In the Matter of the Petition by: Harvey L. Garrett, Publisher, P.O. Box 260, Danville, VA 24541 Proposed Annulment of Second-Class Mail Privileges for "COMMERCIAL APPEAL" P.S. Docket No. 6/148 08/10/79 Duvall, William A., Chief Administrative Law Judge Appearance for Petitioner: Stuart L. Craig, Esq. Carter, Craig & Bass, 126 South Union Street, Danville, Va 24541 Appearance for Respondent: Grayson M. Poats, Esq. Law Department United States Postal Service Washington, DC 20260
On July 17, 1978, Theodore W. Troy, Director, Office of Mail Classification, United States Postal Service, (Respondent) sent to the Commercial Appeal, P.O. Box 260, Danville, VA 24541, a notice that it was proposed to annul the second-class mail privileges of that publication.
The reasons given for the proposed action were stated as follows:
"Section 132.227, Postal Service Manual, prescribes that publications designed primarily for free circulation may not qualify for second-class mail privileges.
The Postal Service considers that a publication is not designed primarily for free circulation when over one-half of the copies circulated by any means are paid for at a rate above nominal by the ultimate recipients, unless other available evidence indicates that the intent of the publishers is to circulate the publication free.
In order to make a determination as to whether a publication is designed primarily for free circulation, it is necessary to consider the distribution f all of the copies which are circulated, in the mails or otherwise.
We have received information from the Postmaster at Danville, Virginia, indicating that 'Commercial Appeal' is circulated primarily free. A review and verification of the circulation of the December 14, 1977 issue of 'Commercial Appeal' indicated that tout of 21,500 copies printed of that issue, only 1,400 copies were paid for at a rate above nominal, and 20,050 copies were circulated free. It appears, therefore, that "Commercial Appeal' does not meet th requirement of section 132.227, Postal Service Manual.
In the notice it was stated, in part, that --
If you do not desire to file a statement showing compliance or intention to comply, you may contest this ruling by filing a petition within 15 days from its receipt in accordance with the provisions of section 954.8 of the attached copy of the 'Rules of Practice in Proceedings Relative to the Denial, Suspension or Revocation of Second-Class Mail Privileges."
On August 28, 1978, the Publisher of the Commercial Appeal, Mr. Harvey L. Garrett (Petitioner) filed a Petition appealing the proposed revocation. In the Petition it is stated, inter alia:
1. The Petition has from its inception published a legitimate weekly newspaper and not an advertising circular or other publication 'designed primarily for free circulation';
2. The regulation which declares ineligible for second class mail privileges those that are 'designed primarily for free circulation' was drafted in 1940 and it, therefore, obsolete in respect to today's weekly newspaper economic situation;
3. Postal regulations should apply only t copies of newspapers distributed by mail and not to those copies otherwise distributed; an
4. The denial (annulment) of Petitioner's second class mail privileges would be a denial of constitutional rights of freedom of the press, freedom of speech and equal protection and treatment under the law.
To the foregoing allegations in the respective subparagraphs of paragraph 4 of the petition, Respondent, in its Answer, pleaded as follows:
4. (1) Deny. Petitioner confuses the provision that only newspapers and other periodical publications may be mailed at the second-class rates (Postal Service Manual 132.211) with the further requirement that publications designed primarily for free circulation cannot qualify for second-class privileges (Postal Service manual 132.227). Even a 'legitimate weekly newspaper' may not qualify for second-class entry if it is 'designed for free circulation.
(2) Deny.
(3) Deny. The regulation applies to publications designed primarily for free circulation and is not limited to publications mailed free of charge. The word 'circulation' includes all forms of distribution of a publication. Philip Maimone, P.S. Docket No. 5/30 (1977); Mary Scarpa, P.S. Docket No. 6/40, Initial Decision (June 13, 1978).
(4) Deny. This issue may not be raised in this administrative proceeding. The Judicial Officer and the Administrative Law Judges of the Postal Service do not determine the constitutionality of statutes nor the validity of Postal Service regulations (39 C.F.R. § 224.1(c)(5)(iii) and 224.1(c)(5)(iv)(B)).
The matter came on for hearing in Danville, Virginia on September 28, 1978. Three Joint Exhibits were received in evidence as follows:
J. Ex. No. Description
1 July 17, 1978 Notice of proposed
annulment.
2 Copy of September 20, 1978 issue
of the "Commercial appeal" with
the indication at the top of
page 1 that it was deposited
into the mail.
3 Same as J. Ex. 2, except that in
the upper right hand corner of
page 1 thee is the statement
that the paper is delivered free
to all Danville residents each
Wednesday afternoon.
The first witness was Ms. Louise Harvey, Secretary-Treasurer and bookkeeper for the newspaper. She gave much of the history of the paper, part of which will appear from Mr. Garrett's testimony. some years ago the paper comprised 14 or 16 pages, whereas at present there are 20, 22 or 24 pages per issue. (Tr. 14)
There is another newspaper in Danville which publishes a morning "Register" and an evening "Bee". These papers carry more international, national, and state news with some local news, while the "Commercial Appeal" focuses primarily on local news. (Tr. 15, 16)
There are mail subscribers to the paper all over the country and there are people in the state, in the United States, and in foreign countries who receive their copies of the "Commercial Appeal" by mail. In Virginia and North Carolina the subscription rate is $8.00 per year. Beyond those areas the yearly subscription rate is $10.00. (Tr. 18, 19).
