In the Matter of the Petition of

 LOVEJOY'S COLLEGE GUIDE, INC.

 for a second-class mail permit for "LOVEJOY'S GUIDANCE DIGEST."

 P.O.D. Docket No. 2/115

 June 29, 1965

 Jesse B. Messitte Hearing Examiner

 POST OFFICE DEPARTMENT,
 DIVISION OF HEARING EXAMINERS,
 WASHINGTON, D.C.  20260

 APPEARANCES:
 Marion E. Harrison, Esq.  
 1750 Pennsylvania Avenue, N.W. 
 Washington, D.C. for the Petitioner

 Ivan F. Kardos, Esq., and
 Clinton I. Newman, Esq. 
 Office of the General Counsel
 Post Office Department for the Respondent

The Petitioner, Lovejoy's College Guide, Inc., seeks a second-class mail permit for "Lovejoy's Guidance Digest" (sometimes referred to herein as "the Digest"). The Respondent, an official of the Post Office Department, opposes granting a permit on the grounds that the Digest is designed primarily for advertising purposes and for circulation at nominal rates. This Hearing Examiner concludes that Petitioner's publication, the Digest, meets all requirements and the permit should be granted.

At a hearing held in New York City, Clarence E. Lovejoy, President of the Petitioner corporation, Seymour Turk of Simon & Schuster, publisher of various of Mr. Lovejoy's books and John Macrae III of Harper & Row, publisher of one of Mr. Lovejoy's books, testified on behalf of the Petitioner.

At a supplemental hearing held April 27, 1965, at Red Bank, New Jersey, Clarence E. Lovejoy testified again. And two certified public accountants testified concerning an audit of Petitioner's financial records and the economic justification for the Digest.

The Respondent presented no witness.

About 25 joint exhibits were received in evidence including copies of four books authored by Clarence E. Lovejoy, samples of the Digest, and an accountant's report dated October 29, 1964, of an audit of Petitioner's accounts for the year ending December 31, 1963.

Proposed findings, conclusions of law and briefs, submitted by the parties, have been carefully considered with the entire record, in arriving at this initial decision.

The statute, which Respondent contends should defeat Petitioner's cause, reads in pertinent part:

"A periodical publication designed primarily for advertising purposes *** or for circulation at nominal rates is not entitled to be admitted as second class mail ***." 39 U.S.C. 4354(c).

The Respondent relies also upon two rules or regulations of the Department related to the foregoing statutory provision. They read in pertinent part:

1. "Advertising publications . Publications designed primarily for advertising purposes may not qualify for second-class privileges. They include:

* * * * * * * *

"Those owned or controlled by individuals or business concerns and conducted as an auxiliary to and essentially for the advancement of the main business or calling of those who own or control them." 39 C.F.R. 22.2(b)(6)(ii)

2. "Nominal rate publications . Publications designed primarily for circulation at nominal rates may not qualify for second-class privileges. They include those for which subscriptions are sold:

* * * * * * * *

"At a reduction to the subscriber, under a premium offer or any other arrangements, of more than 50 per cent of the regular advertised annual subscription price. ***" 39 C.F.R. 22.2(b)(8)(ii)

1. The Petitioner is a New Jersey corporation formed in the latter part of 1962. The business of the Petitioner consists in part (about 45 percent based on percentage of total cash revenues for 1963) of publishing Lovejoy's Guidance Digest. The Digest is issued regularly ten times a year on a monthly basis. The Digest is published from a known office of publication, is composed of printed sheets, and contains information of a public character. The Digest generally consists of about twelve pages.

2. The Digest is designed to supply current information to counsellors at the high school, prep school and college level to guide them in their work of counselling prospective students and their parents about schools, scholarships and closely related matters.

3. About 3000 - 3500 copies of the Digest are, generally, distributed each month of publication. The periodical is not published in July or August when school is not in regular session. The September issue print order is usually 8000 - 9000 copies to permit distribution of sample copies at the beginning of regular new school year.

4. The business of the Petitioner also consists in part (about 55 percent based on percentage of total cash revenues for 1963) of (a) selling individualized educational consulting services, including personal interviews, and (b) buying from publishers Simon & Schuster and Harper & Row, at booksellers' discounts (40 percent off retail price) books authored by Clarence E. Lovejoy, and selling such books to the public.

