In the Matter of the Petition by ) November 27, 1972 ) 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. 1/123 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 Wenchel, Adam G.
On June 9, 1972, Respondent denied the Petitioner's application of March 7, 1972, for a second class mail permit for its publication "Today's Post". The reason given for the denial is:
"The circulation of the issue of this publication dated March 22 on which the application for second-class mail privileges was based did not meet the qualifying conditions for entry to the second-class of mail since 15,785 copies were distributed free while 9,343 were circulated to paid subscribers.
"The law, 'old' Title 39, United States Code, section 4354(c), provides in part, that a periodical publication designed primarily for free circulation is not entitled to be admitted as second-class mail. This provision is carried forward by section 3 of the Postal Reorganization Act, Public Law 91-375, as implemented by Postal Service Orders 71-9 and 71-10, June 21, 1971.
"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."
Petitioner filed with the Docket Clerk a timely appeal from the denial of the application.
After hearing and argument the Chief Hearing Examiner 1/ issued an Initial Decision upholding the Respondent's denial essentially for the reasons stated by Respondent. The matter is now before the Judicial Officer on Petitioner's appeal from that Decision.
For approximately 30 years prior to 1962 Postal Regulations provided that to be eligible for second-class mail privileges a publication must have a circulation comprising more than 50% of copies paid for by subscribers. 2/ On December 6, 1961, Postal Service Regulations were amended to prescribe that a publication would be deemed to be denied entry if its paid circulation was
39 C.F.R. 1st Ed. § 5.28(e)(i)
39 C.F.R. 1949 Ed. § 34.27(e)
39 C.F.R. 1955 Supp. § 22.2(b)(7) less than 65% of its total circulation. 3/ That regulation remained the published regulation of the Postal Service until September 1, 1972, 4/ when all references to a percentage of circulation were deleted. 5/ The current regulation reads:
"Publications designed primarily for free circulation may not qualify for second-class privileges." In its present form the regulation merely paraphrases its statutory base, viz.:
"A periodical publication designed primarily * * * for free circulation * * * is not entitled to be admitted as second-class mail under this section". 6/ Although the change in the published regulation was not made until September 1, 1972, it is likely that the 65% rule had not been applied since the decision in the Sterling House case in October 1971 7/ and it is clear that it was not applied to Petitioner's application denied on June 9, 1972.
At the present time, therefore, postal regulations only repeat the statutory language; they do not purport to construe it. Respondent, however, cites the administrative practice of applying the 50% rule set out in his denial of the application as the determinant of whether the statutory prohibition against admitting to the second-class of mail matter publications "designed primarily * * * for free circulation * * *".
Petitioner, in his exceptions to the Initial Decision, treats the asserted administrative practice as though it were a regulation and argues it should be set aside as unreasonable. The Initial Decision accepted the administrative practice as a reasonable construction of the statute adopted by the official charged with its administration and on that basis adopted it for application in this proceeding. Appellant's exceptions therefore will be treated as excepting to the Chief Administrative Law Judge's adoption of the 50% rule for application in this case.
The thrust of all Petitioner's exceptions is that the Initial Decision improperly accepted Respondent's test to the effect that a publication whose publisher gives away half of its copies is perforce a publication designed primarily for free circulation and therefore does not qualify for a second-class mail permit. 8/ The Initial Decision, of course, did accept the per se 50% test as valid and pointed out that it represented a long administrative interpretation of the statutory language 9/ broken only by the period during which a regulation imposed the more stringent 65% 10/ test.
I concur in the conclusion that the test is a valid one, although it may be that it ought not be applied in complete mathematical strictness in all cases without being embodied in a specific regulation.
But the Director's decision can also be sustained without reliance on the per sej 50% rule. The Chief Administrative Law Judge found that by reason of Petitioner's circulation practices "the proportion of the paid subscribers tends to be kept in the minority". 11/ The publisher contends that because it is seeking to build the paid circulation of the publication, the publication cannot be said to be designed primarily for free circulation. But that conclusion does not follow here even if the emphasis is placed on the word "designed" that Petitioner seeks. The circulation practices of the publication must be considered as determining the publisher's design. Where, as here, those practices are such that they tend to keep paid circulation in the minority, and as a consequence two-thirds of the circulation is free circulation, the publication can only be said to be designed primarily for free circulation.
For the reasons set forth above, Petitioner's exceptions to findings made in the Initial Decision are denied. Petitioner also excepts to the failure of the Chief Administrative Law Judge to make the following factual findings:
"1. That the circulation efforts of the management of Today's Post are designed and intended to continually increase its paid circulation (N.T. 15);
"2. That the distribution of so-called complimentary copies of Today's Post is directly related to, and in support of its efforts to increase its paid subscriptions (N.T. 13-14)"
It is true that Petitioner does seek to increase its paid circulation on a systematic basis, but the management also has been following a policy, as the Chief Administrative Law Judge found, that has the effect of keeping free circulation grossly in excess of the paid circulation. Whether the distribution method followed supports the effort to increase paid circulation likewise is not a critical fact, since it also has the effect of maintaining the circulation of the publication as primarily free, and since the method appears to be as much in support of the publisher's advertising revenues based in part on the free circulation as in support of increasing the paid circulation.
Petitioner's exceptions to the Initial Decision are denied and Respondent's determination, sustained by the Initial Decision to the effect that Petitioner is not entitled to a second-class mail permit for the publication "Today's Post" because it is a publication designed primarily for free circulation, is affirmed.
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1/ Hereafter referred to by his present title, Chief Administrative Law Judge.
2/ See § 527 § 5(a) Postal Laws and Regulations, 1932
3/ Vol. 26 Fed. Reg., p. 11541, Dec. 6, 1961
39 C.F.R. 1962 Ed. § 22.2(b)(7)
4/ 39 C.F.R. § 22.2(b)(7) was renumbered as 39 C.F.R. 132.2(b)(7) in 1970 (it is also found in § 132.227 of the Postal Service Manual).
5/ 37 Fed. Reg. 17827
6/ Former title 39 U.S.C. 4354(c). The Postal Reorganization Act completely rewrote title 39 omitting the provisions of section 4354. However, the second-class mail category and other classes of mail were preserved by section 3 of the Act "until changed in accordance with chapter 36, subchapter II" of the current title 39 U.S.C.
7/ Sterling House, Inc. v. Blount, U.S.D.C.-D.C., CA 1966-69.
8/ There is no dispute either (1) that the mandate to deny permits to publications designed primarily for free circulation is still in force or (2) that during the 16 1/2 months for which figures are in the record free circulation varied from approximately 86% to approximately 65% of the total circulation.
9/ See title 39 Code of Federal Regulations (1st Ed.) § 5.28(e)(i) based on § 527 § 5(a) Postal Laws and Regulations 1932; 39 C.F.R. 1955 Cum. Supp. § 22.2(b)(7)