Leo J. Polack - Page 3




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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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