“Substantial” opposition to $107m USPS direct mail contract
US postal regulators have noted “substantial” opposition to a $107m mailing contract proposed between the US Postal Service and one of its largest direct mail customers. The terms of the Negotiated Services Agreement (NSA) with Valassis Direct Mail were filed with the Postal Regulatory Commission back in April, but since then 40 opponents have filed dissenting views.
On Friday, the regulators issued a call for more evidence in their review, stating that they have not received enough evidence from either side to form a judgement.
Michigan-based Valassis sends out direct marketing materials and coupons, including a publication called Red Plum, to around 100m households each week within the United States. It mailed out 400m mailpieces in each of the last two fiscal years.
The Postal Service’s proposed NSA offered the company rebates on postage for its saturation mail to “provide an incentive for Valassis to find innovative ways to expand its use of Standard Mail”.
USPS believes that based on projections, the contract could be worth $107m in revenue, generating around $15m profit during its three-year term.
In its proposal, USPS noted its concern at the growing threat to its direct mail volumes from private delivery alternatives, who “are becoming technologically more sophisticated, offering prices substantially below the current prices of mail distribution, and aggressively marketing their services to saturation mailers”.
It said the right offer to Valassis would support new saturation mail programmes from the company, in addition to existing deliveries.
Under the agreement, Valassis would have to mail at least 1m additional mailpieces during the next 12 months, to secure rebates of between 22% and 34% of postage costs.
Newspapers
Much of the opposition to the Valassis contract has come from its competitors in the advertising market – with particular vocal opposition from the American newspaper industry.
The Newspaper Association of America filed last month to urge the Commission to reject the “sweetheart deal” with Valassis, stating that the special deal for the direct mailer would cause “significant harm” to newspapers across the country.
“Even a small decline in newspaper mail would cause a net revenue loss for the Postal Service”
The group based just across the river from Washington DC, which represents almost 2,000 newspapers in the US and Canada, said the NSA would “subsidise a direct attack on local newspaper advertising throughout the nation”.
It said the effective postal rates being offered Valassis were up to 72% lower than those paid by other mailers.
NNA said the Valassis deal might even make the struggling USPS worse off by driving down newspaper volumes, with one of its surveys suggesting the $107m Valassis deal could prompt a $200m reduction in newspaper mailings.
“Newspaper publishers are shocked by the specifics of this special deal for the country’s largest direct mail company,” said NNA president and CEO Caroline Little.
Congress
Congress is now also being drawn into the battle over the Valassis deal, after the California Newspaper Publishers Association wrote to their local representative in Washington, the House of Representatives Oversight Committee Chairman Darrell Issa.
Issa, along with more than two dozen members of Congress, wrote to Postmaster General Patrick Donahoe last week to demand a “detailed justification” for the Valassis deal.
In their letter, the Congressmen said the Postal Service should not “indirectly pick winners and losers in the private sector” through its contracting.
But they also warned: “Due to the volume of profitable mail at risk, even a small decline in newspaper mail would cause a net revenue loss for the Postal Service under this negotiated service agreement.”
The Postal Regulatory Commission is now taking evidence on the contract until 29th June.
Valassis said yesterday that it should have had a decision on its contract within 45 days of filing, and that delays in the approval process now likely to stretch into July meaning it is running out of time to launch its NSA mailing campaigns.
“Because of the seasonality of advertising distribution contracts, the window of opportunity for launching the NSA programme this year is narrowing,” said Valassis counsel Thomas McLaughlin, adding: “Further delays in this proceeding could well close that opportunity.”
