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EcommerceBytes-NewsFlash, Number 2526 - April 21, 2011 - ISSN 1539-5065    4 of 6

PRC Finds USPS Discriminated against Gamefly in Netflix Case

By Ina Steiner
April 21, 2011

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The Postal Regulatory Commission (PRC) issued a decision in the complaint of Gamefly against the USPS, concluding that the Postal Service unlawfully discriminated against GameFly by giving special treatment to its competitors Netflix and Blockbuster,

According to the PRC's findings, 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 PRC said the Postal Service separates and hand processes a substantial proportion of Netflix's returns without imposing a non-machinable surcharge but has been 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 PRC ordered the Postal Service to establish two parallel rate categories within First-Class Mail for roundtrip 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 USPS had argued that GameFly was not similarly situated to Netflix and Blockbuster because GameFly never used letter mail and had designed its flat mailpieces to weigh two ounces in order to ensure machine processing, and said GameFly's use of a less distinctive mailpiece design made it more difficult to identify and process them by hand than the distinctive Netflix and Blockbuster mailpieces.

The PRC said it had encouraged both parties to negotiate and informally resolve their disputes on their own terms and said it remains willing to consider any settlement the parties are able to negotiate. It gave the Postal Service 60 days to implement the remedy.

This case was the first to be decided under the PRC's new complaint process - see "Postal Service Complaint Department, Open for Business" - link.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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