In the Matter of the Petition by ) December 23, 1983 ) BANNER PUBLICATIONS, INC. ) 6560 Superior Avenue ) Sarasota, FL 33581-5836 ) ) Denial of Application for Second- ) Class Mail Privileges for ) "INTERMISSION" Magazine ) P.S. Docket No. 17/32 APPEARANCE FOR PETITIONER: James W. Freiburger, pro se Publisher Banner Publications, Inc. 6560 Superior Avenue Sarasota, FL 33581-5836 APPEARANCE FOR RESPONDENT: Jeffrey H. Zelkowitz, Esq. Law Department United States Postal Service Washington, DC 20260-1143 Mason, Randolph D.
This proceeding arises out of a petition filed by Banner Publications, Inc., ("Petitioner") from the ruling of the Director, Office of Mail Classification ("Director"), denying the application for second-class mail privileges for the publication "Intermission." In its timely filed Answer, the Respondent Postal Service stated that the application was denied because Intermission is "primarily designed for advertising purposes" within the meaning of Domestic Mail Manual § 422.231. In taking this position, Respondent also stated that the publication is ineligible because it falls within the three examples set forth in subparagraphs (b), (c), and (e) of Section 422.231. Respondent's Answer requests that the decision of the Director be upheld.
A hearing was held by the undersigned on August 25, 1983, in Sarasota, FL. Both parties were afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. Both parties filed proposed findings of fact and conclusions of law which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise they have been rejected as irrelevant or contrary to the evidence. Based on the entire record herein, including my observation of the witnesses and their demeanor, the exhibits, stipulations, and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:
1. Petitioner is Banner Publications, Inc. ("Banner"), located at 6560 Superior Avenue, Sarasota, FL 33581. Banner has been publishing Intermission since August of 1982. Prior to that time Intermission was owned and published by Oliver Publishing, Inc.
2. Intermission is a custom-designed publication, which primarily consists of program listings and other material concerning the programming offered on the cable television system operated by Storer Cable TV of Florida, Inc. ("Storer") in Sarasota, FL (Tr. 79-91; R-4 at 2, item 1).
3. Storer offers its customers three types of service, with separate charges for each. First, it provides a "basic cable" service which includes all area network and independent stations plus three additional channels featuring news, sporting events, and movies. For an additional charge, subscribers may gain access to the "tier channels" consisting of about 14 channels featuring sports, news, weather, music, health and religion. The third type of service offered consists of three "premium" channels presenting first-run and classic movies: Home Box Office (HBO), Spotlight, and Showtime. Separate charges are made for each of the premium channels (R-12 at 35-37).
4. Subscribers pay either $7 or $8 for the basic cable service depending on geographical location. The additional charge for the tier channels is $3. Persons who wish to subscribe to one or more premium movie channels must pay an additional fee for each channel (R-4, § 5).
5. There are about 28,000 customers who receive the basic cable service (Tr. 22). Since Intermission does not describe the programming on local channels, these customers do not receive copies of the magazine. On the other hand, subscribers to the tier channels and premium channels automatically receive monthly copies of Intermission. There is no additional charge for the monthly magazine; Storer automatically instructs Banner to send Intermission to all subscribers of the tier channels and premium channels (Tr. 12; R-18, R-19).
6. Prior to the initial publication of Intermission, Storer published its own magazine for subscribers entitled "Premium Channel Guide" (Tr. 34). Subsequently, on September 2, 1981, Storer entered into a contract with the Oliver Publishing Corporation to produce Intermission magazine (R-6). When Banner Publications, Inc., purchased the magazine from Oliver in August of 1982, Banner became bound to the terms of Oliver's contract with Storer (R-4, § 3). That contract provides, in part, as follows:
(1) In the production of the monthly news magazine for STORER, the PUBLISHER agrees to provide the following services:
(a) Format (i) Supervise Mailing
(b) Design (j) Financing
(c) Editorial Contents (k) Bookkeeping
(d) Photography (l) Sales
(e) Art (m) Sales Promotion
(f) Type Setting (n) All Salaried Employees
(g) Paste-up (o) Management
(h) Handle Printing
(2) STORER shall have the right to examine manuscripts submitted for publication and to suggest such revisions or additions as it may deem necessary. STORER is to have final editorial approval and agrees to observe the deadline established by the PUBLISHER.
(3) On approval of the magazine contents, PUBLISHER agrees to publish and distribute the magazine by mail to a current subscriber list, provided by STORER, at the magazine's expense. Physical characteristics and description of the magazine shall be as follows:
SIZE: 8 1/2 inches by 11 inches
PAPER QUALITY: 30 lb. newsprint pages inside
BINDING: Stapled
COVER: Full Color
PUBLISHER shall maintain standards of quality and distribution consistent with the policies and objectives of STORER.
