By David Ingram
WASHINGTON, Jan 11 (Reuters) - A federal appeals court ruled
on Friday that Netflix Inc received an unfair advantage from the
U.S. Postal Service's special handling of its DVDs, and ordered
postal regulators to remedy the discrimination or offer a good
explanation.
The unanimous decision, by the U.S. Court of Appeals for the
District of Columbia Circuit, is a victory for GameFly Inc
, which said the postal service should treat the games
it ships similarly to Netflix DVDs.
The court did not order a specific change in how the postal
service handles digital disks, instead leaving it up to the
Postal Regulatory Commission to determine an equitable solution.
"The commission must either remedy all discrimination or
explain why any residual discrimination is due or reasonable,"
wrote Judge David Sentelle.
The case now heads back to the commission, which regulates
the independent postal service.
"We trust that the commission will take the court's decision
to heart, and require the postal service to be compliant with
the law by offering the same price and quality of service to all
DVD rental companies," GameFly Chief Executive Dave Hodess said
in a statement.
A postal service spokesman said on Friday that its position
has not changed. "The different treatment that we provided to
our customers was fully justified and reasonable, and consistent
with the law," spokesman David Partenheimer said in an email.
A Netflix spokesman declined to comment.
Movie rental service Netflix appears to be the postal
service's biggest DVD mailer customer, the court said. The
service processes Netflix DVDs by hand and with specially
designated containers.
"Rather obviously, this is not without cost to the postal
service. Nonetheless, the service provides it to Netflix free of
charge," Sentelle wrote.
GameFly, which mails primarily video games for rent, asked
for the same treatment, but the postal service refused, forcing
GameFly to make adjustments that cost millions of dollars each
year, the court said.
The Postal Regulatory Commission sided with GameFly in 2011
but failed to put the two companies on the same footing, the
court said.
The case is GameFly Inc v. Postal Regulatory Commission,
U.S. Court of Appeals for the D.C. Circuit, No. 11-1179.
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