When the U.S. Postal Service asked the Postal Rate Commission to endorse an innovative three-year experimental negotiated service agreement with Capital One Services Inc. it stepped onto new territory.
In a separate filing, the USPS asked the PRC to formally dismiss the three-year old challenge to Post E.C.S., an experimental document service for direct marketers that it formally ended in May.
The Capital One filing is the first time that the postal service has asked the PRC to endorse such an agreement.
The requested endorsement is seen as being a novel issue for the PRC as its rules do not cover such a request although negotiated service agreements between the USPS and high-volume mailers are allowed under existing postal law.
PRC approval of the proposal would pave the way for other high-volume first-class and Standard Mail mailers to negotiate similar agreements with the USPS.
Because of the novelty of the postal service’s request, Capital One, in an unusual move, has asked the PRC for permission to actively participate in its hearings so it could offer testimony in support of the postal service’s request.
Capital One Services, a unit of Capital One Financial Corp., is the postal service’s fourth-largest customer and the largest single producer of first-class mail.
On July 16, Capital One Financial Corp., the parent of Capital One Bank and Capital One, F.S.B, and marketer of Visa and MasterCard credit cards, reported second quarter earnings of $213.1 million. Earnings for the first quarter totaled $188 million.
Under the postal service’s proposal Capital One would have to mail a minimum of 1.225 billion pieces of first class mail in order to receive discounts that are slightly higher than those already given mailers for automatable first class letters presorted by ZIP code and carrier route.
Those discounts currently range from three-tenths of one cent to 3 cents.
Three years ago United Parcel Service and the Coalition Against Unfair USPS Competition, challenged the postal service’s authority to offer the service, a joint venture with Canada Post and France’s La Poste, without seeking both the PRC’s endorsement and the approval of its governing board.
The PRC, which is expected to order a dismissal of the challenge, suspended proceedings in the case last year when postal officials sought the PRC’s support for the rate increase that went into effect in January.
Two weeks after the PRC called for a status report on the service, the USPS said the challenge was moot because it ended the service this past May 31.
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