US Postal Service to deliver discount to largest first-class mailer

A battle is mounting as the United States Postal Service seeks approval for its first-ever negotiated service agreement to provide discounted rates to the nation’s largest first-class mailer.

The Postal Rate Commission is likely to announce a decision in February on the pending deal with Capital One Services Inc.

“We are seeking ways to make it easier and more beneficial for postal customers doing business with us,” said Anita Bizzotto, Washington, D.C., chief marketing officer for the Postal Service.

But the Vienna, Va.-based Newspaper Association of America, a leading critic, called the plan a “sweetheart deal” that’s unavailable on the same terms to other potential users.

The proposed pact clearly violates the 1971 Postal Reorganization Act, which was created to ensure equity in pricing for all postal customers, the association contends.

“They would be able to give a rate that could drive advertisers out of the newspaper and into the mail,” said Paul Boyle, Washington, D.C., the association’s vice president of government affairs.

The Postal Service defended the proposal as a way to guarantee a steady mail volume while still managing to economize.

“There’s always been the competitive dynamic on whatever medium you use.

There’s a lot of direct marketers that would appreciate the chance for more flexible pricing,” said Gerry Kreienkamp, Washington, D.C.-based public relations representative for the Postal Service.

Appleton-based postal officials referred all inquiries to Washington.

Capital One’s hundreds of millions of credit card solicitations and account statements make it the Postal Service’s fourth-largest customer and the largest-single producer of First Class mail in the country.

The deal would grant Capital One discounts on mail above a set volume of 1.225 billion pieces. At the same time, Capital One would forgo the return of undeliverable-as-addressed mail in exchange for free USPS electronic notification of address changes.

Kathryn Peotter, president of Bouwer Printing and Mailing in Appleton, said her firm is pleased to see the Postal Service seek cost-saving methods.

“However, if the electronic notification method proposed in the Capital One agreement is effective and reduces overall postal costs, we would like to see the opportunity made available across the board to large and small mailers,” she said.

The arrangement means rather than having to return mail as undeliverable the Postal Service can just notify mailers electronically of the incorrect and correct address, Kreienkamp said.

Postmaster General John Potter said the Postal Service stands ready to negotiate rates with mailers of all classes including Standard Mail.

The electronic return of undeliverable mail data by the Postal Service would eliminate more than 200 million physical returns over the three years, a significant reduction in costs, the Postal Service said.

But the Newspaper Association said the gain is relatively small: After factoring in the lost revenue from the discount rate, the Postal Service would realize a net savings of $8 million, a bare fraction of its $70 billion-plus annual budget.

The most significant drawback is it would set a precedent for similar deals that reward large-volume mailers, particularly so-called saturation advertisers, with discounted postage.

The deal amounts to a backdoor attempt to implement postal policies soundly rejected by Congress, the association said.