Republicans question Postal Service advertising deal

By Bernie Becker - 08/29/12 02:05 PM ET

A dozen House Republicans are urging their Oversight panel to hold a hearing on an agreement between the U.S. Postal Service and a prominent bulk advertiser.

The Republicans say the agreement – under which USPS would give the advertiser, Valassis, a lower rate in exchange for increased mail volume – could hurt smaller advertisers and newspapers.

“While we applaud the Postal Service for seeking innovative ways to get back on the path to fiscal solvency, we do not believe the USPS should be choosing winners and losers in the private sector,” said the letter, spearheaded by Rep. Scott Tipton (R-Colo.) and sent to Rep. Darrell Issa (R-Calif.), the Oversight Committee chairman.

The Postal Service’s regulator, the Postal Regulatory Commission, gave its blessing last week to the three-year deal, which postal officials say could generate up to $15 million in new revenues.

Newspaper publishers have threatened to sue over the agreement, which they say could hurt Sunday advertising sections by allowing Valassis to offer a better deal to retailers.

In all, publishers say the deal could threaten at least $1 billion worth of newspaper advertisements, swamping the profits USPS would make from Valassis.

But Ruth Goldway, the PRC chairwoman, dismissed the idea that Valassis, which would get discounts of up to a third, would gain an unfair advantage from the deal, noting that newspapers themselves also get discounts.

The deal would also not apply to regional and local advertisers, nor would it include advertising from grocery stores.

Postal officials have said the deal is one of the methods USPS has to grow new revenues, in the face of increased electronic communication. USPS lost more than $5 billion in its latest quarter, and recently defaulted for what is thought to be the first time on a payment to the Treasury.

The House Republicans pointed at that default on a $5.5 billion payment in their letter to Issa, whose postal reform bill is currently stalled in the chamber. Their complaint about USPS giving preferential treatment to Valassis also underscores the broader Republican complaints that the tax code and government funding in general can pick winners and losers in the private sector.

“As the Postal Service is facing billion dollar annual deficits and has defaulted on payments for retiree health benefits, now is not the time for a monopolistic deal that could actually result in less revenue for the USPS,” the GOP lawmakers wrote.

The Postal Service faces another similar-sized payment at the end of September, which it has also said it will not be able to make.

Postmaster General Patrick Donahoe has called on Congress to pass a postal reform bill. The Senate passed a measure in April, but the House has yet to act, leading to suggestions that a final postal reform bill could get pushed off into at least the post-election session of Congress.