LITTLE ROCK — Netflix Inc., the largest U.S. mail-order movie-rental service, got special treatment from the U.S. Postal Service, which improperly discriminated against other mail-order companies, a federal appeals court ruled.
In a challenge filed by GameFly Inc., the video-game rent-by-mail service, a three judge panel in Washington on Friday ordered the Postal Regulatory Commission to cure “all discrimination” against the company or explain why treating GameFly different from Netflix is reasonable. The ruling may lead to changes in the way Netflix movies are handled by the postal service.
GameFly sued the postal commission in May 2011, challenging its response to allegations that the post office was giving Netflix special treatment by manually sorting its DVDs free of charge. Without similar handling, Los Angeles-based GameFly could be subject to an “epidemic” of broken discs, the appeals court said.
“The Postal Service has saved Netflix - apparently its biggest DVD mailer customer - from this crippling otherwise industry wide problem by diverting Netflix mail from the automated letter stream, shifting it to specially designated trays and containers, hand culling it and hand processing it,” U.S. Circuit Judge David Sentelle wrote. “Rather obviously, this is not without cost to the Postal Service.”
Jonathan Friedman, a spokesman for Los Gatos, Calif.-based Netflix, declined to comment on the ruling.
The U.S. Postal Service is analyzing the decision and its implications, David Partenheimer, a spokesman for the service, said in an e-mail.
Business, Pages 21 on 01/14/2013