U.S. court denies USPS appeal in Gamefly-Netflix postage case

For the past five years, a Los Angeles-based firm that rents video games by mail has been alleging that Netflix, which rents DVD movies by mail, has been getting an unfair advantage from the United States Postal Service.

The battle GameFly Inc. has been waging against the USPS over Netflix’s special postage rates may have ended April 8.

The U.S. Court of Appeals for the District of Columbia sided for the second time with GameFly and against the USPS over a postage scheme that the court found has forced GameFly to pay twice as much as Netflix.

The appeals court last year had ruled that the USPS was unfair to GameFly, forcing it to pay 88¢ in postage plus spending an extra 20¢ on a special mailer for the same service that Netflix was then getting for 44¢.

The Postal Service had waived its nonmachinable processing charge for each Netflix DVD, processing its return DVDs by hand.

But the Postal Service refused to do the same for GameFly, whose game discs are similar to the movie discs Netflix mails.

The USPS had appealed the case after losing in 2013, saying that the relief proposed by the Postal Regulatory Commission was arbitrary.

But a three-judge appeals court panel held otherwise in an April 8 ruling, finding that “the remedy the commission selected was unequivocally effective in equalizing the playing field, thereby eliminating the discrimination — or at least its injurious effects.”

The commission had ordered the Postal Service to “equalize the rates for letter- and flat-shaped DVD mail either by: (1) establishing new equalized rates for letter-shaped and flat-shaped DVD mail; or (2) reducing the price for a two-ounce First-Class flat-shaped round-trip DVD mailer to the price of a one-ounce First-Class letter-shaped round-trip DVD mailer.”

That should end the Netflix advantage, the appeals court said.

“We are pleased with the ruling that affirms the court’s decision that the USPS discriminated illegally against GameFly and other DVD mailers,” Ugil Wu, GameFly marketing manager, told Linn’s.

“While we hope that the case is resolved, the USPS still has the right to appeal for the next several weeks.”