Postal Service, Hallmark battle over cost of stamps

By on November 9, 2005

WASHINGTON – The price we pay for postage stamps is a big part of a first-class political clash between mailing Titans in the U.S. Senate.

On one side is a coalition that includes Hallmark Cards, the nation’s largest greeting card company. Its congressional field general: Sen. Kit Bond, R-Mo.

Leading players on the other side are the U.S. Postal Service and L.L. Bean Inc., the Maine mail-order giant. Their patron: Sen. Susan Collins, a Maine Republican who is shepherding a postal reform bill through the Senate.

At issue – aside from politicians protecting powerful home-state interests – is how postal rates are set, especially for first-class mail, the way most ordinary Americans send letters, bills and greeting cards using 37-cent stamps.

For 35 years the law has required postal rate changes to be “fair and equitable” and allowed for challenges to proposed rate changes if mailers think they are not.

Bond wants that provision to be a standard in the new law, saying it has historically protected small mailers from having to pay exorbitant rates to subsidize lower rates for bulk mailers. Bulk mailers use both first-class and standard mail.

Collins wants to scrap the provision, saying it should be a goal, but mandating it would limit the flexibility of the postal service in an increasingly competitive age.

A Senate aide close to the process said that “if you artificially hold down rates for single-piece first class, that means you artificially pull up the rates for all other mailers,” even if they use a different class.

Their disagreement has led Bond to put a hold on the bill, stalling its momentum and likely killing it for the year. The action has no bearing on the Postal Rate Commission’s recent decision to raise the price of a first-class stamp 2 cents to 39 cents.

“The way they have it set up, there’s no protection for those of us, the vast majority of Americans, who use first-class mail,” Bond said. “We could get hammered with continuous price hikes, while junk-mailers continue to get very low rates.”

Barbara Koirtyohann, a Hallmark spokeswoman, said it’s about protecting “citizen-mailers.”

But it’s also in Hallmark’s business interest, as an estimated 70 percent of greeting cards are sent through the mail.

“When the cost of a stamp starts approaching the cost of a card, that starts to change the dynamic pretty substantially,” Koirtyohann acknowledged.

The dispute arises from Collins’s desire to bring wholesale change to how the postal service sets rates. Currently, proposed rate changes must be approved by the Postal Rate Commission, and those who want to fight a proposed rate change can challenge it by saying it’s not “fair and equitable” because it would unfairly burden one type of mailer. The rate-hike process typically takes nearly a year.

Under Collins’ bill, the postal service would be able to raise rates yearly, within a cap pegged to the Consumer Price Index. Any challenges to rate changes would have to come after the rates had already been raised.

Proponents of Collins’ bill say that a rate cap system tied to inflation is inherently fair and equitable. But the proposal also would allow the postal service to institute different increases within that cap for different subclasses, thus potentially increasing rates more for individuals mailing greeting cards and letters to subsidize discounts for first-class bulk mailers.

“The current system, which Hallmark supports, includes a long, litigious and expensive rate-setting process and does not address the critical need of the Postal Service to modernize,” Collins said in a written statement. On the other hand, she said, the proposed plan would “provide more predictability for its users and helps ensure a stronger financial future for the (postal service).”

Keeping bulk mail is a key to the postal service’s future. It accounts for about 85 percent of mail. Household-to-household mail, such as greeting cards and letters, accounts for about 6 percent.

“If rates go too high, the cheapest mail is the first to leave,” said Jerry Cerasale, a spokesman for the Direct Marketing Association, which represents many bulk-mailers. “As the price of mail goes up, I look for alternatives,” such as going door-to-door or using the Internet.

Cerasale said his group “keeps the postal service afloat,” accounting for about 70 percent of its revenues.

Beside the point, Bond retorts.

“The reason we gave (the Postal Service) a monopoly is not to deliver advertising,” Bond said. “There’s lots of ways to deliver advertising. We gave the Postal Service a monopoly so Harry could write to Mary. … If it starts getting up to 65 cents, it becomes a lot more difficult.”

Congressional insiders paint the dispute as largely between Hallmark and L.L. Bean. That rankles both, who note many other interests are involved.

Hallmark has been described as aggressive in negotiations through its backing of Postal Reform in the Public Interest, which is run from the offices of a top Washington lobbying firm. L.L. Bean attorneys routinely participate in Senate negotiating sessions – even more frequently than the postal service, the party ostensibly most interested in the dispute’s outcome.

An August compromise was deemed acceptable, if grudgingly, by most parties. But L.L. Bean objected, according to several people familiar with the negotiations, deep-sixing the agreement. Since then, other interests on L.L. Bean’s side have said they were not happy with the compromise. Company officials did not return calls seeking comment for this story.

The language that Bond wanted was in the version of the bill that passed the House last summer.

Ironically, another section of the Collins bill is focused on accounting changes for the Postal Service’s pension system that should put the system on more solid financial footing and thus require fewer rate increases.


About Matt Stearns