The decision to convert from a largely paid subscription basis to largely free circulation was made for economic reasons. The decision was made to give up local subscriptions and increase the advertising rates. Advertisers would be getting more exposure of their advertisements and the increased revenue from the advertisements would offset the loss of income from local subscriptions. The intent is to distribute most of the papers free, outside the mail. (Tr. 17, 20)
Because the publisher was unable to appear at the hearing, it was agreed that he could submit a post-hearing affidavit, and, after, he would answer written interrogatories.
Mr. Garrett's statement follows:
Harvey L. Garrett, the petitioner, hereby submits this affidavit in lieu of his personal appearance at the hearing scheduled in this proceeding for September 28, 1978 in Danville, Virginia, before the Honorable William A. Duvall, Chief Administrative Law Judge:
1. There he is the owner and publisher of 'Commercial Appeal', a weekly newspaper, and that the proposed annulment of the second-class mail privileges for 'Commercial Appeal' is the subject matter of the pending proceeding.
2. There he has been associated with Commercial Appeal for approximately 30 years, and that the publication has always been a legitimate weekly newspaper published for the dissemination of information of a public character to the community of the City of Danville, Virginia and surrounding areas of Pittsylvania County, Virginia. the publication has placed particular emphasis upon local events and local news within the City of Danville and Pittsylvania County, Virginia. At all times the function and purpose of the publication has been to educate, to entertain, and to keep the public informed of current news developments.
3. That from the birth of the newspaper in 1939, its format has not changed and today it remains the same type of publication as when it began. Until November 2, 1977, the paper was distributed to paid subscribers by carrier boys who collected at the delivery location. Mail subscriptions were available to persons outside the area served by the carrier by. During these 38 years, the newspaper financed its operation by such paid subscriptions. The subscribers supported the publication because it had significant and substantial value to them which warranted it purchase and delivery to their homes or businesses. In this regard, the paper was published, sold, delivered and mailed in the same manner as any bona fide daily newspaper.
4. The Commercial Appeal never was designed and never existed as a mere advertising circular or advertising publication. It was not initiated or designed as a free publication, nd for 38 years its existence was supported by the purchasing public. The publication came into existence as a legitimate newspaper and was designed only for that purchase. It was founded by concerned citizens who felt that the City of Danville needed a second voice other than the one supplied by the sole existing daily newspaper which published both morning and afternoon editions and had and still has a virtual monopoly over news and editorial coverage within the city. Since the origination and inception of the Commercial Appeal it has had and today continues to have substantial value to the public and to the community in providing that other voice and in covering local news events which have not been adequately covered by the daily papers.
5. that the orignal classification language for second-class mail privileges was set forth in 39 U.S.C. § 4354 (1962). This section, the language of which has been adopted by the present mail classification schedule, provided as follows:
(c) 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.
The Commercial appeal was never designed primarily for advertising purposes nor was it designed to be circulated free. The obvious intent of the above language was to deny second-class mail privileges to advertising brochures and circulars and special interest publications distributed on a cost-free basis.
The publication has significant and substantial value to the public. It is not published as a device to achieve good-will on behalf of such special interest concern or group or to promote special business or commercial interests.
6. That throughout the years of its publication, Commercial Appeal has not changed its advertising news ratio. At all times the paper's content has been approximately 40% news coverage and 60% advertising. This is a standard for weekly newspaper publications and has remained essentially the same throughout the history of the paper. There has never been advertising even approaching the 75% permitted by the postal regulations.
7. That circulation of the publication during the 1940's was approximately 7,000 to 8.000 copies and that this continues until November of 1977. The original subscription price ten or fifteen years ago was $3.00 per year. The subscription price increased to $4.00 after about fifteen years and then went to $6.00 and remained there until November 2, 1977. At the present time the subscription is $8.00 per year. When the paper was distributed by carrier boys, they charged $.10 a copy originally which increased to $.20 by November 2, 1977.
From 1939 until 1977 the public was willing to pay for the newspaper and it existed for those years on a paid subscription basis. At the present time all mail subscriptions are paid for which again has established that the public is willing to pay for the paper and that it has value as a legitimate news publication.
8. That when the publication began in 1939, it was published in tabloid form and had approximately 12 to 16 pages, which would amount to 6 to 8 standard newspaper pages. Prior to November 0f 1977, the publication was being published in the form of 12 to 14 standard pages each week. This ha now increased to 18 to 24 standard pages. Because of the increase in the size of the publication, a staff increase has been necessary and the current publication is benefited by better news content and a greatly increased voice in the community and in community affairs.
9. That as of November 2, 1977, a business decision was made on an economic basis to switch to free local distribution in order to continue publication of the weekly newspaper. This decision became necessary as a result of decreasing revenue, the competition of television, and continuing difficulties in obtaining adequate carrier delivery service.
