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discount). ZSI typically shared the presorting discount with its
customers such that ZSI would refund, or reduce, fees paid to ZSI
by 2 cents. Despite receiving this presorting discount, the
presorting division historically maintained a very low profit
margin; high volume was essential to the success of the
presorting division. Through 1990, ZSI’s overall performance was
stagnant, and petitioner attempted to sell ZSI’s unprofitable
presorting division but was unsuccessful.
In 1990, the Postal Service instituted an additional refund
program wherein the Postal Service began refunding to
participants 0.9 cent for each piece of presorted bulk mail that
met certain Postal Service criteria (the value-added refund, or
VAR, program). One criterion of the VAR program was that the
participant place bar codes on each piece of mail so that the
Postal Service could use optical scanners to economize its
operations. In June 1990, ZSI entered into a lease1 for a
multiline optical character reader (MLOCR) which automated its
presorting division, printed bar codes on pieces of mail, and
sorted the pieces by ZIP Code.
Although ZSI began leasing the MLOCR in 1990, ZSI did not
yet qualify for participation in the VAR program; in 1990, ZSI
1ZSI leased the multiline optical character reader (MLOCR)
either because MLOCRs were too expensive to purchase (between
$400,000 and $1,000,000) or because, for security reasons, the
manufacturer would not sell a MLOCR to ZSI.
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Last modified: May 25, 2011