USPS Accused of Offering Preferential Contract to Direct Mail Distributor

The U.S. Postal Service is in hot water again, this time for offering deep discounts to one of the largest direct mail companies in the world. The Postal Regulatory Commission is reviewing a controversial deal reached by the USPS and Valassis Direct Mail which opponents claim could offer Valassis a monopolistic advantage.

More than two dozen members of Congress from both parties, led by House of Representatives Oversight Committee Chairman Darrell Issa (R - Calif.), wrote to Postmaster General Patrick Donahoe with concerns about the Negotiated Services Agreement (NSA) that the USPS inked with Valassis in April. Under the terms of the NSA, Valassis would receive rebates of up to 36 percent for postage costs for direct mail pieces, many of which contain ads from major national retailers. Valassis would need to send out a minimum of 1 million additional pieces in order to receive the rebates, which the USPS said would generate more than $100 million annually.

The rules governing the postal service allow it to enter into special contracts to increase mailings and therefore revenue, but as a quasi-governmental agency, providing discounts to specific corporations or industries can become a legal minefield. In the letter to Donahoe, the Congressmen state that USPS contracts should not "indirectly pick winners and losers in the private sector."

One of the strongest opponents of the NSA is Newspaper Association of America, which relies on the same ad revenue as Valassis as well as distribution through the postal service, both for newspapers and for direct mail pieces.

"Newspaper publishers are shocked by the specifics of this special deal for the country's largest direct-mail company," said Caroline Little, CEO of the Newspaper Association of America. "The proposal to provide steep discounts to a major newspaper competitor is a dagger aimed at the financial health of newspapers."

According to the association, the $100 million "sweetheart deal" with Valassis could cause a $200 million decrease in mailings from newspapers alone. Other direct mailers could also be forced to find another, more competitive method of distribution. The Postal Regulatory Commission is accepting information and opinions on the contract until this Friday, June 29.

The Valassis NSA comes along at the same time as another hotly debated USPS initiative. Beginnning July 1, the postal service will no longer guarantee overnight delivery for first-class mail, and the delivery time will change from one-to-three days to two-to-three days. The change will impact approximately 20 percent of first-class mail.

In addition, certain states such as Maine and Washington will be reducing the size of areas that can receive one-day service for mail. Both changes are a result of mail sorting hub closures, which some postal workers are resisting with a hunger strike started on June 25. More information on changes to first-class mailings is available on the USPS website.