[Federal Register Volume 88, Number 160 (Monday, August 21, 2023)]
[Notices]
[Pages 56887-56889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17904]


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POSTAL REGULATORY COMMISSION

[Docket Nos. MC2023-222 and R2023-4; Order No. 6619]


New Postal Products

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is recognizing a recent Postal Service filing 
requesting the addition of a negotiated service agreement with 
Publisher's Clearing House to the Market Dominant product list. This 
notice informs the public of the filing, invites public comment, and 
takes other administrative steps.

DATES: Comments are due: September 11, 2023.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Overview of the Postal Service's Filing
III. Initial Administrative Actions
IV. Ordering Paragraphs

I. Introduction

    On August 11, 2023, the Postal Service filed a request to add a 
negotiated service agreement (NSA) with Publisher's Clearing House 
(PCH) to the Market Dominant product list.\1\ If favorably reviewed by 
the Commission, the intended effective date will be in November or 
December 2023. Request at 1. The Request, which was filed pursuant to 
39 U.S.C. 3622 and 3642 as well as 39 CFR 3040 subparts B and G, 
triggers a notice-and-comment proceeding.
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    \1\ USPS Notice of Filing of Contract and Supporting Data and 
Request to Add Publisher's Clearing House Negotiated Service 
Agreement to the Market-Dominant Product List, with Portions Filed 
Under Seal, August 11, 2023 (Request).
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II. Overview of the Postal Service's Filing

    Contents of filing. The Postal Service's filing consists of its 
Request, six attachments, and one set of financial workpapers:
    <bullet> Attachment A--a copy of Governors' Resolution No. 23-5, 
establishing price and classification changes for Market Dominant 
products to implement a negotiated service agreement with PCH, which 
the Postal Service asserts conforms with 39 CFR 3040.131(b);
    <bullet> Attachment B--a copy of the instant contract, which the 
Postal Service asserts conforms with 39 CFR 3040.221(b);
    <bullet> Attachment C--proposed changes to the Mail Classification 
Schedule (MCS), which the Postal Service asserts conforms with 39 CFR 
3040.131(f);
    <bullet> Attachment D--a proposed data collection plan, which the 
Postal Service asserts conforms with 39 CFR 3040.222;
    <bullet> Attachment E--a statement of supporting justification, 
which the Postal Service asserts conforms with 39 CFR 3040.132 and 39 
CFR 3040.221(f)-(j);
    <bullet> Attachment F--an application for non-public treatment of 
``certain data which reflect commercially sensitive aspects of 
Publisher's Clearing House's business model, response rates, and 
strategy[,]'' (id. Attachment F at 1), appearing in the Request and 
financial analysis, which the Postal Service asserts conforms with 39 
CFR part 3011; and
    <bullet> Supporting Financial Analysis--an Excel file containing a 
financial analysis, which the Postal Service asserts conforms with 39 
CFR 3040.221(f) and demonstrates that the PCH NSA will improve the net 
financial position of the Postal Service.

Request at 2-3, 9.
    Background. The Postal Service explains that in recent years the 
mailing industry has seen steady year-over-year decline in mail 
volumes. Id. at 3. To compensate for industry shifts away from direct 
mail, the Postal Service states that it ``has been looking to 
strengthen its existing strategic partnerships and build new ones when 
opportunities arise.'' Id. PCH ``is a prominent direct mail marketing 
company that sends a variety of letter mail to consumers related to 
sweepstakes entries, marketing materials, invoicing, and related 
correspondence.'' Id. The Postal Service explains that ``PCH typically 
interacts with the Postal Service in a five-stage mailing and shipping 
lifecycle, which begins with promotional mailings and ends with bill 
payments.'' Id. at 3-4.
    The Postal Service represents that PCH has found that certain 
dormant prospects (i.e., individuals not mailed to in at least 3 
months) ``are no longer profitable for PCH to send promotional mail to, 
because the lifetime value of these prospects falls below the cost of 
mailing . . . .'' Id. at 4. The Postal Service asserts that an up-front 
discount on an initial USPS Marketing Mail promotional mailing would 
allow PCH to inject reactivation volume into the

