GameFly wins in USPS dispute

The two-year dispute between GameFly and the United States Postal Service has finally come to an end. The Postal Regulatory Commission handed down its ruling today in GameFly's dispute with the USPS, finding that the service has been unfairly giving preferential treatment to the parcels of movie rental-by-mail services like Netflix and Blockbuster Video.

At the heart of the dispute is a question about the hand-sorting of the various companies' disc mailers. GameFly claimed that its movie-renting counterparts received hand-sorting at no charge, a practice that kept their discs from going through the USPS' automated sorting machines, significantly reducing the rate of breakage. However, the USPS has thus far refused to give GameFly and other rental-by-mail outfits the same consideration.

In its ruling, the PRC determined there was an unreasonable preference given to the mail of Blockbuster and Netflix and ordered that it be remedied by having the USPS establish two parallel rate categories specifically for roundtrip DVD mail of the sort used by those services. The new categories will prevent GameFly from incurring a surcharge for hand-sorting or an excess ounce fee for envelopes that avoid the automated sorting machines by being slightly thicker and heavier.

In a concurring opinion, Commissioner Tony L. Hammond supported the ruling, albeit "reluctantly." Specifically, he was worried people would misinterpret the PRC's finding in the case.

"The Postal Service worked with a customer, Netflix, to help its business thrive through the use of the mail," Hammond wrote. "The Postal Service should work with current and potential customers. Netflix explained to the Postal Service what treatment would be most helpful to it. There is nothing wrong with that. In fact, the Postal Service should encourage this type of communication. I hope this decision does not discourage the Postal Service from helping businesses to use the mail."