In order to provide the same news coverage and service to the reading public, the decision was made to increase advertising rates, increase the circulation of the paper, and distribute on a local basis within the City of Danville on a cost-free basis.
10. That in November, 1977, the paper increased its circulation to approximately 21,000 to 22,000 copies, increased its advertising budget, and established itself on a sounder financial basis. The drop in subscription income was more than off-set by the increase in advertising income. At the same time advertisers benefited from the lower effective advertising cost, got more for their advertising dollar, and thereby the economy of the locality was promoted.
11. That in order to accomplish free local distribution, the City of Danville was divided into 11 districts. An adult in each district [was engaged] to deliver the paper on a door-to-door basis. That paper is now delivered every Wednesday between 4:00 and 6:00 p.m.
Although substantial changes in the method of local distribution were made, the paper has remained essentially the same in content, purpose and effect. It ha not become in any sense and advertising publication or a free circular to promote any special interest.
12. That the present subscription for mail subscribers, all of whom pay for the newspaper, is based upon the ability of the publication to mail at second-class rates. It would be an economic hardship, not only to the publication but to its reading public to require that it pay third-class mail rates on the 1400 copies that are mailed out of the City of Danville to subscribers. Present subscribers should not be denied the privilege to receive th paper as they have in the past at a reasonable cost. If there is a substantial increase in mailing costs the publication may have to cease distribution to persons residing beyond the limits of the present delivery service.
From the beginning, the reading public, as evidence by its support of the paper, has established that the publication has substantial and sufficient value. The subscribing public should not be denied the right to obtain the publication at a reasonable rate which may be jeopardized if second-class mail privileges are withdrawn.
The regulation under which this proceeding is brought provides:
Publications designed primarily for free circulation may not qualify for second-class privileges. Postal Service Manual § 132.227; Domestic Mail Classification Schedule § 200.1(a)(7).
There is, therefore, but one issue in this proceeding, and that issue is "is the 'Commercial Appeal' designed primarily for free circulation." There is no question regarding the amount of advertising carried, nor is there any question concerning the nature or quality of the contents of the newspaper and its worth and value to the readers.
The specific points raised in the Petition will be discussed in the order in which they were stated.
1. The publication is a legitimate weekly newspaper and not an advertising circular. These matters have not been questioned.
2. The regulation applicable to the issue in this proceeding has been in effect for many years, although the language has been changed from time to time, and it recently has been re-9ss8ed and published as § 422.223 of the Domestic Mail Manual (39 C.F.R. 422.223; 44 F.R. 39788, July 6, 1979).
3. In Petitioner's third argument it is insisted that "since all appears sent through the mail are paid for in full, its second-class mail privileges should not be terminated."
This argument overlooks the requirement that in determining whether a publication is designed primarily for free circulation, the entire circulation, that is, all copies that, by whatever means, reach the ultimate recipients must be taken into consideration. This requirement was stated in Philip Maimone, PS Docket No. 5/30 (1977), and it was upheld in Philip Maimone v. United States Postal Service, et al., Civ. No. 77-559 (D.N.J. Sept. 8, 1978).
4. Petitioner's last argument raises the questions of constitutional guarantees of freedom of the press and speech and equal protection and treatment under the law.
Respondent correctly points out that Administrative Law Judges do not determine the constitutionality of statutes nor the validity of agency regulations. Granting the accuracy of the foregoing statement, it is pointed out that it has been held that administrative agencies do not have authority to determine whether a statute is constitutional, but they do have authority to decide whether the statute's application to a particular set of facts is constitutional. McGrath v. Weinberger, 541 F.2d 249, 251 (C.A. 10, 1976).
In the light of the holding of McGrath v. Weinberger, it is appropriate to make two comments:
1. This is not a proceeding to keep the 'Commercial Appeal" from being mailed. Basically, it is a proceeding to determine whether it may be mailed at the favorable second-class rates. Freedom of speech and press are not involved.
2. Under the factual situation revealed by this record, not to terminate second-class mail privileges for the 'Commercial Appeal' when such privileges for others similarly situated necessarily and routinely are terminated would be arbitrary and discriminatory against the other publishers. Dixie Highway Express v. United States, 242 F.Supp. 1016 (D.C. Miss., 1965); NLRB v. Mall Tool Co., 119 F.2d 914 (Ct. Cl., 1965).
3. The regulation was properly applied in this case.
Many statements by Petitioner in this record indicate that of the entire circulation, approximately 20,000 - 21,000 copies are distributed free, and 1400 copies are paid for at a rate which exceeds a nominal rate (Petition PP3 and 5(d); Tr. 17-18; Mr. Garrett's post-hearing statement, P10).
The record dictates a finding of fact that the "Commercial Appeal" is designed primarily for free circulation.
It must, therefore, be concluded as a matter of law that the "Commercial Appeal" is not eligible to retain its second class mail privileges.
The Decision of the Director, Office of Mail Classification, to annul the second class mail privileges of the "Commercial Appeal" is correct and that decision is affirmed.