[Federal Register Volume 79, Number 213 (Tuesday, November 4, 2014)]
[Notices]
[Pages 65434-65435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26118]


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POSTAL REGULATORY COMMISSION

[Docket Nos. MC2015-3 and R2015-2; Order No. 2231]


New Postal Product

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is noticing a recent Postal Service filing 
concerning an addition of Discover Financial Services Agreement 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: November 17, 2014.

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. Notice of Filing
III. Ordering Paragraphs

I. Introduction

    On October 27, 2014, the Postal Service filed a request pursuant to 
39 U.S.C. 3622 and 3641, as well as 39 CFR 3010 and 3020, et seq., to 
add a Discover Financial Services (Discover) negotiated service 
agreement to the market-dominant product list.\1\
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    \1\ Notice of the United States Postal Service of Filing Request 
to Add Discover Financial Services Negotiated Service Agreement to 
the Market-Dominant Product List, October 27, 2014 (Request).
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    Request. In support of its Request, the Postal Service filed a copy 
of the Board of Governors' Resolution No. 14-07, authorizing a 
negotiated service agreement with Discover; a copy of the contract; 
proposed descriptive language changes to the Mail Classification 
Schedule; a proposed data collection plan; a statement of supporting 
justification as required by 39 CFR 3020.32, which the Postal Service 
also asserts satisfies the requirements of 39 CFR 3010.42(b)-(e); and a 
financial model.
    The Postal Service believes that the Discover negotiated service 
agreement conforms to the policies of the Postal Accountability and 
Enhancement Act, and meets the statutory standards supporting the 
desirability of a special classification under 39 U.S.C. 3622(c)(10). 
Id. at 3. In particular, the Postal Service believes the agreement has 
the potential to enhance the Postal Service's long-term financial 
position, and it will not cause unreasonable harm to the marketplace. 
Id.
    Related contract. The Postal Service indicates that the agreement 
is designed to increase the total aggregate contribution that the 
Postal Service receives from mail eligible under its agreement with 
Discover. Id. at 5. The Postal Service states that the implementation 
date of the agreement will be December 1, 2014 or on a date mutually 
agreed upon by the Postal Service and Discover, and will expire three 
years from the implementation date, unless otherwise terminated 
pursuant to the provisions of the agreement.\2\ Id. at 1; Attachment B 
at 6.
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    \2\ Pursuant to 39 U.S.C. 3622(c), the Postal Service is 
required, among other things, to provide public notice of the rate 
adjustment and provide an opportunity for review by the Commission 
of at least 45 days before the implementation of any adjustment in 
rates under section 3622. Accordingly, it initially appears that the 
implementation date may be no earlier than December 11, 2014, 
provided the other conditions in Section I.G. of the proposed 
agreement are satisfied.
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    The Postal Service contends that the agreement consists of the 
following four key components: (1) Annual revenue growth thresholds; 
(2) a baseline mail volume; (3) tiered rebates based on aggregate gross 
revenue; and (4) a nonperformance penalty to be paid if the annual 
revenue growth threshold is not met. Id. at 6-10.
     Discover must meet or exceed annual revenue growth 
thresholds (i.e., 3-6%) to qualify for specific rebate percentages 
under a tiered structure. The baseline revenue amount to calculate the 
annual growth thresholds is $304,053,073.
     Discover must also meet or exceed a baseline volume amount 
annually (1,256,212,059 pieces in the first year, subsequent contract 
years' eligible volume depends on volume in prior years) in order to 
qualify for a rebate.
     The agreement provides for a tiered rebate structure for a 
portion of the postage paid for eligible mail if such mail (i) meets or 
exceeds specified annual revenue thresholds, and (ii) exceeds the 
aggregate total baseline volume for mail eligible under the agreement. 
Id. at 5. The tier 1 and 2 rebates are 2.25% and 2.5%, respectively.
     If Discover does not meet the annual revenue growth 
thresholds provided for in the agreement, Discover must pay the Postal 
Service a nonperformance penalty of 10% of the difference between the 
annual revenue growth threshold and the annual revenue actually 
generated by Discover for mail eligible under the agreement.
    Similarly situated mailers. With respect to potential similarly 
situated mailers, the Postal Service states that it is ready to 
negotiate and implement functionally equivalent agreements with such 
mailers. Id., Attachment E at 4. It believes that in assessing the 
desirability of a similar agreement, the defining characteristics of 
Discover are its size, large aggregate Standard Mail and First Class 
postage; its expanding Standard Mail advertising volume; and its 
declining First Class Mail billing and statement volume. Id. at 13.
    Notice. The Postal Service represents that it will inform customers 
of the new classification changes and associated price effects through 
publication in the Federal Register. Id. at 2.

II. Notice of Filing

    The Commission establishes Docket Nos. MC2015-3 and R2015-2 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 November 17, 2014. The filing can 
be accessed via the Commission's Web site (http://www.prc.gov).
    The Commission appoints John P. Klingenberg to serve as Public 
Representative in these dockets.

III. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket Nos. MC2015-3 and R2015-2 for 
consideration of the matters raised in each docket.
    2. Pursuant to 39 U.S.C. 505, John P. Klingenberg 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 by interested persons in these proceedings are due no 
later than November 17, 2014.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.


[[Page 65435]]


    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2014-26118 Filed 11-3-14; 8:45 am]
BILLING CODE 7710-FW-P