GameFly and Netflix sleeves

The U.S. Postal Regulatory Commission ruled on April 20, 2011 that the U.S. Postal Service has applied a double standard when it comes to handling disc mailers from GameFly compared with Netflix and Blockbuster.

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GameFly, A Los Angeles-based online video game rental service, alleged in 2009 that it was being charged more for hand handling (None Machinable) of its disc mailers than were Netflix and Blockbuster.

U.S.P.S. provides a discount for first class letter mail that passes regulations. The restrictions are on size, weight and flexibility (rigidity).

This is great news for GameFly, as the company says it is losing $730,000 per month on high postal fees, but it will also help every company that sends discs through the mail. The entire case seemed to boil down to two details: both companies were mailing the same type of product, and Gamefly was willing to change its mailers if offered the same considerations as Netflix.

In its report, the commission concluded the Postal Service had “unduly discriminated” against GameFly — a business it said is similarly “situated” to Netflix and Blockbuster.

Netflix is the Postal Service’s largest individual customer.

“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,” read the report. “The Postal Service has failed to present adequate and legitimate justifications for these preferences.”

The commission ordered the Postal Service to establish “parallel” rate categories for first-class round trip mailers. One category would include discs sent as presorted first-class mail letters to subscribers and not subjected to the non-machinable surcharge when returned. The other rate category provides that discs mailed round-trip as first-class flats will not be subject to an additional ounce charge.

The Postal Service has 60 days to implement the changes.

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