It looks like the U.S. Postal Service will have to rethink how it handles GameFly's mailers in the future. The Verge reports that the game rental service has won its appeal on a lower court ruling, forcing the USPS to rethink how it will deal with GameFly's mailers in the not-too-distant future. The case revolves around how the USPS gave preferential treatment to Netflix and Blockbuster DVD mailers, while ignoring GameFly's – specifically it hand-sorted Netflix and Blockbuster material, but did not afford the same treatment to GameFly's. GameFly was forced to use more expensive cardboard packaging to mail out its discs, and when it asked the USPS to give it a better rate, they refused. This ultimately led to a lawsuit in 2009.
In 2011, a lower court ruled that, while GameFly had been wronged by the USPS, it rejected two proposed solutions: that the Postal Service provide free manual sorting to GameFly like it did for Netflix, or that it substantially reduce the rate for flat pack envelopes. But the appeals court ruling says that that lower court ruling was wrong.
"Without special manual processing like that afforded to Netflix," the ruling says, "switching to letter mail could subject GameFly to an epidemic of cracked and shattered DVDs." Now, the Postal Service will either have to offer the same service to all parties or explain once again why discrimination is justified. This ruling marks one of the last developments in a long-running case with significant repercussions for DVD-by-mail services, but it's a little amusing to see it handed down at a time when Netflix is far better known for streaming than discs and even GameFly is moving to digital distribution.
You can read the full ruling here (PDF). It will be interesting to see what the USPS does to get in line with the court's ruling…