(4) This contract shall be for a period of five (5) years from the date of said contract. Either party may renew at the end of the five (5) year period, provided that the party gives the other party a ninety (90) day notice of its intention to renew. In the event that the PUBLISHER sells its publishing business, STORER shall have the right of first refusal. Breach of any of the conditions of this contract shall give either party the right to immediately terminate.
(5) The PUBLISHER shall have exclusive right to publish and distribute the magazine to all areas served by the Sarasota System.
(6) PUBLISHER warrants that it has not and will not infringe any existing copyrights excepting only reproduction of copyrighted materials with written permission that it has not and will not libel any person and that it will indemnify and hold harmless STORER against any claim, demand or recovery by reason of said infringement, libel, mistake or other act of omission or commission.
(Exh. R-6)
7. Intermission is basically a monthly viewing guide for subscribers to the tier and premium channels. It lists all of the programs appearing on those channels for each day of the month. The magazine does not compile these pages of program schedules and movie indices; these listings are supplied to Banner by a separate computer printout program service and reprinted in Intermission (R-13.)
8. In addition to the program listings, Intermission contains articles about the movies and other feature presentations for the month. Also, articles frequently describe, in favorable terms, movies and features that will be shown in future months. In addition, Intermission describes how to order the services provided by Storer, frequently describes in its articles what services are offered by Storer, and routinely provides Storer's telephone numbers for the purpose of billing, repairs and sales. Banner did not consider the latter as advertisements.
9. "Spotlight" is a premium channel which is owned, in part, by Storer. As in the case of the other premium channels, Intermission frequently has articles highlighting the special presentations which will be seen on "Spotlight" (R-10 at 10; Tr. 85).
10. Although Intermission has made a few critical comments regarding some individual movies or programs, the vast majority of its comments are favorable (Tr. 79-91, 98-99). Also, it has pointed out that Storer does not choose the programs shown on the cable channels and that readers should complain directly to the programmers (R-17 at 15, 23).
11. As indicated in the contract, Storer has the right to examine manuscripts submitted for publication and to suggest such revisions or additions as it may deem necessary --Storer has final editorial approval (Exh. R-6). Storer has exercised this control to a limited extent. For example, it has checked for errors in programming times and dates and approved or disapproved of proposed answers to letters to the editor (Tr. 111). Matters reflecting Storer company policy were reviewed by Storer (Tr. 111). Storer also made other suggestions which were adopted by Petitioner, and which often coincided with Storer's advertising campaigns (Tr. 37; R-6, § 2). Storer also made certain decisions on format and contents (Tr. 76-77). After the Postal Service began its investigation of the instant application, Storer and Petitioner's predecessor decided to delete from the cover the words "The Monthly News Magazine from Storer Cable TV" (Tr. 76).
12. Intermission's survival depends upon financial support and assistance from Storer. First, Storer purchases all 25,000 copies of the magazine for a flat fee of $2,500 per month (Tr. 12-13). Banner retains about 300 of these copies to show potential advertisers (Tr. 15). By arrangement with Storer, Banner mails about 22,000 copies to Storer's subscribers on a mailing list provided by Storer (Tr. 11). There are no other purchasers or subscribers to the magazine (Tr. 24). Intermission does not sell the magazine directly to the subscribers since the latter receive their copies by contract with Storer (Tr. 11, 17). After mailing the copies to Storer's subscribers, the remaining 3,000 copies are sent directly to Storer. The latter are distributed free as sample copies by Storer's salesmen to introduce potential cable subscribers to Storer's services (Exh. R-5; R-4, § 7, Tr. 68). They are also given to new subscribers and to old subscribers who have lost their copies of the magazine (Tr. 69).
13. Storer also provides financial support to Intermission by purchasing advertisements and providing the magazine with editorial matter (Tr. 35-36; R-12 at 17; R-17 at 21). Storer also provides Intermission with a mailing list and market which attracts advertisers to the publication and provides the magazine with another source of revenue (Tr. 33, Tr. 40, Tr. 13).
14. The existence of Intermission magazine is clearly beneficial to Storer's business. As previously mentioned, Storer uses the magazine to attract new customers (Tr. 68-69; R-5, R-4 § 12). In addition, by constantly featuring movies and programs that will appear in future months, the magazine encourages existing subscribers to the cable system to renew their subscriptions each month. More importantly, however, the magazine encourages subscribers to purchase additional services provided by Storer (Tr. 38). For example, an HBO subscriber will be encouraged to purchase "Spotlight" by articles favorably describing that service. The magazine also has the purported intention of improving Storer's image (R-7 at 5, 6, 9; R-8 at 35). It provides information on the cable system and its use and information about Storer's non-television services such as FM hookups and television converters. Finally, the magazine is beneficial to Storer because its customers not only expect but demand that a program guide be provided (Tr. 41).
