It ain’t over yet

Sep 01, 1998 9:30 PM  By

Although the U.S. Postal Service Board of Governors announced that the new rates of its highly complex postal rate case will be implemented on Jan. 10, the controversial case isn’t over yet. In July and August, three mailing concerns filed or said they would file separate appeals to the case before the U.S. Court of Appeals. If the court agrees with any one of the appeals, the rate case could be modified or even sent back to the Postal Rate Commission (PRC) for review, possibly delaying implementation of the new rates.

On July 13, United Parcel Service, which has unsuccessfully appealed rate cases in the past, announced it would appeal the rate case by mid-August. But as of early August, it had yet to reveal what aspect of the case it was appealing. And on July 24, mail order photo processors District Photo, Nashua Photo, Mystic Color Lab, and Seattle Filmworks jointly appealed the rate case’s 10-cent surcharge on all Standard A parcels.

But the most sweeping appeal came from the Alliance of Nonprofit Mailers. On July 16, the Alliance asked the Court of Appeals to throw out the whole case, arguing that the USPS doesn’t need more revenue right now. During the rate case before the PRC, the Alliance battled the USPS, which proposed and eventually received rate increases averaging 12%-14% for nonprofit catalogers. By contrast, commercial catalogers will pay up to 4.5% more in postage rates.

“The Postal Service asked for increases when it’s rolling in dough,” says Alliance executive director Neal Denton, pointing out that the USPS has posted more than $5 billion in profits over the past three fiscal years. And when the PRC on May 11 said that the USPS had “seriously underestimated” how strong its finances would be in its proposal, “that should ha ve ended the matter,” Denton says, with the postal rate case being thrown out. “But the PRC lost its nerve.”

Instead, the PRC gave the USPS two-thirds of the revenue the agency had requested, and after the case concluded, the Alliance, unable during the rate case proceedings to prove the USPS wrong in its assertion that nonprofit costs have increased more than commercial mail costs, filed its appeal.

As for the grounds of the photo mailers’ appeal, “the procedure by which the parcel surcharge was derived may not be legal,” says economist John Haldi, who was hired by the four firms. “Costs were averaged across four postal subclasses. But in rate cases, each subclass is supposed to have rates based on its own costs.”

At press time, no date had been set for the Court of Appeals to review the appeals. While there’s no clear precedent, some past appeals have succeeded. In 1980, for instance, a group of nonprofit mailers appealed for the same presort discounts that were given to commercial mailers. They won and later formed the Alliance of Nonprofit Mailers.

“Obviously, we think we have a chance or we wouldn’t have filed,” Denton says. “We’re getting a bunch of ‘attaboys’ from our commercial mailing colleagues.”

PRC’s hands tied?

PRC chairman Ed Gleiman doesn’t disagree with the Alliance in its challenge of the rate case. But he says the PRC’s hands were tied, because it couldn’t prove that the USPS’s profits or mail volume wouldn’t plummet next year.

“There are certain limits under law. We could not second-guess the U.S. Postal Service on what might transpire in expenditures until the end of the year,” Gleiman says, referring to the USPS’s costs and mail volume estimates for the remainder of its fiscal year that it reported in the rate case. “But arguably, it seemed unlikely that the bottom could drop out.”

Despite the 12%-14% rate increase for nonprofit catalogers slated to go into effect in January, not all nonprofit mailers are overly concerned by the size of the increase. “Nonprofits have always been the hardest hit by postage increases,” says Tom Slaven, project manager of database marketing for the National Fire Protection Association (NFPA). The NFPA plans to mail nearly 4 million catalogs, solo mailers, and letter membership packages next year, up from 3.5 million this year. “Of course we don’t like it. But we expected it because we pay less than commercial mailers.” (Because nonprofit postage is subsidized by the government, nonprofit postal rates are up to 20% lower than commercial rates.)

Similarly, the National Geographic Society, which plans to mail 6 million catalogs in 1999, had expected a double-digit rate increase. “We budgeted for a 10% rate increase based on initial figures by the Postal Service,” says vice president of distribution Jim Pridemore. “The increase is coming out at 13.1% for us, but we fortunately budgeted for a June 1998 implementation date.”

Nonprofits have already had to budget for step 6 of an annual multistep rate increase resulting from the Revenue Forgone Act of 1992. At that time, mailers knew up front when and how much rates would be increased. The amounts of those increases have been 3%-4% for catalogers. Step 6, the last increase of the series, goes into effect Oct. 4.