US newspapers seek injunction against USPS direct mail contract

The US newspaper industry has taken to the law courts in an attempt to block a key US Postal Service direct mail contract, which was approved by regulators last week. The Newspaper Association of America, representing around 2,000 local and community newspapers across the country, filed on Friday for an emergency injunction on the new USPS contract with Michigan-based direct marketing giant Valassis.

The trade association hopes to block the three-year, $107m contract pending a full judicial review.

The contract proposed by USPS back in April offers discounts of around 20% for Valassis if the company sends out at least a million extra mailpieces a year beyond its existing mailing campaigns.

The newspaper industry, which says the deal could actually mean more than 400m extra direct mail items a year, says the Postal Service is giving unfair assistance to Valassis to take advertising that newspapers currently send out via the mail.

But last Thursday the Postal Regulatory Commission approved the contract by four votes to one, ruling that the deal was above cost and would not inflict “unreasonable” harm to the mailing market.

The NNA filed for its emergency stay with the US Court of Appeals for the District Court of Columbia Circuit on Friday as it requested a judicial review of the Commission’s approval order.

It said in the filing it was likely to succeed in its judicial review because the Commission’s ruling in favour of the Valassis deal was “arbitrary and capricious”, and that the contract will cause unreasonable harm to the marketplace and worsen the financial position of USPS.

Impact

The newspaper group argued that the Commission’s ruling that the Valassis deal would not inflict unreasonable harm on the newspaper advertising market was based on incorrect analysis of the figures involved.

It said the USPS analysis suggested that the $107m estimated revenue of the contract would only be 0.6% of the total forecast revenue of newspaper advertising market in 2014. But the NNA pointed out that this $107m figure would be the Postal Service revenue – the postage, not the value of the advertising being mailed under the Valassis deal.

The newspapers’ group claims that its industry stands to lose $1bn in advertising revenue – a 40% decrease in the revenue from the inserts advertising category – with the Valassis deal going ahead.

The NNA also claimed that similar terms to those offered to Valassis were not available to similar mailers, although in its ruling the Commission had said that USPS is now obliged to offer similar contract terms to other saturation mailers similar to Valassis.

In its filing, the NNA said that if the Valassis deal goes ahead, the newspaper industry will seek to move as much as $200m worth of mailing a year to private delivery companies, or will be converted from current full-price high density flat rates to heavily-discounted saturation mail rates.

“At best, the Valassis NSA is projected to produce 440m pieces of saturation flats over three years, meaning that a corresponding loss of approximately 175m pieces of high density flats would erase any net positive contribution under the NSA,” said the Association’s filing.

Survey data suggested as much as 1.1bn pieces of newspaper industry mail could leave the USPS system if the Valassis deal goes ahead, though evidence to this effect was ruled as “speculative” by the Commission in its review.

US newspaper advertising revenues have been in decline since 2001, except for 2003-5 when there was a brief period of slow growth. At the height of the economic crisis the market faced a 28% decline, while last year saw a 9.2% year-on-year decline.

The US Postal Service is also facing competition from the internet, having lost more than a quarter of its mail volume in the last six years. The Valassis NSA was part of USPS efforts to grow its mail volumes and revenues to help reduce its current $14bn-a-year losses.

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