The Alliance of Nonprofit Mailers delivered the following letter to the USPS in response to a Federal Register Notice that proposes to create only two categories for images and words allowable on customized postage: commercial and social. This rule would essentially prohibit a third category: nonprofits. The Alliance suggests that the USPS add a third category that allows the multiple purposes that nonprofits use mail for. Adding a nonprofit category would be best for USPS and their nonprofit customers and avoid violation of anti-discrimination law.

February 2, 2017

Manager, Payment Technology

United States Postal Service

475 L’Enfant Plaza, SW, Room 3500

Washington, DC 20260

Re: Comments of Alliance of Nonprofit Mailers on Notice of Proposed Rule, Revisions to the Requirements for Authority To Manufacture and Distribute Postage Evidencing Systems; Customized Postage Products, 82 Fed. Reg. 1294 (January 5, 2017)

Dear Sir or Madam:

The Alliance of Nonprofit Mailers respectfully submits these comments on the proposed rules for Customized Postal products published by the Postal Service at 82 Fed. Reg. 1294 (January 5, 2017).  Standardization of the rules for Customized Postal products is a good idea.  With one major exception, the proposal should be adopted as proposed.

The exception involves the restrictions in proposed 39 C.F.R. § 501.21(a)(2) on the range of images or text that may be printed next to the indicia of postage payment.  The proposed rule would allow for “commercial” images or text that are “intended for no other purpose than the sale of goods or services in commerce.”  Id., § 501.21(a)(2)(i).  The proposed rule would also allow “social” images or text—i.e., images that promote or depict “people, animals, items, or events commonly associated with friendly relations or companionship and likely to generate invitations, announcements, notices, thank you notes, RSVPs, or similar correspondence.”  Id., § 501.21(a)(2)(ii).  

These categories, which appear to have been drafted with for-profit business mailers and household mailers in mind, exclude many of the most important purposes for which nonprofit organizations use First-Class Mail.  These purposes are considerably broader than the “commercial” purposes enumerated in proposed Section 501.21(a)(2)(i).  To be sure, some First-Class Mail sent by nonprofits is designed to market “goods or services in commerce.”  But nonprofits also use First-Class Mail to encourage members, supporters and other members of the public to (1) donate money; (2) donate services in kind (e.g., perform services as a volunteer); (3) perform services for third persons: (4) read literature enclosed in the mailpiece; (5) take other action that relates to qualifying nonprofit purposes of the mailer; (6) purchase goods or services offered as a membership benefit through a third party; (7) apply to, enroll in, or contact the mailer to obtain more information about the mailer’s educational institution or program; (8) attend a seminar or event sponsored by the nonprofit organization that relates to the education or other nonprofit purpose of the organization (e.g., a retirement seminar or health care conference); or (9) contact the organization for additional information that relates to its educational or other nonprofit purposes (e.g., a catalog of courses or a list of publications).  USPS Customer Support Ruling PS-323, Computer-Prepared Mailpieces Entered By Authorized Nonprofit Mailers (rev. ed. January 2017) at § 2.  In addition, solicitation mailings by nonprofit organizations often include response envelopes with prepaid First-Class postage.  At least on its face, proposed § 501.21(a)(2) does not appear to authorize images or text that promote any of these purposes.

These omissions are problematic in three respects.  First, they would deprive nonprofit mailers of the full potential benefits of allowing Customized Postage products on First-Class Mail.  Customized Postage products placed on outbound mailpieces and return envelopes can improve the attractiveness and response rate of mailings by nonprofit organizations in the same way as for commercial and social mailers.  This is true not only for mailings that offer “goods or services in commerce,” but also for mailings that solicit the other categories of responses listed above.

Second, the proposed restrictions on the permissible purposes of Customized Postage products would also harm the Postal Service.  Limiting the potential uses of Customized Postage available to nonprofit mailers would needlessly suppress the demand for Customized Postage by these mailers.  The costs of this self-inflicted problem would not be trivial for the Postal Service.  Nonprofit organizations generate approximately one-tenth of all mail sent in the United States, and the letter mail sent and received by nonprofit organizations at First-Class Mail rates generates a healthy contribution for the Postal Service.  (The contribution is even healthier when, as often occurs, the organization prepays First-Class return postage but the recipient does not use the response envelope.)  Further, the missed opportunity to promote mail from nonprofit organizations would also needlessly suppress other kinds of mail.  The Household Diary Study and other analyses have long indicated that many households like to receive and respond to mail from nonprofit organizations. Diverse, interesting, and desirable content in the mailbox is critical to the future relevance of the USPS.

Third, the exclusion of many kinds of nonprofit purposes from Section 501.21(a)(2) would unlawfully discriminate against nonprofit mailers in violation of 39 U.S.C. § 403(c).  Section 403(c) provides that the Postal Service, in “providing services and in establishing classifications, rates, and fees . . . shall not, except as specifically authorized in this title, make any undue or unreasonable discrimination among users of the mails, nor shall it grant any undue or unreasonable preferences to any such user.”  In National Easter Seal Society v. USPS, 656 F.2d 754, 760-762 (D.C. Cir. 1981), the Court of Appeals ruled that disparities between the presort discounts offered to commercial vs. nonprofit users of third-class mail violated Section 403(c) “absent some reasonable ground for differential treatment.”

