[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Notices]
[Pages 27491-27492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11204]


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POSTAL REGULATORY COMMISSION

[Docket No. MC2012-14 and R2012-8; Order No. 1330]


New Postal Product

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is noticing a recently-filed Postal Service 
request to add a negotiated service agreement with Valassis Direct 
Mail, Inc. to the market dominant product list. This notice addresses 
procedural steps associated with this filing.

DATES: Comments are due: May 23, 2012.
    Reply Comments are due: May 30, 2012.

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

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel 
at 202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Notice of Filing
III. Ordering Paragraphs

I. Introduction

    On April 30, 2012, the Postal Service filed a request pursuant to 
39 U.S.C. 3622 and 3642, as well as 39 CFR 3010 and 3020 et seq., to 
add a negotiated service agreement (NSA) with Valassis Direct Mail, 
Inc. (Valassis) to the market dominant product list.\1\
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    \1\ Notice of the United States Postal Service of Filing of 
Contract and Supporting Data and Request to Add Valassis Direct 
Mail, Inc. Negotiated Service Agreement to the Market-Dominant 
Product List, April 30, 2012 (Request).
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    Request. In support of its Request, the Postal Service filed six 
attachments as follows:
     Attachment A--a copy of Governors' Resolution No. 11-4, 
establishing mail classifications and rates corresponding to Domestic 
Market Dominant Agreements, Inbound International Market Dominant 
Agreements, and Other Non-Published Market Dominant Rates;
     Attachment B--a copy of the instant contract;
     Attachment C--proposed changes to the Mail Classification 
Schedule (MCS);
     Attachment D--a proposed data collection plan;
     Attachment E-a Statement of Supporting Justification as 
required by 39 CFR 3020.32, which the Postal Service is also using to 
satisfy the requirements of 39 CFR 3010.42(b)-(e); and
     Attachment F--a financial model, by which the Postal 
Service demonstrates that it believes that the instant contract will 
generate an additional $13 million to $42 million in contribution.
    In its Request, the Postal Service identifies Michelle Yorgey, 
Acting Manager, Pricing Strategy, as the official able to provide 
responses to queries from the Commission. Id. at 2. David Mastervich, 
Manager, Saturation and Catalogs, provides the Statement of Supporting 
Justification. Id., Attachment E. In his Statement of Supporting 
Justification, Mr. Mastervich reviews the factors and objectives of 
section 3622(c) and concludes, inter alia, that the instant contract 
will provide an incentive for profitable new mail; will enhance the 
financial position of the Postal Service; will increase mail volume; 
and will not imperil the ability of Standard Mail (or the instant 
contract) to cover its attributable costs. Id. at 1-3.
    The Postal Service believes that this NSA conforms to the policies 
of the Postal Accountability and Enhancement Act, and meets the 
statutory standards supporting the desirability of special 
classifications that improve the net financial position of the Postal 
Service by increasing contribution. Id. at 3.
    Instant contract. The Postal Service states that the objective of 
the instant contract is twofold: (a) To maintain the total contribution 
the Postal Service receives from Valassis Saturation Mail Postage, and 
(b) to provide an incentive for Valassis to find innovative ways to 
expand its use of Standard Mail. Request at 2. The Postal Service 
describes the instant contract and its four key components: Mailer 
eligibility, mail eligibility, mailing and volume commitments, and 
rebates on Standard Mail Saturation Flats Mail. Id. at 4.
    To be eligible for the contract prices, Valassis must initiate new 
shared saturation mail programs (limited to advertising of durable and 
semi-durable goods with a physical retail outlet presence in 30 or more 
states) in markets where it has maintained an existing Standard Mail 
Saturation mailing program on at least a monthly basis during the 2 
years prior to the execution of the instant contract. Valassis must 
also maintain its pre-existing shared mail program for the duration of 
the instant contract, and cannot transfer or consolidate advertising 
from current advertisers into the new program, extend the new program 
to ZIP Codes or carrier routes that are beyond the market profile of 
its existing programs, or migrate advertising circular business from 
the solo mail stream into its new program. Id.
    Mailpieces eligible under this program are Standard Mail Saturation 
Flats entered at a destination Sectional Center Facility (SCF) or 
Destination Delivery Unit (DDU). Id. at 3. Qualifying mailpieces must 
have dimensions between 6.125'' x 11.5'' x .25'' and

