COLUMBUS — Regulatory issues can be confusing, especially when terms like Negotiated Service Agreements and market-dominant projects are bandied about, so it’s no wonder most people are unaware of the growing battle over postage rates between newspapers and Valassis, a coupon and advertisement distributor.
Under the rules governing the U.S. Postal Service, the federal agency is allowed to enter into contracts with various customers to increase mailings by offering special rates. Valassis negotiated such an agreement — an NSA — which would provide a discount of between 22 percent and 36 percent on additional future mailings.
USPS has estimated that the NSA could produce as much as $100 million in new incremental revenue. But some politicians, including Ohio U.S. Sen. Sherrod Brown, a Democrat, are not happy with agreement.
The newspaper industry doesn’t want potential competition, so it’s rallying politicians to oppose the NSA.
In a letter to the chairman of the U.S. Postal Regulatory Commission, which has the final say on the agreement, Brown said the agreement would “ultimately harm Ohioans who rely upon local newspapers to remain informed about current events.”
Brown admits to having heard from members of the Ohio Newspaper Association, and his letter repeats their allegations that the agreement could “result in a loss of at least $1 billion in revenue for the newspaper industry.”
Currently, newspapers are paid to include retail circulars from companies like Best Buy, Sears and Target, in their Sunday papers. In some communities, newspapers mail out circulars under what is known as a Total Market Coverage Program. Their concern is that Valassis, under the proposed discounted rate, could steal away their circular clients, so they’ve mobilized their members to contact their representatives to oppose the NSA.
Brown said the NSA is an “unfair subsidy.”
“Many local newspapers — whose revenues rely on advertisements — could be forced to downsize print volume or reduce their utilization of the USPS. These actions would ultimately harm Ohioans who rely upon local newspapers to remain informed about current events,” Brown wrote.
Steve Mitzel, senior vice president and general manager of Valassis Shared Mail, rejects that contention. “There is no correlation whatsoever. Our NSA shouldn’t impact dissemination of information or editorial content,” he said.
Mitzel said Valassis Shared Mail has invited the newspapers to file as “similarly situated mailers” and qualify for the exact same rates, so long as they meet the same requirements Valassis has agreed to in the NSA.
Additionally, Mitzel said, the rates in the NSA are higher than the rates the newspaper can get in their discounted cost structures.
“The Postal Service is not a government entity,” he said. “It’s a rate-funded entity, and they should have an ability to engage in contracts for the delivery of print vehicles.”
The National Newspaper Association called the deal “unjust and unreasonable,” saying it violates the Postal Accountability and Enhancement Act, which requires the Postal Service and the PRC to take into account the effect upon the marketplace of USPS actions.
On Friday, the PRC concluded that neither the claims of the Postal Service nor those who oppose the Valassis NSA had yet been fully developed and requested further documentation to support the increased profit the USPS was claiming as well documentation from the newspaper industry on their claimed $1 billion loss in revenue.
NNA was granted an extension until June 29, 2012, to file its response.
While the PRC was questioning the impact to the Postal Service and the newspaper industry, Mitzel was focused on the average American consumer.
“This is a different way to get printed circulars delivered to them without having to subscribe to a newspaper to get it,” he said. “They’d be getting it for free so the common American would actually benefit from this.”