Direct Marketing: Permanent Exigency Fees? - Midwest Direct

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December 9, 2015

Direct Marketing: Permanent Exigency Fees?

This past September, Senator Tom Carper (D-Del.) introduced a bill called iPOST (Improving Postal Operations, Service and Transparency Act of 2015). The bill, designed to put the USPS on a permanent “fiscally sustainable path,” gained momentum when three bipartisan senators recently joined in sponsorship.

Direct marketers and mailers reacted quickly and negatively. At issue is the exigent rate increase – which is set to expire this Spring – making mail pieces a few cents cheaper in the process.

Carper’s bill “Makes the current temporary rate increase put into place in 2014 permanent, while freezing any further rate increases until a new rate system can be established by the Postal Regulatory Commission by January 1, 2018.”

The mailing industry seeks a balanced solution, but believes the 4.3 percent postal rate increase was never justified in the first place. The DMA stated they “Will continue to work toward a solution that keeps the Postal Service solvent while safeguarding the mailing community.”

“A further extension of postal exigency rates only serves to harm the very businesses – marketers and their solution providers – who are stimulating the economy and who use mail as a key component of their omnichannel marketing plan,” said Christopher Oswald, VP of Advocacy for DMA.

Senator Carper retorts his bill is necessary because “It’s important to stabilize the USPS, because Americans rely on it and it’s hurting financially.”

History of the exigency increase

According to the laws on the books, the USPS can only raise prices on the products it dominates (First-Class mail, marketing mail, magazines, etc.) in line with inflationary increases.

But, the USPS can ask its regulatory body for an additional price increase in exceptional circumstances. The Post Office views the Great Recession, which began in late 2007, as precisely such a circumstance.  

The USPS argued this financial crisis was reason to raise rates above the CPI, and the Postal Regulatory Commission agreed – but set a cap on the revenue the USPS could raise from the temporary increase. Mailers sued, arguing the recession should have never justified an increase in the first place.

A federal appeals court ruled that the rates were justified, but the temporary increases should not become permanent. Which takes us full-circle to Carper’s bill, which would do just that.

Industry insiders have said that, frankly, a freeze on the current increase would be preferable to further rate increases … displaying a somewhat jaded attitude toward the rate hikes and the overall legal and legislative processes at work.

We’ll keep a close eye on this bill, as our direct marketing partners and customers plan for a profitable 2016.

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