what aspect of the PRC’s ruling the USPS is appealing, and on the mailing industry’s appeal. “Despite the decision to appeal, we will be implementing the exigent prices increase along with the inflation-based price increase on January 26, as previously announced,” he said. Representatives from the PRC did not immediately return a request for comment.

The exigent increase is expected to generate some $1.8 billion per year for the Postal Service. Though the PRC refused to make the increase permanent, a substitution amendment to the Postal Reform Act of 2013, put forth by Sen. Tom Coburn (R-Okla.) and Sen. Tom Carper (D-Del.), would make the exigent increase the new baseline for future increases, in effect making it permanent. It would also raise the standard price hike from the rate of inflation (consumer price index, or CPI), to CPI plus 1 percent.

“The Postal Service would like to raise rates. They’re not focused on doing the right thing to achieve efficiencies. Their new approach is to seek higher rates,” said Xenia “Senny” Boone, general counsel for the DMA. “With increased rates, nonprofits don’t have a lot of choices. It’s a huge expense and they’re not businesses.”

PRC chair Ruth Goldway said in December that the Postal Service estimated its losses to be about $6.6 billion. The PRC determined that all but $2.8 billion was due to Internet diversion and therefore not subject to the exigent increase. Because of this, the mailers’ appeal argues that “The finding is inconsistent with the Commission’s decision to impose a $2.8 billion above-inflation rate increase on mailers,” according to the DMA’s statement.

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