Fearing a far worse rate hike if they didn't agree-the Postal Service threatened to seek immediate recovery of losses resulting from the economic downturn and the fallout after the anthrax scare-several major marketing and mailer groups last week signed on to a settlement offered by Postmaster General John E. Potter. The proposal also raises by 3 cents the cost of a first-class stamp.
The settlement, which awaits approval from the Postal Rate Commission, would allow the Postal Service to implement the rate hike initially proposed in September 2001 on June 30, 2002-roughly two months ahead of schedule, since it normally takes a year for implementation.
Neal Denton, executive director of the Alliance of Non Profit Mailers, said the increase "seemed an appropriate response. The Postal Service is in dire straits with the double whammy of the recession and anthrax."
The hike was originally proposed at a Sept. 11 Postal Service Board of Governors meeting that was adjourned because of the terrorist attacks. There, the Postal Service announced it was seeking a 3 cents hike in the price of a first class letter to 37 cents. Marketers and publishers would average about an 8.7% increase, with publishers paying 10%, and mailers of so called "standard mail" seeing a 7.3% rise in rates.
Marketers had originally planned to fight the hike, the third in little more than 18 months, or seek to delay it. But in the wake of the anthrax attacks, they worried that the Postal Service would seek to avoid the normal year wait between requesting and getting rate hikes by updating its revenue projections to press its case. The result would have been a much higher increase this year. Then, in Decem- ber, Mr. Potter offered to move back implementation from June 1 until June 30.
"We understand that the economic situation has changed and we know they [the Post Office] need additional money," said Jerry Cerasale, senior VP of the Direct Marketing Association. "We feared that if we didn't settle, instead of facing an 8% hike in June, we could be facing a 12% to 15% rate hike in September."
Jim Cregan, exec VP for the Magazine Publishers of America, said mailers were left with little choice. "We think in light of all the circumstances, it is fair and justifiable," he said. "It was pretty clear that the Postal Service intended to update its data [if mailers didn't agree] and the result would not have been good for us or any other mailing organization. The bottom line is we would have gone up another 5 or 10%"
The deal offered by Mr. Potter in December didn't fully guarantee not to raise rates again this year, but he said the Postal Service had no intention of seeking a further rate hike before the end of September based on current volume. That would mean the rates effective June 30 would likely hold through July or August of 2003.
The Postal Rate Commission set Jan. 18 as its deadline for comment. No marketing groups so far appear to be opposed, although at press time the Newspaper Association of America had not yet taken a formal position. Nor had the United Parcel Service.
The Postal Service said last week that it was satisfied that it had achieved sufficient support. "We have a viable agreement," said Jerry Kreienkamp, a Postal Ser-vice media-relations representative. "The next step is up to the [rate commission]."