[[Page 27492]]

12'' x 15'' x .75'', and must contain between 3 and 10 advertising 
inserts during at least 9 of the 12 months of each contract year. Id. 
at 5. The volume mailed to DDUs must exceed 85 percent of the total 
volume of pieces mailed. Id.
    Valassis has agreed to initiate mailings under the instant 
agreement within 90 days of its effective date. Otherwise, either party 
may cancel the agreement within 30 days. Id. The effective date is 
defined as the date on which the Commission approves the contract. Id., 
Attachment B at 5. If Valassis decides to proceed with the agreement, 
it must mail at least 1,000,000 pieces during the following 12 months 
or pay the Postal Service a one-time fee of $100,000. Request at 5.
    If all the above conditions are met, Valassis will earn an annual 
rebate on published prices as follows:

------------------------------------------------------------------------
      Weight per piece              DDU rate              SCF rate
------------------------------------------------------------------------
4.5 to 6.5 ounces...........  20% off published     20% off published
                               rates at the time     rates at the time
                               of mailing.           of mailing.
6.5 to 9 ounces.............  $0.172..............  $0.185.
9.0 ounces to 11 ounces.....  $0.211..............  $0.229.
Over 11 ounces..............  20% off published     20% off published
                               rates at the time     rates at the time
                               of mailing.           of mailing.
------------------------------------------------------------------------

    The annual rebate will be paid after the end of each contract year. 
Id. at 5-6. If the Postal Service implements price adjustments during 
the term of the agreement, the rebate prices for the 6.5- to 9.0-ounce 
and 9.0- to 11-ounce mailpieces will be adjusted in an amount equal to 
the percentage price change for Standard Mail Saturation Flats, 
provided that the rebates remain in the range of 22 percent to 34 
percent. Id. at 6. The mailpieces sent under the instant contract will 
be entered exclusively under dedicated PostalOneTM permit 
accounts. Id.
    The Postal Service expects that the value of the agreement to still 
be positive if the penalty provision is triggered, reducing the risk of 
the agreement. Id. at 7.
    Similarly situated mailers. With respect to potential similarly 
situated mailers, the Postal Service states that the design 
imperative--to generate additional contribution--and the basic 
structure of the agreement with Valassis as described in the Request, 
will guide the Postal Service in the negotiation of similar agreements 
and may, in other NSAs, yield parameters that are substantially 
different from those in the instant contract. Id. at 6-7. It states 
that in assessing the desirability of the instant contract, it believes 
that the defining characteristics of Valassis are its size, nationwide 
distribution network, and significant volume of Saturation Mail. Id. at 
7. It maintains that these characteristics enable Valassis to provide a 
new opportunity to retail advertisers of durable and semi-durable goods 
that is scalable across multiple media markets. Id. In offering similar 
agreements, the Postal Service will look for all of these 
characteristics, as well as other conditions that might affect a 
favorable contractual agreement. Id.
    Notice. The Postal Service represents that it will inform customers 
of the new classification changes and associated price effects through 
a press release, notification on www.usps.com, and publication in the 
Federal Register.

II. Notice of Filing

    The Commission establishes Docket Nos. MC2012-14 and R2012-8 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 filing in the captioned dockets are consistent with the 
policies of 39 U.S.C. 3622 and 3642 as well as 39 CFR parts 3010 and 
3020. Comments are due no later than May 23, 2012. Reply comments to 
initial comments are due May 30, 2012. The filing can be accessed via 
the Commission's Web site (http://www.prc.gov).
    The Commission appoints Malin G. Moench to serve as Public 
Representative in these dockets.

III. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket Nos. MC2012-14 and R2012-8 for 
consideration of the matters raised in each docket.
    2. Pursuant to 39 U.S.C. 505, Malin G. Moench is appointed to serve 
as officer of the Commission (Public Representative) to represent the 
interests of the general public in these proceedings.
    3. Initial comments by interested persons in these proceedings are 
due no later than May 23, 2012.
    4. Reply comments may be filed no later than May 30, 2012.
    5. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2012-11204 Filed 5-9-12; 8:45 am]
BILLING CODE 7710-FW-P