Netflix, Inc. (NASDAQ:NFLX) received preferential treatment from the U.S Postal service, says a U.S federals appeals court. The court ruled that the U.S Postal Service, which may start selling magazines in the foreseeable future, gave priority to Netflix and unconventionally discriminated against other mail-order companies.
The case against the U.S Postal Service was filed by GameFly Inc, a video game rent by-mail. After assessment and due considerations, a three-judge panel on Friday in Washington ordered the Postal Regulatory Commission to scrap off any element of discrimination against the company, or give a solid reason for favoring Netflix, Inc. (NASDAQ:NFLX) over GameFly. This ruling could translate into changes in the way Netflix's movies are handled by UPS.
The appeals court revealed that GameFly's suit dates back to May 2011, suggesting that the unfair treatment has been going on for a considerable amount of time. At the time, GameFly's suit challenged UPS's response to allegations that it was giving Netflix special treatment through the manual sorting of its DVDs at no extra cost or better yet, free of charge. The Appeal court said on Thursday that if GameFly was not given similar treatment, it would be victim to an eruption of broken discs.
U.S Circuit Judge, David Sentelle, shared deep insight on the matter, revealing that Netflix, Inc. (NASDAQ:NFLX)'s mail was diverted from the automated letter stream and shifted to specially designed trays and containers. What's more interesting is the fact that the UPS did not charge Netflix, Inc. (NASDAQ:NFLX) for the costs it incurred while diverting mail.
Judge Sentelle wrote,
“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,”
Although the UPS will face the direct consequences of this ruling, the blowback will eventually land on Netflix, Inc. (NASDAQ:NFLX) as it will now have to compete with GameFly on what could be described as level ground.