National Newspaper Association Challenges Valassis, Inc. | Postal Deal in Federal Court

March 4, 2013

National Newspaper Association this week filed a brief in the US Court of Appeals for the District of Columbia Circuit arguing that the Postal Regulatory Commission (PRC) failed to follow federal law in approving a historic postage discount deal between the private direct mail company, Valassis, Inc. and the US Postal Service.

In a joint filing with ValPak Direct Marketing Systems, Inc. and Valpak Dealers Association, Inc., NNA told the court that the PRC did not exercise its responsibility to protect against unreasonable harm to the marketplace. It also overlooked the threat to small businesses expressed by more than 200 community newspapers across America.

NNA joined the Newspaper Association of America in a lawsuit against the PRC after postal regulators approved a Negotiated Service Agreement (NSA) for Valassis that provides deep postage discounts if the direct mail firm is successful in enticing certain advertisers away from newspapers and related products and into a new Valassis weekend direct mail piece.  This NSA was a first-ever attempt by USPS to formally square off against newspapers in the advertising markets through discriminatory contract postage rates.  Both NNA and NAA protested the proposed deal at the PRC in the summer of 2012, but the PRC decided the deal is not anticompetitive because it is not offered at a below-cost postage rate and because it believes USPS should be encouraged to compete against newspapers for weekend advertising inserts.

Among NNA’s claims are that the deal will have a heavy impact upon hundreds of newspapers across the country that qualify as small businesses and that the discounts will distort local advertising in hundreds of marketplaces, many of which are already economically distressed.

NNA attorney Steven Douse, an antitrust attorney with the Nashville, TN, law firm King & Ballow,  is critical of the Commission’s attempt to apply federal antitrust laws to the Postal Service’s decision to grant special discounts to a single special-privilege mailer.

“Antitrust laws are designed to function in unregulated markets,” Douse said. “But here the dominant firm (USPS) has a statutory monopoly with legally enforced barriers to entry….The Commission failed to realize that because of the postal and mailbox monopolies, one of the competitive responses that would normally be open to firms affected by the NSA—entry into the postal space by providing mailbox delivery—is foreclosed. It forces firms to compete with the Postal Service and Valassis with one hand tied behind their backs.”  

NNA President Merle Baranczyk, publisher of the Mountain Mail in Salida, CO, said NNA’s appeal of the PRC decision is part of a unified industry effort to achieve a fair competitive environment.

“The Postal Service has seriously diminished newspapers’ trust by initiating this special deal with one single company,” Baranczyk said. “This NSA demonstrates that USPS is willing to inflict intentional damage upon hundreds of its newspaper customers around the nation. We are disappointed the PRC does not realize the Postal Service’s role as a government-protected monopoly should forestall special deals like this. NNA believes USPS, in its desperation to solve financial problems, is grasping at straws to find new revenues. This particular straw should be strictly off limits. There should be no NSAs for advertising. The markets all over the country are already fully competitive and USPS can achieve nothing more than exploiting its monopoly to the detriment of tax-paying newspaper businesses and the communities they serve. We look forward to a full hearing of our concerns by the appeals court.”

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