5. Clarence E. Lovejoy is the President of the corporate Petitioner and of a total of 22 shares of the corporation's common stock he is record owner of 10 shares. His wife is record owner of 10 shares. Each of the remaining shares are owned by his children. The Respondent claims that Clarence E. Lovejoy owns or controls the Petitioner's business and the Petitioner does not appear to contend otherwise.

6. Clarence E. Lovejoy is the author and receives from the publishers royalties from sales of the following four books: Lovejoy's College Guide, Lovejoy's Vocational School Guide, College Scholarship Guide and Lovejoy's Prep School Guide. These royalties are not the property of Petitioner.

&. The book, Lovejoy's College Guide, has been published by Simon & Schuster for about 25 years. About 50,000 copies are sold annually by Simon & Schuster. The price range for sales at retail is generally from about $3.50 to $5.95, depending on whether the book is paper bound or cloth bound.

8. The books, College Scholarship Guide and Lovejoy's Vocational School Guide, have been published by Simon & Schuster for about 14 years. About 20,000 copies of the Scholarship Guide and 15,000 copies of the Vocational Guide are sold annually by Simon & Schuster. Prices at retail range generally from about $2.25 to $4.95, depending on binding, among other things.

9. Simon & Schuster is spending more than $3,000 a year in advertising one or more of the three books -- Lovejoy's College Guide, College Scholarship Guide and Lovejoy's Vocational School Guide in newspapers and other advertising media. Simon & Schuster does not advertise the books in Lovejoy's Guidance Digest.

10. Harper & Row publishes Lovejoy's Prep School Guide. About 5,000 copies are sold each year. The book is sold at retail at prices beginning at $3.95 for the paper bound copy. Harper & Row pays to advertise the book in various media but does not advertise in Lovejoy's Guidance Digest.

11. The four books, have been or will be revised by Clarence E. Lovejoy, every few years or more frequently, so as to embody current data. The books are sold mainly to students or their parents. Some books are sold to or used by the counsellors who receive the newsletter, Lovejoy's Guidance Digest. Each of the four books contains one or more references to the publication of the Digest and the individualized educational consulting services (now the business performed by Petitioner).

12. Royalties earned by Clarence E. Lovejoy equal a sum represented by not less than 5 nor more than 15 percent of the retail price of sale of the four books authored by him.

13. The Petitioner, because of the Digest, earned a small net income, on a cash basis, (about $1,000 in 1963) from the sale of subscriptions and advertising space after deducting reasonably allocable expenses, including salaries, totalling about $11,000, paid to Clarence E. Lovejoy, his wife and other members of his family. The Petitioner, because of business activities other than the Digest, had a small net loss (about $400 in 1963) after deducting reasonably allocable expenses, including salaries, totalling about $15,000, paid to Clarence E. Lovejoy, his wife and other members of his family.

14. Clarence E. Lovejoy earns, for himself or his designees, a net income of more than $12,000 a year in royalties from Simon & Schuster and Harper & Row from the sales of the four books authored by Clarence E. Lovejoy, as aforesaid. The $12,000 figure is computed by applying the minimum 5 percent royalty estimate to the lowest price of the books and the annual sales disclosed by the publishers. If the royalties were at the 15 percent level and the actual retail prices of books sold were known, then the earnings of Clarence E. Lovejoy from royalties would appear to be several times $12,000 a year.

15. On the basis of (a) the confusing similarity of Petitioner's name "Lovejoy's College Guide, Inc." and the name of Clarence E. Lovejoy's best selling book "Lovejoy's College Guide" published by Simon & Schuster and (b) direct advertising and references, expressed or implied, in the newsletter "Lovejoy's College Guidance Digest," to some extent the newsletter (the Digest) stimulates the book sales and the individualized consulting service business so as to enhance Petitioner's revenues from commissions or fees and Clarence E. Lovejoy's income from royalties.

16. The percentage of space in the newsletter (the Digest) that directly promotes or advertises the Petitioner's individualized consulting service or the books, authored by Clarence E. Lovejoy is relatively small (less than 10 percent) and 75 percent or more of the space of the newsletter is used to bring important current information about schools, scholarships and closely related matters to counsellors, who individually or through the schools they are associated with, constitute almost all of the subscribers to the newsletter (the Digest). Some advertising space in the Digest is sold to educational institutions. Space Sold or used for any form of advertising in the Digest is less than 25 percent of total space. Revenue from advertising is less than 20 percent of the revenues from sales of subscriptions to the publication.

