PRC says USPS discriminated against Gamefly

Washington, DC –The Postal Regulatory Commission today issued Order No. 718, in the Complaint of Gamefly, Inc. (GameFly) against the United States Postal Service, concluding that the Postal Service has unlawfully discriminated against GameFly.

The Commission directed the Postal Service to modify its Mail Classification Schedule for round-trip DVD mail. The Postal Service was given 60 days to implement the remedy. This is the first case decided under the Commission’s new complaint process.

Executive Summary:

In this proceeding, the Commission considers a complaint filed by GameFly, Inc. (GameFly), a firm that rents and sells video games recorded on DVDs. In its Complaint, GameFly alleges that it is the victim of undue discrimination by virtue of Postal Service violations of 39 U.S.C. sections 101(d), 403(c), 404(b) and 3622(b)(8).

GameFly mails DVDs to its customers via First-Class Mail. Customers return DVDs to GameFly via First-Class Mail Business Reply Mail. Both outgoing and incoming GameFly DVD mailers enter the mailstream as flats. GameFly alleges that two other DVD mailers, Netflix, Inc. (Netflix) and Blockbuster, Inc., (Blockbuster), both of which send and receive DVDs by letter mail, are accorded undue processing preferences and rates. Specifically, GameFly alleges that both Netflix and, to a lesser extent, Blockbuster receive hand processing at no additional charge and that GameFly is denied these or comparable benefits. GameFly asserts that these actions constitute unlawful preferences and/or discrimination.

Upon consideration of the evidentiary record and the arguments made in the initial and reply briefs of the parties, the Commission concludes that the Postal Service has unduly discriminated against GameFly in violation of 39 U.S.C. 403(c). In reaching this conclusion, the Commission expressly rules on GameFly’s right to file its Complaint (see section IV.A.); discusses the legal standards for evaluating claims of discrimination and the filed rate doctrine invoked by GameFly (see sections IV.B. and C.); and evaluates the fact-based issues raised by the parties (see section IV.D.). In this latter section, the Commission confirms evidentiary rulings made by the Presiding Officer; finds that GameFly is similarly situated to Netflix and Blockbuster; concludes that Netflix and Blockbuster have been given a number of preferences, including various forms of manual processing coupled with the avoidance of the non-machinable surcharge; and determines that the Postal Service has failed to present adequate and legitimate justifications for these preferences.

DVDs returned by subscribers to Netflix in its prepaid letter-sized mailers are non-machinable, and are frequently damaged or cause machine jams. DVDs returned by subscribers to GameFly also are damaged from processing on automated letter processing equipment. The Postal Service separates and hand processes a substantial proportion of Netflix’s returns without imposing a non-machinable surcharge. The Postal Service is unwilling to hand process GameFly’s returns causing GameFly to incur an additional ounce charge on its mail, which the Postal Service refuses to waive.

To remedy this unreasonable preference, the Commission orders the Postal Service to establish two parallel rate categories within First-Class Mail for round-trip DVD mail. One category establishes that DVDs sent as presorted First-Class Mail letters to subscribers will not be subject to the non-machinable surcharge when returned. The other rate category provides that DVDs mailed as First-Class Mail flats to and from subscribers will not be subject to an additional ounce charge.

The Postal Service is given 60 days to implement this remedy.

Order_No_718

  • Postal Deb

    No surprise to us, the Postal Service plays the favorites game in all aspects of it’s business. Employees witness it everyday. Thanks to the PRC for calling a spade a spade!

  • wow

    Actually, they called a DVD a DVD.

  • Jack Potter

    They should have called a dvd a parcel.

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  • Joe

    Funny Netflix has a ad at the top of this page and we do seperate netflix dvds from regular mail MMMMM!! They are right But we take care of the big customer just like UPS Does

  • Bill

    I thought Grandma was our customer, Joe? I guess not as we’ve just become whores to big business. Nice…

  • Huh?

    I guess this shows once and for all that USPS is a federal agency and not a business.

  • Mailer

    No sense in catering to Netflix anyway as they gradually try to push customers into lower resolution online streaming service and away from using postage and physical media.

    Gamefly is sending out 25 GB Bluray discs and they have little to no opportunity to segue into streaming even for smaller footprint titles since consoles have proprietary networks and publisher agreements established.

  • benny

    Why not charge all of them proper postage, and stop playing games with the future of the USPS. Everyday we have UPS and Fed Ex dropping off the packages they dont want to deliver…we make about .20 cents on each and they get full price for something we delivered. we are talking about millions of dollars everyday!!

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