In the Matter of the Petition by MONTGOMERY PUBLISHING COMPANY, 160 North Gulph Road, King of Prussia Plaza, King of Prussia, Pennsylvania 19406 Denial of Application for Second Class Mail Privileges for "TODAY'S POST" P.S. Docket No. 1/123August 4, 1972
William A. Duvall Chief Hearing Examiner
APPEARANCES: Benjamin M. Quigg, Jr., Esq. Morgan, Lewis & Bockius 123 South Broad Street Philadelphia, Pennsylvania 19109 for Petitioner Arthur S. Cahn, Esq. Law Department United States Postal Service Washington, D. C. 20260 for Respondent
On March 7, 1972, the Montgomery Publishing Company applied for second-class mailing privileges for the publication "TODAY'S POST." My understanding of the way these matters proceed is that an application is submitted to the Post Office at the office where the publisher desires to have his publication entered as second-class matter and if it appears to the postmaster that there is no question as to the eligibility of the publication, he enters the matter as second-class mail. If there is such a question, the matter is referred to the Headquarters of the Postal Service for a resolution of whatever question is involved. Whether that is precisely the procedure that is followed, I don't think is too material but I state that for the record.
In any event, on June 9, 1972, the Manager of the Mail Classification Division of the Finance Department of the Postal Service advised the publisher that his application for second-class mailing privileges was denied, subject to the right of the publisher within 15 days to appeal the ruling by filing a petition on appeal. This petition was timely filed; the answer to the petition was duly filed; and the matter came on for hearing as scheduled. Both parties were represented by Counsel. Both parties have participated in the examination and cross-examination of witnesses. Counsel have made oral argument and each is persuasive as to his point of view.
The notice of denial of this application informed the publisher, in substance, that the publisher was not issuing his publication in strict compliance with the requirements of that portion of the law governing second-class matter which controls the circulation of the publication and reference was made in that notice of proposed denial to Section 4354 of Title 39 of the U. S. Code as it existed prior to the enactment of the Postal Reorganization Act, which was Public Law 91-375. By regulation, this provision of law has been made applicable to second-class mailing applications today.
The particular provision of law on which the Respondent Manager of the Mail Classification Division relied is subsection (c) of Section 4354 of Title 39, U. S. Code, which reads as follows:
"A periodical publication designed primarily for advertising purposes or for free circulation or for circulation at nominal rates is not entitled to be admitted as second-class mail under this section."
As Counsel pointed out in oral argument, the facts of this situation are pretty well agreed upon. The publication started out with a rather modest list of paid subscribers in February of 1971, with 2658 paid subscriptions in that month, and there has been a gradual but steady increase up to the time when the latest figures are available and that is for the month of June 1972, whereas of June 16 that figure had risen to 9504 paid subscribers.
During this same period of time the number of copies of the publication distributed free has varied between 15,000 and 17,000, and the testimony of the Circulation Manager of the publication is that it is the plan of the publisher that the number of freely circulated copies in the future will decrease as the number of paid subscribers increases.
Now, if the area in which this sales effort is concentrated remains the same, eventually -- assuming successful efforts on the part of the Circulation Department -- the number of paid subscribers would become the majority of the circulation. But if the area in which this free circulation is carried out does not remain the same - if it shifts from one area to another, then the number of copies distributed free could remain the same while the paid circulation generally and gradually increases.
There has been testimony, and there is no reason whatsoever to doubt this testimony, that it is the hope and the objective and the desire and the purpose of the publisher to have the majority of his subscribers as paid subscribers. No objection in regard to any other feature of this publication has been raised except the free subscription question.
The Postal Service takes the view that more than 50 percent of the total circulation of the publication, of any publication, must be to paid subscribers before that publication is eligible for entry into the mails as second-class matter, and the letter from the Respondent to the publisher states this position succinctly as follows:
"The Postal Service considers that a publication is not designed primarily for free circulation when over one-half of the copies circulated are paid for at a rate above nominal by the ultimate recipients, unless other available evidence indicates that the intent of the publisher is to circulate the publication free."
