Netflix Postal Advantage Comes to an End

(CN) - The D.C. Circuit approved the Postal Commission's plan to end DVD-mailer discrimination - and Netflix's favored status at the U.S. Postal Service - by equalizing the postage for DVD flats and letters.

Last year, the D.C. Circuit ended the U.S. Postal Service's favoritism toward Netflix mail, which sorted Netflix DVD-mailers by hand, free of charge, while sending other companies' DVD-mailers through automated processing machines.

GameFly, a video game rental service, challenged the Post Office's bias in court, claiming that automatic processing often damages DVDs, requiring Gamefly to package their discs in heavier - and therefore, more expensive - cardboard packaging.

GameFly paid 88 cents per rental to send DVDs as 1-ounce, first-class flats, twice as much as it costs Netflix to mail a 1-ounce, first-class letter.

On remand, the court ordered the Postal Regulatory Commission to justify the discrimination or eliminate it.

The Commission then adopted a solution which equalized the cost of first class letter and flat DVD rates, so any DVD mailer can use either first-class letter or flat.

The D.C. Circuit affirmed the remedy, denying the Postal Service's petition for review.

"The remedy the Commission selected was unequivocally effective in equalizing the playing field, thereby eliminating the discrimination - or at least its injurious effects," Judge Karen Henderson wrote for the three-judge panel.

The Commission considered three other possible solutions, but found they would be too difficult to enforce.

The court noted that the Postal Service acknowledged in a letter that it would be "difficult, if not practically impossible, or exceedingly costly, to maintain an ongoing enforcement mechanism that would ensure that every mailer's DVD letters will receive exactly the same levels of manual processing experienced by every other mailer of DVD letters, either locally or nationally."

An operational remedy would also require reopening the docket, which would require additional delay in complying with the court's order to end the Postal Service's discrimination.

"Given the Commission's thorough and sound explanation for preferring the rate-based remedy it chose over the proposed operational remedies, we defer to its technical remedial choice," Henderson wrote.

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