Court Raps USPS for Treating Netflix Better Than Gamefly

A federal appeals court today ruled that the U.S. Postal Service unfairly treated Netflix (NASDAQ: NFLX  ) better than Gamefly.

DVDs can get damaged in the mail, noted the court in its ruling. "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. Rather obviously, this is not without cost to the Postal Service. Nonetheless, the Service provides it to Netflix free of charge."

Gamefly, meanwhile, has to spend more to make sure the games it rents make it through the mail safely.

In the past, Gamefly asked the Postal Service to remedy the situation by reducing rates and offering the same hand-processing care. Being unsatisfied with the outcome, Gamefly petitioned the United States Court of Appeals for the District of Columbia Circuit to review its case.

Today, the Court ruled that the US Postal Service did discriminate and must provide a better reason for this discrimination or remedy the situation.

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