In the Matter of the Application of                          )
                                                                               )
HIGH FIDELITY BROADCASTING CORP.                )
                                                                               ) P.O.D. Docket No. 1/8
for entry of the publication known                         )
as WFMR Program Guide as second-                    )
class matter.                                                           )

Ablard, Charles D.

POST OFFICE DEPARTMENT WASHINGTON, D. C.

DEPARTMENTAL DECISION

The High Fidelity Broadcasting Corporation petitioned the Post Office Department for a hearing on the proposed denial of its application for second class entry for its publication the WFMR Program Guide. WFMR is an FM radio station in Milwaukee owned by the petitioner. The Director, Postal Services Division, the respondent, answered the petition and a hearing was held before Hearing Officer James C. Haynes, Jr. Proposed findings of fact and conclusions of law were filed by both parties but before a Report and Recommendation could be filed the Hearing Officer resigned from the Post Office Department and was unavailable to make a decision in the matter. Hearing Examiner Edward Carlick was designated as Hearing Officer for the purpose of rendering a Report based on the evidence and the pleadings. There were no witnesses at the hearing so there was no question of credibility. The report was made on September 25, 1958, recommending that the application of the petitioner be granted and that the publication be entered as second class mail.

The respondent has excepted to the report of the Hearing Officer and the petitioner has replied to the exceptions. The question for determination is whether the WFMR Program Guide is designed primarily for advertising purposes. The Congress has established four conditions for the entry of the publication as second class matter. In addition to these it has provided that:

"Nothing herein contained shall be so construed as to admit to the second class rate regular publications designed primarily for advertising purposes, or for free circulation, or for circulation at nominal rates." (39 U.S.C. 226).

The Post Office Department has promulgated a regulation which defines "primarily for advertising purposes." (Section 132.226, Postal Manual) The pertinent portion of that regulation provides:

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

...(b) 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."

The problem is one of statutory and regulatory construction. Is the regulation of the Department a reasonable interpretation of the authority granted by the statute and does the publication of the petitioner come within the definition of the regulation? There is no question as to the cultural value of the publication.

The second class privilege is a form of subsidy and the Congress has established the policy as to what publications will be subsidized. ^1/ The question is not one of administrative discretion but the Department must follow the policies of the Congress.

On March 1, 1879, a case concerning a house organ newspaper was decided by the Assistant Attorney General for the Post Office Department. ^2/ He said:

"What is a regular publication designed primarily for advertising purposes? In order to arrive at a proper conclusion, it may be necessary to examine critically two words used in the paragraph, namely, 'designed' and 'primarily.' The term 'design' means to intend, to purpose -- i.e., a paper, the intention or purpose in the publication of which is to advertise. But this must be its primary purpose. The term 'primary' here relates not to the order of time when this purpose was formed, but relates to the character of this design, its dignity and importance. It means, therefore, a regular publication, the principal purpose or object of which is to advertise. But we are told that the principal profit derived from the most of the periodical publications is derived from advertisements, and that, therefore, we are asked to conclude that advertising is principal object of the leading newspapers of the country, and as it was not the design of Congress to include the common, current newspapers of the day in this class, that therefore this definition is unsatisfactory. But we must not confound the desire or wish of the publisher with his design."

The Assistant Attorney General went on to describe two other papers and compare them with the publication under consideration. He said:

"In fact, there is nothing in either one of the papers I have named, or the thousands of others that might be named (for I have instanced these two as leading examples of the two different kinds of papers) to indicate that the publishers have any other business than that of publishing the paper. A careful examination of these papers fails to disclose that the editor of either has any other occupation than publishing a newspaper. The one advertises for nobody, the other for everybody. The paper under consideration pursues neither course; the burden of its editorials and general reading matter is directed in a single channel, viz, that of building up the private business of its editor."

This decision was reviewed by the Attorney General and was affirmed. ^3/ These decisions, although now over eighty years old, have been the guideposts which the Department has consistently followed throughout the years in interpreting this statute. ^4/

The Hearing Officer relies on Lewis Publishing Co. v. Wyman, 182 Fed. 13. That decision concerned a postal regulation providing that sample copies of a publication would be evidence that a publication was primarily for advertising. The court found that this had a direct bearing on the question. The fact that this element is not present in this proceeding does not mean that other elements might not form a sufficient basis upon which to base a similar finding. In this proceeding I believe they do.

The publications of the petitioner must be considered in their entirety. Consideration must be given to the apparent intent of the publisher. The question is one of fact to be determined from the evidence. Opinions of the Attorney General, supra, footnote 3 at 305.

The WFMR Program Guides for May and June were introduced into evidence as respondent's Exhibits 2 and 4. They are small booklets of thirty-two pages each containing the program schedule of WFMR in Milwaukee for the respective months. Additionally, each publication contains a variety of information about classical music on the first five or six pages. ^5/ The publication also contains several advertisements all of which deal in some manner with music. WFMR justifiably calls itself "Wisconsin's Fine Music Station". The guide is published monthly and the subscription rate is $6 a year.

A similar question was before the Department in the matter of the petition of Channel Northwest Inc., H.E. Docket No. 5/178. In that proceeding it was determined that the publication was primarily for advertising purposes. The issues in that case and the present proceeding were essentially similar with the following exceptions:

(1) Although the Channel publication was also a program guide, it was published for the distribution of druggists and was designed to advertise for those druggists.