[[Page 56888]]

cycle that it would not have mailed under normal business practices. 
Id. The Postal Service avers that the resulting proportional increases 
in final mail volume is anticipated to be two times greater than if the 
dormant prospect mailing list were never reactivated. Id. Accordingly, 
the Postal Service states that it engaged in discussions with PCH ``to 
determine whether an NSA could help PCH make these dormant prospecting 
mailings economically feasible,'' while at the same time providing the 
Postal Service ``with a needed boost in volume, revenue, and 
contribution from additional follow-on mailings.'' Id.
    The Postal Service's position. The Postal Service asserts that the 
PCH NSA conforms to the policies embodied in the Postal Accountability 
and Enhancement Act (PAEA),\2\ the statutory standards supporting the 
desirability of special classifications (39 U.S.C. 3622(c)(10)), and 
associated regulations. Id. at 3. The Postal Service provides a 
statement of supporting justification from Mr. Steven E. Mills, 
Director of Product Management, Mailing Services, which reviews the 
objectives and factors appearing in 39 U.S.C. 3622(b) and (c) and 
asserts, inter alia, that the PCH NSA will provide an incentive for 
profitable new mail; will enhance the financial position of the Postal 
Service; will encourage increased mail volume; and will not imperil the 
ability of USPS Marketing Mail (or the PCH NSA) to cover its 
attributable costs. See id. at 2; id. Attachment E at 1-3. The Postal 
Service states that the PCH NSA would also align with a core mission of 
the Delivering for America plan, as it would allow the Postal Service 
``to build and set new rational pricing strategies with long-standing 
partners.''
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    \2\ Public Law 109-435, 120 Stat. 3198 (2006).

Request at 4.
    PCH NSA. The Postal Service states that the PCH NSA is designed to 
give PCH a discounted initial mailing of 1 million pieces of USPS 
Marketing Mail letters, mailed at cost. Id. at 5. This initial mailing 
would be limited to 1 million dormant prospecting customer addresses, 
which PCH has not mailed to within the past 3 months. Id. In exchange 
for these discounts, the Postal Service represents that PCH has 
committed to certain performance targets for follow-on mailings (both 
from PCH to the addresses of the million-piece mailing and to PCH from 
the addresses of the million-piece mailing) that are expected to result 
from the initial mailing, also known as the ``multiplier effect.'' Id. 
PCH expects that 2 million pieces will result from the initial mailing, 
mailed at published rates, within 9 months of the date of the initial 
mailing. Id. If the parties deem the initial mailing and performance 
satisfactory, an additional second prospecting mailing could be 
authorized at least 6 months after the initial mailing. Id. The Postal 
Service represents that ``[t]he same performance period and targets 
would apply to the second mailing.'' Id.
    The parties intend for the PCH NSA to take effect in November or 
December 2023, assuming favorable review by the Commission. Id. The 
Postal Service states that the initial mailing date would then be 
established at least 30 calendar days after the effective date of the 
contract, expected to be in January 2024 or shortly thereafter. Id. at 
5-6. The contract term would be for 1 year from the date of the initial 
mailing. Id. at 6. If the parties were to agree to a second mailing, 
then the NSA term would conclude 1 year from the date of the second 
mailing. Id.
    The contract contains a termination for convenience provision, 
which allows either party to terminate the NSA without penalty upon 30 
days' written notice to the other party, provided that no termination 
by the Postal Service would be effective during the 15-week period 
prior to either the initial mailing or the potential subsequent 
mailing. Id. Additionally, either party may immediately terminate the 
NSA for breach of any material term of the contact, if the breaching 
party fails to cure such breach within 5 business days after receiving 
written notice from the non-breaching party describing the breach. Id.
    Similarly situated mailers. The Postal Service states that if the 
NSA were to prove successful at improving the financial position of the 
Postal Service as expected, then the Postal Service ``stands ready to 
consider NSAs on comparable terms to similarly situated mailers, 
provided that [they] can provide a similar `multiplier effect' and are 
willing to commit to performance targets that mitigate the financial 
risk to the Postal Service.'' Id.
    Financial analysis. The Postal Service states that to both incent 
PCH to meet certain performance targets and protect the financial 
interests of the Postal Service, the financial terms of the PCH NSA 
consist of three primary components:
    <bullet> The Postal Service would provide PCH with an initial 1-
million-piece mailing priced at the Postal Service's attributable cost, 
which the Postal Service asserts would result in approximately $128,000 
in revenue. To maintain this discount, PCH would need to achieve at 
least 50 percent of its forecasted total multiplier volume.
    <bullet> If PCH were to not achieve at least 50 percent of the 
forecasted multiplier volume, PCH would lose the discount on the 
initial mailing, which would be paid back to the Postal Service. The 
Postal Service asserts that this would result in approximately $299,000 
in total postage and $171,000 in contribution from the initial mailing, 
plus however much multiplier percentage PCH were able to achieve.
    <bullet> If PCH were to achieve 90 percent of more of the 
multiplier volume, the Postal Service would provide an additional 
discount to PCH of the price paid for the initial mailing in the form 
of a postage credit of approximately $128,000.

