PRC Recommends Only Temporary Cut in Standard Flats Rates

The Postal Regulatory Commission (PRC) agreed on Friday that catalog mailers deserve a break – but only a small, temporary one.

In its reconsideration of rates for Standard Mail flats –the category affecting most catalogers — the PRC recommended a temporary rate reduction of $0.03. The PRC also recommended a reduction of $0.02 for all Standard Mail Nonprofit Regular flats. No other rate changes were recommended. If approved by the Postal Service Board of Governors (BOG), the temporary rates would take effect on an as-yet-undetermined date and expire on or before Sept. 29.

In a summary of their decision, PRC officials wrote that these transition rates would provide relief for users of Standard Mail flats, “giving them approximately three months of lower rates during which they could adjust their mailing practices and business plans. Other mailers would not be unfairly burdened with a further rate increase.”

The BOG had in March approved the majority of the recommendations issued by the PRC regarding Rate Case 2006-1. Except for periodical rates – which take effect July 15 — the new pricing structure went into effect on May 14. But the BOG had asked the PRC to reconsider the pricing structure for Standard Mail flats because “the Governors are concerned that price increases recommended by the PRC may impose an unnecessary degree of ‘rate shock’ on the catalog industry, particularly small businesses. The recommended increase for some catalog mailers is as much as 40%, which is more than double what the Postal Service had proposed” in its initial rate case filing last year.

In the summary released Friday, PRC officials acknowledged that the BOG is responsible for implementation dates for new rates, and for “preserving the overall financial health of the Postal Service. In light of that latter responsibility, the Governors may determine that it is necessary to reject this recommendation.”

While the PRC “recognizes that some users of Standard Mail flats face large rate increases, and that the Governors would like to soften the impact of
their increases … the Commission finds it is justified in recommending a temporary rate reduction. If the Governors find that the Postal Service can financially afford to soften the impact of increases on these mailers, this recommendation provides a means for them to do so.”

Although he declined further explanation, USPS spokesperson Dave Partenheimer told MULTICHANNEL MERCHANT that “this recommendation represents a different approach than those previously discussed.”

The postal rate case is designed to increase revenue for the USPS by about $4 billion – an amount deemed necessary for the USPS to break even next year.

According to the PRC summary, the temporary rate relief would require “minimal” administrative or transaction costs, since the savings could easily be measured at the end of the transition period or at the time of mailing. Further, mailers would not need to reprogram computer hardware or software to accommodate this temporary change. Mailers could simply multiply the number of flats mailed by $0.03 to calculate their savings in this transition period.

Not surprisingly, catalog industry representatives appear less than overjoyed at the PRC’s recommendation. In a press release, Direct Marketing Association president/CEO John A. Greco Jr. said, “Over the past several months, postal officials have heard a loud and clear message from the mailing community that these outrageous rate increases will force catalog and nonprofit mailers to make significant cuts in mailing volumes. Giving mailers a ‘summer break’ doesn’t change that fact. Come October — just as companies head into the peak holiday mailing season — the hurt will be on once again.”

Jerry Cerasale, the DMA’s senior vice president for government affairs, added: “We are encouraged that the PRC at least seemed to recognize our fundamental premise that flat rates can be reduced without imposing
higher costs on other classes of mail. We have every confidence that today’s proposed relief can be made permanent without causing financial harm to the Postal Service. While obviously the PRC understood the difficulties its original recommendation would create, offering this temporary relief is merely a Band-Aid that will do little to address the ultimate problem and stop plummeting mail volumes.”

The DMA is asking its members and others in the mailing community to write to the BOG and request that the PRC’s rate reductions be kept in place beyond Sept. 29. “We have tremendous strength in numbers,” Greco added. “If we work together, we can present a powerful, unified message that lets the Postal Governors know that permanent rate relief for flat-shaped mail is the only real solution for the mailing community. Temporary relief is not what we asked for — and it’s not the relief mailers desperately need.”

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