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Gamefly to Cross-Examine U.S. Postal Service

25 Aug, 2010 By: Erik Gruenwedel



Online video game rental service Gamefly said it plans to cross-examine witnesses from the United States Postal Service Sept. 1-2, in the ongoing civil complaint involving rival video game and movie rental services and the nation’s mail service.

GameFly April 23, 2009, filed a complaint with the U.S. Postal Commission alleging discrimination that it provided “unreasonable preferences” in rates and handling practices to Netflix and Blockbuster when dealing with DVD mailers.

Los Angeles-based Gamefly, which at the time of the filing said it shipped about 590,000 discs per month, contends that to meet the 1-ounce first-class mail weight limit, it experienced a surge in broken discs due to absence of protective inserts in the mailers. Adding the inserts bumps the mailer to 2 ounces, increasing postage from 42 cents to $1.

Upon visual inspection of several postal processing facilities, GameFly alleged it saw workers processing both Netflix and Blockbuster first-class mailers by hand, unlike most first-class mail that is processed via automation.

GameFly asserted the issue became acute after Blockbuster began by-mail distribution of video games. Netflix does not rent games.

Gamefly’s cross-examination follows a similar engagement July 28 in Washington, D.C., by lawyers from the U.S. Postal Commission. In that affair it was revealed that Gamefly mailers were more difficult to spot by postal workers compared to Netflix and Blockbuster’s ubiquitous red and blue mailers.

In addition, Gamefly and Blockbuster both use business replay mail, which requires an additional accounting step to determine the return postage amount, while Netflix uses permit reply mail whereby the return postage is pre-paid.

Finally, Netflix opts to pick up mail from 130 different locations nationwide (compared to four locations for Gamefly) and delivers it to 58 shipping centers to reduce mailer exposure to automated sorting — a process that saves the postal service money.

The postal service estimated that Netflix’s by-mail service accounts for 97% of all DVD mailers compared to 2% for Blockbuster By Mail and 1% for Gamefly.

Indeed, Netflix said it will spend more than $600 million in postage fees this year, making the online DVD rental pioneer the postal service’s largest single customer.


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