The unprecedented nature of the US Postal Service’s forthcoming “exigent” rate case is uniting the business mailing community in a way few other issues have.
Mailing groups across a wide spectrum of the industry are forming a coalition to fight the Postal Service’s first-ever exigent price increase, Jerry Cerasale, the Direct Marketing Association’s senior VP for government affairs, confirmed. USPS is expected to file the exigent case with the Postal Regulatory Commission (PRC) on July 6. A postal spokesperson said USPS is not making any statements on the exigent case at this time.
The coalition, which has not been named yet but some are informally calling the “Just say no coalition,” will include a broad base of postal customers. Sources say that every association with some interest or connection to mail has been invited to join the coalition.
“It is not just the usual suspects,” Cerasale asserted, though he declined to name members until the coalition has officially announced itself.
The coalition will challenge the Postal Service’s premise that a weak economy constitutes a reason to invoke the exigency clause in the Postal Accountability and Enhancement Act (PAEA), which became law in 2006. The PAEA put a price cap on the Postal Service’s market-dominant products, restricting price increases to the increase in the Consumer Price Index. With no inflation in 2009, the USPS could not raise rates across its mailing products in 2010. The law, however, includes an exigency provision, which allows the Postal Service to seek price increases in excess of the inflation-based cap for “extraordinary or exceptional circumstances.” Postal officials have said the recession and subsequent effect on mail volume and revenue justify the use of the exigency clause.
Mailers, however, disagree — not only with the USPS’ argument, but with the size and timing of the increase. While the USPS is not releasing details on the price increase in advance of its filing, many industry leaders expect the increases to be in the 5% to 10% range. The new prices are expected to take effect in January 2011.
“This is absolutely counter-productive,” said Hamilton Davison, executive director of the American Catalog Mailers Association. “It makes no sense to seek a price increase just as we are starting to come out of a tailspin.”
Davison added that he believes a price increase will further depress the Postal Service’s volumes. “Companies can’t pass this on to their customers and they can’t absorb any more hits on their P&Ls (profit and loss statements). They will have to take it out of volume.”
Mailers face an administrative challenge in fighting the Postal Service’s exigent case due to the short procedural time frame. By law, the PRC has to issue its recommended decision on the USPS’ request within 90 days. At a recent technical hearing hosted by the Commission, the PRC’s general counsel said the Commission would need 30 days at the end of the proceedings to make its decision. This leaves only 60 days for interested parties to review the USPS’ case and develop evidence to argue against it. As the technical hearing made clear, the lack of precedence leaves much uncertainty about how the process will work or even how much authority the PRC has in an exigent case. For example, it’s not clear if the PRC has the authority to make significant changes to what the Postal Service proposes or just has the authority to say “yes” or “no” to the request.