"This is not a way to run a business," said Nina Link, president-CEO of the Magazine Publishers of America. "In the face of a soft economy, you don't raise rates"
H. Robert Wientzen, president-CEO of the Direct Marketing Association, said in a statement, "With another greater-than-inflation-sized increase, the Postal Service is writing a how-to book on driving customers away."
The rate hike request was unveiled at a meeting of the Postal Services Board of Governors on Sept. 11 that was suddenly adjourned because of security concerns stemming from the terrorist attacks in Washington, D.C., and in New York City that morning.
Besides a 3 cents hike in the prices of a first class stamp to 37 cents, the Board of Governors said the rate increases in all categories would average about 8.7%. A fact sheet distributed by the board said Express Mail would rise 9.7%, priority mail 13.5%, periodicals 10%, so-called "standard mail" (advertising circulars) 7.3% and packages 8.9%. Details of all rates won't be available until the Board of Governors formally files the rate case later this month with the Postal Rate Commission.
Robert F. Rider, chairman of the Postal Service governing board, said the rate hike is necessary "to protect the ever expanding universal delivery system" and had been below projections of 10% to 15% because of cost-cutting efforts. He also blamed antiquated governing laws that give the board few options to make up a $1.65 billion deficit besides a rate hike.
"It's like trying to listen to a CD on an eight-track player," he said. "We simply don't have the basic tools necessary to operate in a modern businesslike manner."
While marketing groups confirmed the rate increase request is somewhat lower than had been feared, they also said that the increase would be the third in two years and could impact next year's Christmas season. Magazines saw rates rise 9.9% in January and again by 2.6% in July. Direct marketers saw their rates rise by 4.5% in January and by 1.3% in July.
The DMA said the increase could cost U.S. consumers and businesses an additional $5.6 billion a year, slow the economy and drive commercial mailers to switch to more economical alternatives.
"The Postal Service is forcing commercial mailers to plan now to scale back their mailings for the next holiday season. This is a `lose-lose' situation for the Postal Service. It means bad press now and fewer customers later-at the time of the year the Postal Service counts on for the bulk of its revenue," said Mr. Wientzen.
Ms. Link said the hike would cost publishers $200 million a year and MPA would work both to get the rate hike reduced and to delay its implementation until 2003.
"It was not unexpected, but a third rate increase in a very short amount of time is unheard of and really hard for the industry," she said. "It's not a pretty picture. It hurts smaller members."
Jerry Cerasale, DMA senior VP, noted in a statement that the request is the first time ever that the Postal Service has increased rates and sought approval for another round of increases in the same year.
"Both the timing and size of this increase are troubling," he said. "This could have ripple effects throughout the entire economy. The average consumer may also be asked to pay even more if the Postal Service's biggest customers head for less expensive alternatives."