In Letter to Postal Regulatory Commission, Brown Seeks to Protect Ohio Newspapers from Unfair Competition

Proposed Deal Between Postal Service and Direct Mail Firm Could Undermine the Finances of USPS and Disadvantage the Newspaper Industry

WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH) today wrote to the Chairman of the U.S. Postal Regulatory Commission, Ruth Goldway, expressing concern over a Negotiated Service Agreement (NSA) that could lead to unfair subsidies for Valasiss, a major coupon and advertisement distributor, while putting Ohio newspapers at a competitive disadvantage and doing little to improve the solvency of the USPS. Brown has heard from members of the Ohio Newspaper Association regarding the issue, and the Youngstown Vindicator editorialized that the NSA with Valassis would leave “thousands of daily and weekly newspapers” on the “losing end” of the deal, forcing newspapers to “pay higher rates than their competitors.”

“Throughout its history, the Postal Service has worked closely with our nation’s newspapers. Now is not the time to create additional obstacles for either our newspaper industry or the USPS,” Brown wrote in the letter. “Under the terms of the [Negotiated Service Agreement], Valassis – a major coupon and advertisement distributor – would be added to the USPS’s list of market-dominant products and thereafter receive discounts ranging from 22 percent to 36 percent for any new pieces of advertising mail. According to some estimates, this NSA could result in a loss of at least $1 billion in revenue for the newspaper industry. Furthermore, neither the USPS nor Valassis have offered adequate evidence that the NSA would benefit the USPS financially.”

“I am concerned that the proposed deal with Valassis would unfairly subsidize its services while putting its competitors, including the newspaper industry, at a disadvantage,” Brown continued in the letter. “Many local newspapers – whose revenues rely on advertisements – could be forced to downsize print volume or reduce their utilization of the USPS. These actions would ultimately harm Ohioans who rely upon local newspapers to remain informed about current events.”

The text of the letter is below.

Chairman Ruth Y. Goldway
U.S. Postal Regulatory Commission
901 New York Avenue NW, Suite 200
Washington, DC 20268

Dear Chairman Goldway:

I write to express concern over the recently proposed deal between Valassis Direct Mail, Inc. and the United States Postal Service (USPS). In recent weeks, the Postal Regulatory Commission (PRC) has been asked to review a Negotiated Service Agreement (NSA) between the USPS and Valassis. I have heard from members of the Ohio Newspaper Association who share deep concern over the consequences of this agreement. I urge you to reconsider the NSA on the basis that it violates statutory limits under the Postal Accountability Enhancement Act (PAEA), could cause significant harm to our nation’s newspaper industry, and may further impede the USPS’s road to recovery.

It is my understanding, that under the terms of the NSA, Valassis – a major coupon and advertisement distributor – would be added to the USPS’s list of market-dominant products and thereafter receive discounts ranging from 22 percent to 36 percent for any new pieces of advertising mail. I am concerned that this incentive would siphon business from competitors.

According to some estimates, this NSA could result in a loss of at least $1 billion in revenue for the newspaper industry. Furthermore, neither the USPS nor Valassis have offered adequate evidence that the NSA would benefit the USPS financially. This violates both Section 3622(c)(10)(A)(i) of the PAEA and PRC rule 39 C.F.R.§3010.40(a)(1), which provide that NSAs must “improve the net financial position of the Postal Service.” In fact, the Newspaper Association of America has found that this NSA would result in a net loss for the USPS over the long-term. This information is especially important as the USPS seeks to regain strength and bolster mail volumes under its current fiscal circumstances.

As you know, the Senate recently passed legislation to help alleviate problems faced by the USPS. Unfortunately, the 21st Century Postal Service Act has not yet been considered by the House of Representatives.

One of the provisions in the 21st Century Postal Service Act would require that the PRC conduct a study to determine the cost impact of market-dominant products. Should any product be found bearing less than 100 percent of the attributable costs, the PRC would need to consider new postal rates for such services. Given this provision, I am concerned that the proposed deal with Valassis would unfairly subsidize its services while putting its competitors, including the newspaper industry, at a disadvantage. Many local newspapers – whose revenues rely on advertisements – could be forced to downsize print volume or reduce their utilization of the USPS. These actions would ultimately harm Ohioans who rely upon local newspapers to remain informed about current events.

While it works to ensure the long-term viability of the USPS, the PRC must prevent the USPS from entering into anticompetitive agreements that harm the USPS’s financial health. Throughout its history, the Postal Service has worked closely with our nation’s newspapers. Now is not the time to create additional obstacles for either our newspaper industry or the USPS.

Thank you for your consideration of this important matter. I look forward to your response.

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