Regulators should reject deal with direct marketing firm.
We're all for the U.S. Postal Service being more entrepreneurial in an effort to stem its red ink. But the USPS can't simply mail it in by using patently unfair business practices.
That's essentially what the quasi-public corporation is doing with an ill-advised proposal to give a huge economic advantage to a key competitor to the newspaper industry.
The USPS has reached a tentative agreement with Valassis Direct Mail that would give a postage discount ranging from 22 to 36 percent for "new" advertising beyond what the firm currently mails. The new advertisers would include national retailers of "durable and semi-durable goods," which by definition could include major retailers that are currently the largest customers of the newspaper industry.
Newspapers also use the mail to deliver advertising to nonsubscribers through what are called total market coverage products. That business is worth about $500 million annually to the USPS, and yet under the proposed agreement the newspaper industry would not receive the same pricing opportunity as Valassis.
The USPS estimates that the Valassis deal could be worth $13 million to $42 million of new revenue to the company annually.
That revenue is badly needed at the beleaguered USPS. But if the agreement is approved, the Newspaper Association of America warns, its members may shift up to $200 million in business done annually with the Postal Service to nonmail alternatives. So whatever benefit the Postal Service may realize would be eroded, if not erased, by lost newspaper industry revenue.
Not only is the proposed agreement a bad business idea, it goes against the Postal Accountability and Enhancement Act of 2006. That law states that the USPS may enter into such deals if they either improve its net financial position or enhance its operating performance -- without causing unreasonable harm to the marketplace.
The proposed boondoggle with Valassis doesn't meet any of those requirements.
Why should Americans be paying attention to this issue? The fact that the USPS would even entertain such a sweetheart agreement is evidence of its desperation to generate new business and reach financial stability. If this Valassis agreement is the best the USPS can do, there's even more cause for concern about its future.
In our admittedly self-interested opinion, newspapers continue to play a vital public service role in communities across the country. And because they are private enterprises, they shouldn't expect to be immune from competition. Indeed, over the past decade the industry has been buffeted by the technological transformation that has changed the way we consume news and advertising.
As the newspaper industry continues to evolve in the digital age, the kind of anticompetitive measure being considered by the USPS is among the last things it needs.
Fortunately, the USPS cannot unilaterally make a deal with Valassis. The agreement must be approved by the Postal Regulatory Commission. If the right questions are asked, the right decisions will be made and the Valassis deal will be rejected as a potentially money-losing, unfair attack on one industry to benefit one company.
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