The discrimination issue reappeared in Docket No. R2011-5, Notice of Market Dominant Adjustment for First-Class Mail and Standard Mail, the Postal Service proposed a temporary postage discount of three percent on mail carrying or containing a mobile (“3D”) barcode and entered in certain categories of First-Class Mail and Standard Mail during a two-month period in 2011.  As proposed by the Postal Service, the discounts would have been offered only to commercial Standard Mail, not nonprofit Standard Mail.  In response to a Chairman’s Information Request, the Postal Service asserted that the discrimination was justified by “the likelihood of a [greater] multiplier effect [from 3D barcodes on commercial mail], ease of administration, and the fact that nonprofit rates were already discounted.”  Order No. 731 (May 17, 2011) at 8.

The Postal Regulatory Commission rejected these justifications as insufficient to satisfy 39 U.S.C. § 403(c) and National Easter Seal Society:

The Commission finds, consistent with the Easter Seal case, that the Postal Service has not articulated a rationale to justify the differential treatment of nonprofit mailers in this promotion.  656 F.2d at 761.  The Commission directs the Postal Service to make the discount available to nonprofit mailers that comport with all the other program requirements.  The Commission understands that the impact of the inclusion of nonprofit mailers may be negligible, given the short lead time before the promotion, but reiterates the principle that the Postal Service must provide sufficient justification, pursuant to 39 U.S.C. 403(c), to exclude nonprofit mailers from a discount or rate on a product that has a nonprofit rate.  Id. at 760-61.

Order No. 731 at 8-9.

These precedents establish that discrimination against nonprofit mailers may be upheld under 39 U.S.C. § 403(c) only if the discrimination has a rational basis.  Merely asserting that a reasonable ground for discrimination exists is insufficient.  The reasonableness of the asserted justification must be demonstrated, not merely asserted or assumed.  And the Commission must take a hard look at the justifications offered in defense of any discrimination, and not just accept them uncritically.  National Easter Seal Society, 656 F.2d at 761-762; Docket No. R2009-2, Notice of Price Adjustment, Order No. 191 (March 16, 2009) at 69-72 (considering and rejecting several rationales offered by the Postal Service for discriminatory pricing of Confirm subscriptions); Order No. 731, supra, at 8 (considering and rejecting several rationales offered by the Postal Service in Docket No. R2011-5 for discriminatory offering of discounts for 3D barcodes).  See also GameFly, Inc. v. PRC, 704 F.3d 145, 148-49 (D.C. Cir. 2013) (Commission may not leave discrimination in place without a rational explanation; to sanction continued discrimination on “illogical” grounds is “arbitrary and capricious”).

The Postal Service has identified no rational basis for excluding the nonprofit purposes listed above, and no such basis is apparent to the Alliance.  There is no reason why those purposes should not also be allowed as themes for Customized Postage stamps.  They provide attractive themes for customized images or text, and the protection against undesirable words or images provided by proposed Section 501.21(a)(1) should be just as effective for customized text or images with nonprofit themes as for commercial or social themes.  Here are some examples:

Accordingly, the Alliance asks that proposed Section 501.21(a)(2)(ii) be renumbered as Section 501.21.(a)(2)(iii), and that the following sentence be added as new Section 501.21(a)(2)(ii):

Nonprofit means intended for no other purposes than (1) the sale of goods or services in commerce; (2) the solicitation of a donation of funds; (3) a request that the addressee join the mailer’s membership organization or renew an existing membership; (4) a request that the addressee complete and mail an opinion survey, feedback or evaluation form, petition, open letter, or note or card); (5) a request that the addressee contribute other services in kind to the organization (e.g., donate time as a volunteer); (6) a request that the addressee advance a nonprofit purpose of the mailer by performing services for third persons (e.g., “please volunteer to ____” or “please pray for _____”); (7) a request or recommendation that the addressee read literature enclosed in the mailpiece or take any other action that relates to the nonprofit purpose of the mailer; (8) an offer or solicitation, enclosed in a mailpiece acknowledging the payment of a contribution or membership dues, that invites the addressee to purchase goods or services available from the mailer or offered as a membership benefit through a third party; (9) a request that the addressee apply to, enroll in, or contact the mailer to obtain more information about the mailer’s education institution or program; (10) a request that the addressee attend a seminar or event sponsored by the mailer that relates to the educational or other nonprofit purpose of the organization (e.g., a retirement seminar or a health care conference); or (11) an invitation for the addressee to contact the mailer for additional information that relates to the educational or other nonprofit purposes of the organization (e.g., a catalog of courses or a list of publications).

This proposed language is based on the list in section 2 of Customer Support Ruling PS-323.

Thank you for your consideration of these comments.

Very truly yours,

/s/

David M. Levy

Counsel for Alliance of Nonprofit Mailers