Looking at this matter historically, there was a time when the amount of paid circulation required was more than 50 percent. That question was dealt with in a prior case decided in the administra- tive procedure here in the Postal Service. It was styled Great American Publications and it was P.O.D. Docket No. 1/220, decided May 24, 1960. In that proceeding it was held that the word "principally" means "mainly," "chiefly," "in the main," "in the majority," "for the most part," "more than 50 percent." That case was later decided at the Postmaster General's level on a different issue but that finding in the Initial Decision was not disturbed at that time. Later, it was considerably disturbed when the 65 percent rule was adopted and remained in effect, as pointed out by Counsel for the Petitioner, until it was set aside by the Court in the Sterling House case in October 1971. (I must say at this point that I agree with Counsel for the Petitioner that as I read that case, it certainly suggests rather strongly that the use of the 65 percent rule was not looked upon with favor by the Court.) So the Postal Service then reverted to the use of the 50 percent rule and that was the test used in this case today, the 50 percent test and the word "designed." The word "principally" means today what it meant back in 1960. It means more than 50 percent, more than half.
The Department is approaching the question of the design of a publication by looking to see, and by determining, exactly what is being done, and in this case there is no dispute that approximately two-thirds of the copies of the publication are being distributed free. From that fact, the Postal Service concludes that the design of the publication is to have largely a free circulation by necessity, at least until the paid circulation overtakes it. But by the process of moving from one area to another in seeking subscribers, the proportion of the paid subscribers tends to be kept in the minority. Now, certainly this is no criticism of the efforts of the Circulation Department to get subscribers. That Department has evidenced that it has done an outstanding job by reason of the fact that it has almost quadrupled its circulation in a period of roughly a year and a half.
Thus, we are confronted with the statute which says that publications that are designed primarily for free circulation may not be granted second-class mailing privileges. We are confronted, also, with the interpretation of that statute by the agency of the government to which the administration of the statute has been committed. It regards a publication with less than 50 percent of its subscribers being paid as being ineligible for those privileges.
As Counsel are fully aware, regulations of a Department of the government, so long as such regulations are not inconsistent with law, are given the force and effect of law. There are numerous cases that have so held. One of them is Caha v. United States, 152 U.S. 221 (1894). There are numbers of those cases and it is not necessary to cite them.
When a Department has adopted a regulation or an interpretation of the statute and has followed that interpretation for a number of years, that interpretation is not lightly to be aside. There must be some reason for its being changed. And in this connection, the Supreme Court said in the case of Boske v. Comingore , 177 U.S. 459 (1900), that "those who insist that such a regulation is invalid must make its invalidity so manifest that the court has no choice except to hold that the Secretary has exceeded his authority and employed means that are not at all proper to the end specified in the Act."
It has not been shown by the evidence that has been adduced at this hearing today that the interpretation of the statute by the Postal Service is so unreasonable that it must of necessity be set aside. On the contrary, it would seem to me that the people who administer these statutes relating to second-class matter, which are in themselves complicated, would have to establish some sort of guidelines. In order to have any sort or orderliness in the administration of the statute, some regulation must be used and the language of the statute happens to provide a rule of reason when it says that publications designed "primarily" (or "more than 50 percent") for free circulation are not eligible for second-class entry.
In view of the facts and circumstances revealed by this hearing this morning, I make the following finding of fact:
I find that the publication "TODAY'S POST" is designed primarily for free circulation within the meaning of 39 U. S. Code, Section 4354.
I conclude as a matter of law that the denial of second-class privileges for the publication "TODAY'S POST" is correct, and that it is sustained.
As a second conclusions of law, I conclude that there has been no showing that is persuasive that the implementing regulations and interpretation of this statute by the Postal Service are improper or invalid.
I have considered the other proposed findings of fact and conclusions of law submitted by Counsel for the parties and I adopt them to the extent indicated in this decision. Otherwise, however, such proposed findings of fact and conclusions of law are denied because they are unsupported by the evidence, they are contrary to law or they are immaterial insofar as the issues of this case are concerned.
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