15. Intermission is primarily designed for advertising purposes because it is controlled by Storer and conducted as an auxiliary to and essentially for the advancement of Storer's cable television business.
1. The primary issue presented for decision is whether Petitioner's application for second-class privileges should be denied under the provisions of § 422.231(b) 1/ of the Domestic Mail Manual. That section provides, in pertinent part, as follows:
General publications primarily designed for advertising purposes may not qualify for second-class privileges. These include, but are not limited to:
. . .
b. Publications owned or controlled by individuals or business concerns and conducted as an auxiliary to and essentially for the advancement of any other business or calling of those who own or control them.
Respondent takes the position that Intermission is basically controlled by Storer and conducted as an auxiliary to and essentially for the advancement of Storer's cable television business. For the reasons set forth below, I agree with this conclusion.
2. First, I have determined that Intermission is "controlled" by Storer. Petitioner's contract gives Storer final editorial approval. Storer has the right to examine manuscripts submitted for publication and to suggest such revisions or editions as it may deem necessary. The publisher is required to maintain standards of quality and distribution consistent with the policies and objectives of Storer. After the execution of the above contract, Storer exercised, to some extent, its contractual right to review and make changes. Moreover, Petitioner's survival depends to a large extent on Storer's financial support. This effectively gives Storer additional control over the magazine. In this regard, it is noted that Storer purchases for a flat fee every copy of Intermission that is printed. In addition, Storer purchases advertisements, provides editorial matter, and provides a mailing list which attracts advertisers to the publication.
3. I have also concluded that Intermission is "conducted as an auxiliary to and essentially for the advancement of" Storer's cable television business. 2/ Intermission is clearly an "auxiliary" to Storer's cable business because it describes the programs and services and thereby facilitates the customers' use of the cable system. Also, the magazine is "essentially for the advancement of" Storer's business because (1) it favorably describes (with few exceptions) the programs and services; (2) it encourages existing cable subscribers to continue renewing the services on a month-to-month basis; and (3) it encourages existing subscribers to purchase additional services from Storer.
4. Whether a particular publication is considered primarily for advertising purposes within the meaning of § 422.231 of the Domestic Mail Manual is a question of fact which must be determined on a case-by-case basis. Petitioner argues that magazines similar to Intermission have been granted second-class mailing privileges. In the first place, the undersigned would not be bound by a decision of the Director even if the facts surrounding the publication in question were similar to those in the instant case. Moreover, Petitioner has failed to produce any evidence of factually similar cases. Petitioner simply introduced two guides for cable television viewers which have been given second-class privileges (Exhs. P-1 and P-2). It appears that both of these magazines are published on a national basis for many cable companies. There is no evidence of record that these magazines are controlled by the cable companies which they serve.
5. Finally, Petitioner argues that if the application is denied, Banner should be awarded damages in the amount of the difference between third-class bulk rates paid and the second-class postage rate for a portion of time that the application was pending. Petitioner claims that the Director took an excessive amount of time to rule on the application; that the denial procedure should have taken no more than six months; and that the damages should be computed for the period of time in excess of six months. First, it should be noted that Petitioner's application was filed on April 30, 1982, and that the Director issued his denial of the application on July 6, 1983 (Exhs. R-1, R-20). There is no evidence that this 14 month period was unduly long under the circumstances or otherwise constituted an undue hardship on the Petitioner. However, even if such evidence had been adduced, the undersigned would have no jurisdiction to consider Petitioner's claim for damages. Administrative Law Judges have jurisdiction by virtue of authority granted by statutes and regulations, and no such authority has been conferred for claims of this nature.
6. Accordingly, it is concluded that the decision denying Petitioner's application for second-class mail privileges is sustained and the appeal is denied.
1/ Respondent also argues that the application should be denied under subparagraphs (c) and (e) of § 422.231. They prohibit second-class rates for:
c. Publications that consist principally of advertising and articles about advertisers in the publication.
. . .
e. Publications published under a license from individuals or organizations and feature other businesses of the licensor.
In view of my conclusions with respect to subparagraph (b), I need not discuss the issues raised by subparagraphs (c) and (e).
2/ On brief, Petitioner argued that the magazine is not "solely" for the advancement of Storer and pointed out that some of the articles in the magazine might be useful to non-cable viewers since some of the movies reviewed are also shown on network television. Even if I were to accept Petitioner's contention, and I do not, it would not affect the disposition of this case. The test is not whether the magazine is "solely" for the advancement of Storer, but whether it is "essentially" for such advancement.