USPS has filed for releasing a “Round-Trip Mailer” service to ship DVDs and video games from rental companies to their customers, so that customers can then also return the items through the mail through pre-printed envelopes. The service proposal resulted from the 2009 complaint by video game rental firm GameFly that the Postal Service was favouring its rivals such as Netflix, in how its DVD mailings were priced and handled.
Following various regulatory reviews and court hearings, the latest attempt by the USPS to deal with its DVD shipping offering has been rejected on the grounds that USPS wanted it to be a competitive service. As a competitive service, it would avoid certain regulatory controls and allow USPS more power to set prices. Under US postal law, USPS could only run the service as a competitive service that if it has significant competition in the market.
The Commission concluded that USPS could not provide enough evidence that the alleged forms of competition it has devised could prevent it from exercising sufficient market power to set prices significantly higher than total costs. The regulator noted that legal precedents and technological progress might mean that, at some point in the future, the Postal Service might make an argument for such a service as having competition.
During the assessment of the Round-Trip Mailer, the Postal Service had support from shipping rival FedEx in stating that the service should not be covered by the postal monopoly. FedEx had said that DVD mailing service was not a “letter” and therefore was beyond the scope of the monopoly. But Netflix argued that, since the DVD is providing content to recipients, it is effectively a “letter” so could be part of the postal monopoly.
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