We dont typically use this space to editorialize on the business operations of our company or the newspaper industry. But when a government-sanctioned monopoly threatens our livelihood, we cannot remain silent.
Last week, the Post Regulatory Commission approved a sweetheart deal with Valassis, the largest direct-mail company in the nation. The action gives Valassis deep discounts in postal rates, creating an unfair advantage over newspapers and other postal customers for the delivery of advertising circulars.
The Postal Service hopes to generate $15 million in profits from the deal by dropping its rate to Valassis as much as 34 percent in exchange for a promise of increased volume of its mid-week bundle of advertising coupons, called RedPlum by some and junk mail by others.
The agreement threatens to steal from newspapers the circulars from an array of advertisers circulars that are an important part of newspaper revenue and are sought out by subscribers and casual readers.
We dont shrink from competition. We believe it sharpens business senses and, ultimately, benefits the customer.
But the U.S. Postal Service is an agency of the federal government with a constitutional monopoly to deliver the mail. In approving the Valassis deal, the Postal Service is exempting one private company from its rate structure.
Postal Regulatory Commission claims its decision affirms fair competition between the newspaper industry and Valassis. But that is a fundamental misreading of its monopoly pricing power. It is one thing to create a monopoly to deliver the mail. It is quite another to use that monopoly power to play favorites.
Many newspapers rely on the post office to deliver some or all of their copies to customers. Those postage rates are set by the USPS. The deal with Valassis essentially fixes costs for newspapers while at the same time dramatically lowering costs for a principal competitor.
The Newspaper Association of America estimates the Valassis deal could cost the newspaper industry up to $1 billion in advertising revenue. For smaller papers, particularly community newspapers that publish weekly, the loss could be crippling.
The publics representative, appointed by the commission to review the deal, said the post office will give up more revenue than it will gain in volume from Valassis. He called it a lose-lose proposition for both the newspaper industry and the Postal Service.
Newspapers and the U.S. Postal Service have long, rich history together. Our nations founders created the post office system to support the growth of commerce, and to ensure a free flow of ideas and information through newspapers.
The Valassis sweetheart deal irreparably harms that relationship.