Rate appeal ruling due

Jun 01, 1999 9:30 PM  By

An Appeals Court ruling was expected by early June on the Alliance of Nonprofit Mailers’ challenge to the legality of the January 1999 postal rate increase. The three-judge panel could force the U.S. Postal Service to rework the new rate structure or withdraw it altogether.

On April 14, the U.S. Court of Appeals panel heard arguments from Alliance attorney David Levy and USPS counsel Dan Foucheaux. Levy argued that the overall postage increase violates the law that requires the USPS to break even: The agency had based its rate request on a “test year,” in which it speculated its costs based on a previous year’s expenses. In doing so, the USPS projected a $1.4 billion loss for fiscal 1998 but ended up posting a $500 million surplus for the year. The Alliance also protested the 10%-plus disparity in rate increases for nonprofit vs. commercial Standard A mailers.

The Postal Service countered that while basing its rate case on a test year isn’t “a good prediction ofwhat’s going to happen,” the postal Board of Governors, by law, is allowed flexibility in setting the rates, and therefore it can base rate changes on speculation.

But during the hearing, Judge Douglas Ginsburg questioned whether USPS cost estimates were based on “fantasy, back-of-the-envelope calculation.” He added that even the Postal Rate Commission’s recommendation had been “riddled with doubts” over the USPS-supplied figures.

In the rate case, which the postal governors approved last July, the Alliance had argued for an 8% reduction in nonprofit costs to be factored into the new rates; the USPS allowed for only a 1% reduction. But in commenting on the difference, Ginsburg said that for all he knew the USPS could have arrived at the 1% “by spinning a wheel. We don’t know how they picked that number.”

J. Baker, the $584.3 million Canton, MA-based apparel and footwear retailer, signed a letter of intent on April 14 to acquire the assets of the Repp By Mail catalog and Repp Big & Tall retail chain from St. Louis-based Edison Brothers for $33 million in cash. Edison Brothers put the properties on the selling block last fall, then subsequently filed for Chapter 11 bankruptcy protection on March 9, less than two years after emerging from an earlier filing.

The acquisition of the specialty-size menswear cataloger gives J. Baker, which owns the 454-store Casual Male Big & Tall retail chain and 63-store Work ‘n Gear chain, entry into direct mail. “J. Baker had been interested in Repp for about a year or two,” says Leah Hartman, senior vice president at Greenwich, CT-based Credit Research & Trading. “And J. Baker is already in the big-and-tall menswear business, so the acquisition makes good sense. It’s a good add-on business for J. Baker.”