Id. at 6-7. The Postal Service maintains that under any scenario, it 
would see an improvement in its financial position. Id. at 8.
    Possibility of harm to the marketplace. Pursuant to 39 U.S.C. 
3622(c)(10)(B), a Market Dominant NSA may not ``cause unreasonable harm 
to the marketplace.'' The Postal Service maintains that the PCH NSA 
will not cause any such harm. Id. at 10. The Postal Service states that 
the NSA will cover its attributable costs in all cases, and to the 
extent the Postal Service might have overestimated the multiplier 
effect, risk mitigation provisions have been agreed to, in which PCH 
must pay back the amount of the discounted mailing if specified 
performance metrics are not achieved. Id. The Postal Service notes that 
the Commission has previously found ``unreasonable harm to the 
marketplace'' to consist of anticompetitive pricing, i.e., pricing 
below cost,\3\ and the Postal Service states that since the terms of 
the contract would price the postage of the initial mailing and the 
potential subsequent mailing at cost, the proposed rates would be 
neither anticompetitive nor unreasonably harmful to the marketplace.
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    \3\ See Docket Nos. MC2012-14 and R2012-8, Order Approving 
Addition of Valassis Direct Mail, Inc. Negotiated Service Agreement 
to the Market Dominant Product List, August 23, 2012, at 27 (Order 
No. 1448); see also Newspaper Ass'n of America v. Postal Regul. 
Comm'n, 734 F.3d 1208 (D.C. Cir. 2013) (denying petition for review 
of Order No. 1448).

Request at 10-11.
    Notice. The Postal Service represents that it will inform customers 
of the new proposed classification changes and associated price effects 
through publication in the Federal Register. Id. at 2.

[[Page 56889]]

III. Initial Administrative Actions

    The Commission establishes Docket No. MC2023-222 and Docket No. 
R2023-4 for consideration of the Request pertaining to the proposed new 
product and the related contract, respectively.
    Interested persons may submit comments on whether the Postal 
Service's filings in the captioned dockets are consistent with the 
policies of 39 U.S.C. 3622 and 3642, as well as 39 CFR part 3040. 
Comments are due September 11, 2023. The public portions of the Postal 
Service's filing are available for review on the Commission's website 
(https://www.prc.gov). Comments and other material filed in this 
proceeding will be available for review on the Commission's website 
unless the information contained therein is subject to an application 
for non-public treatment. The Commission's rules on non-public 
materials (including access to documents filed under seal) appear in 39 
CFR part 3011.
    Pursuant to 39 U.S.C. 505, the Commission appoints Stephanie A. 
Quick to represent the interests of the general public (Public 
Representative) in these dockets.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. MC2023-222 and Docket No. 
R2023-4 for consideration of the matters raised in each docket.
    2. Pursuant to 39 U.S.C. 505, Stephanie A. Quick is appointed to 
serve as an officer of the Commission (Public Representative) to 
represent the interests of the general public in these proceedings.
    3. Comments are due September 11, 2023.
    4. The Commission directs the Secretary of the Commission to 
arrange for publication of this order in the Federal Register.
    By the Commission.

Mallory Richards,
Attorney-Adviser.
[FR Doc. 2023-17904 Filed 8-18-23; 8:45 am]
BILLING CODE 7710-FW-P