17. The primary purpose of the newsletter (the Digest), by design imposed by the Petitioner, is to earn a profit by supplying current information as aforesaid. That purpose would be usefully served if the books, authored by Clarence E. Lovejoy, were not available for sale by Simon & Schuster or Harper & Row. However, the usefulness of the current data in the Digest is augmented because the Digest supplements and, in that sense, is auxiliary to the large body of related data contained in the aforesaid books, authored by Clarence E. Lovejoy.

18. The newsletter (the Digest) helps but is not essentially for the advancement of the business or calling of Clarence E. Lovejoy in writing or revising books on the sale of which he earns substantial royalties.

19. Petitioner's newsletter (the Digest) helps but is not essentially for the advancement of Petitioner's business as a book seller or as a supplier of individualized educational consulting services.

20. Petitioner's newsletter (the Digest) is not essentially for the advancement of any other business of Petitioner, or what may be the main business o calling of Clarence E. Lovejoy.

21. Petitioner's newsletter (the Digest) is not designed primarily for advertising purposes.

22. The regular advertised annual subscription price for the newsletter Lovejoy's Guidance Digest, depends in part on the number of copies purchased as follows: Single copy - $10.00; Ten copies - $25.00; 50 copies - $100.00; 100 copies - $190.00.

23. Variations in the foregoing regular advertised subscription price, on the basis of quantity purchased, take into account the lower unit cost of addressing and mailing the bulk sales.

24. Of 3,500 copies printed of the December 1962 issue of Lovejoy's Guidance Digest about 1,604 copies were sold at the regular advertised single copy subscription price. About 1,727 copies were sold subscribers at the regular advertised multiple copy rates. About 81 copies were distributed free and about 23 copies were sent to advertisers. This distribution is representative of sales and distribution of the Digest.

25. Petitioner's total cash revenues from the sale of subscriptions to the newsletter (the Digest) and advertising in the Digest exceed total reasonably allocable cash expenditures for publication and sale of the periodical.

26. Petitioner has no premium offer or any other arrangements, to reduce by more than 50 percent the regular advertised annual subscription price, which depends on quantity purchased, as aforesaid. Although Petitioner's newsletter (the Digest) states that "Special rates" are available on request to one who wants a large number of copies, there appears to be no significant departures from the regular advertised annual subscription price, which depends on quantity purchased, as aforesaid.

27. Lovejoy's Guidance Digest is not designed primarily for circulation at nominal rates. The Digest is designed primarily for circulation at the regular advertised annual subscription rate, depending on quantity purchased, to bring a profit to Petitioner, compensation in the form of salaries to Clarence E. Lovejoy or his family, and to supply current useful information concerning schools, scholarships and closely related matters to education counsellors or others similarly engaged.

1. Lovejoy's Guidance Digest is not designed primarily for advertising purposes.

2. Lovejoy's Guidance Digest is not designed primarily for circulation at nominal rates.

3. Lovejoy's Guidance Digest meets all requirements for a second-class mail permit.

4. Petitioner should be granted a second-class mail permit for Lovejoy's Guidance Digest.

1. The Respondent disclosed no general practice or history, in postal operations, incompatible with the foregoing findings and conclusions. Nor did Respondent present evidence of any previous grant or denial of a second-class permit incompatible with the foregoing findings. In fact, Respondent did not supply any evidence concerning the subject matter of this initial decision which, on the basis of evidence presented during the course of this proceeding, would require or adequately justify different findings or conclusions than herein made.

Respondent's arguments have been carefully studied but they do not persuade to findings or conclusions other than those herein made.

2. Proposed findings of fact and conclusions of law, as submitted by the parties, have been fully considered. They are adopted to the extent herein indicated. Otherwise they are not adopted because not supported by persuasive evidence or unnecessary for the resolution of the issues presented.

3. The reasoning and views expressed in The Diners' Club, Inc. (P.O.D. Docket No. 1/225; Initial Decision October 20, 1960; Departmental Decision January 27, 1961) appear to be generally applicable and substantially in accord with this initial decision.