(2) The Channel publication was for free circulation while this publication is for sale. ^6/

As to the two distinctions between this proceeding and the Channel proceeding, I do not believe that the fact that this publication is not for free circulation materially affects the question. "Free circulation" is a separate reason given for exclusion of matter from the second class privileges and while it may be considered in determining whether a publication is designed primarily for advertising there is no requirement that it be proved before a publication may be found to be primarily for advertising purposes. ^7/ The statute reads in the alternative and the fact that this publication may not be primarily for free circulation does not preclude a finding that it is primarily for advertising purposes. ^8/

The other distinction is one which makes the respondent's position in this proceeding even more compelling than in the Channel matter. In this proceeding the control of the publication is in the hands of the owner of the radio station and it is the business of the station which is being advanced. The fact that this magazine might be of cultural benefit to the community in no way negates the intention of the respondent. It is certainly to the advantage of the petitioner to have the publication as widely disseminated as possible so that persons will observe the listing of future programs, develop an interest in those programs and a desire to hear them and ultimately listen to the petitioner's station. It is a well known fact that the greater the number of listeners, the more economically advantageous is the operation of a communications medium. I agree that the publication has some civic and cultural purposes but it is not required that it be solely for the advancement of the business but only that it be essentially for the advancement of the main business of the owner.

The respondent has alleged that there is an "economic circle" which proves that the publication is primarily for advertising purposes. His reasoning is that the publication carries the advertisements of firms who support the station and that readers are urged to patronize those firms so that the programs may continue over WFMR. The petitioner says that this argument is no different than that which could be made as to any publication. He contests the validity of the argument saying that some of the publication's sponsors do not sponsor radio programs. While this may be true the fact remains that the following appears on page 32 of Exhibit 4:

"Commercial announcements represent a major source of revenue for WFMR, and help to insure continued operation in the unique field of fine arts programming in Milwaukee. The sponsors, who are carefully screened by WFMR for excellence in their respective fields, can measure the effectiveness of their announcements only by the response these announcements evoke from the station's audience. By patronizing the businessmen whose messages appear on WFMR you will be accomplishing a two fold purpose: first, you will be assured of receiving unequalled excellence in goods and services because of the station's policy of accepting for sponsorship only those places of business whose integrity and reputation are unimpeachable, and second, mentioning that your patronage came about as a direct result of his commercial announcements on WFMR will help him gauge the effectiveness of his radio advertising. This can only result in continued sponsor support of the station and a more secure future for lovers of fine music broadcast in good taste.

Here is a list of our commercial sponsors who are also friends of WFMR."

There follows a list of sixteen firms.

I believe that this presents a different situation from that existent with the ordinary publisher. In the ordinary publication advertisements are carried which advertise the product of the advertiser and one is induced to patronize the firm because the product appeals to the reader. The publication carries the advertisement because the advertiser pays for it. In this instance the reader is urged to patronize the firm not because the product is appealing but for the totally incidental reason that the main and principal business of the petitioner is dependent upon those advertisers.

Upon an evaluation of these publications in the light of the applicable statutes, regulations and decision, I believe that the primary purpose and intent of the publication is to advertise WFMR. Some of the reasons for this conclusion are that the design of the publication is to attract listeners to WFMR, to emphasize the importance of the station in the Milwaukee community and to encourage readers to support station and program sponsors.

At the time of the hearing it was developed that one half interest in the WFMR Program Guide was owned by Mr. Hugo Koeth, who had no interest in the High Fidelity Broadcasting Corporation. Mr. Koeth had at one time been a partner in the corporation but had established the Koeth Broadcasting Corporation which operated a second FM station in the Milwaukee area. This station and WFMR are the only two FM stations in the area. It was stated by counsel for the petitioner that Mr. Koeth apparently intended to put the program schedule of his station in this same magazine at some later date. This is not material to the question at issue and even assuming, arguendo, that this had in fact been

done or will be done in the future, this publication would still be a house organ of the two FM radio stations designed primarily for advertising purposes.

I therefore conclude that the publication of the petitioner is precluded by laws and regulations from entry to the mails as second class matter.

The recommendation of the Hearing Officer is rejected.

1/ Hannegan v. Esquire, 327 U.S. 146, 151.

2/ Opinions of the Assistant Attorney General for the Post Office Department, 400, 402.

3/ 16 Opinions Attorney General 303. The Hearing Officer refers briefly to this decision and the decision cited in footnote 1 at page 4 of his report.

4/ 8 Opinions of the Solicitor of Post Office Department 50.

5/ In discussing a newspaper found to be primarily for advertising purposes, the Assistant Attorney General said: "Nor does it materially alter the case that such a paper contains a large proportion of reading matter of interest to the general public." Footnote 1, supra, at 405. The Attorney General expanded on this theme in his opinion approving the decision of his subordinate saying: "The fact that it is devoted to literature, science, art or some special industry, and that it has a legitimate list of subscribers, may exist, and yet it may be one designed primarily for advertising purposes. If this be the case, it is not entitled to admission into the second class of mail matter." Footnote 3, supra, at 305.

6/ However, according to paragraphs 7, 11 and 12 of the affidavit of James G. Baker, President of the High-Fidelity Broadcasting Corp. (Petitioner's Exhibit 5), certain persons and organizations receive free copies of the publication.

7/ "As to the statement that it is not published at nominal rates, that has nothing to do with the question as to whether its primary purpose is that of advertising. Papers that are published for free circulation or at nominal rates of subscription form adistinct class. The paper in question may have a large and bona fide subscription list from which its proprietor may derive a large income, it may possess all the paraphernalia of a newspaper, possessing a known office of publication, issued in regular numbers, conveying intelligence of passing events, etc., and yet be a regular publication designed primarily for advertising purposes." Footnote 1, supra, at 402.

8/ 39 U.S.C. 226 "..regular publications designed primarily for advertising purposes, or for free circulation, or for circulation at nominal rates." (Emphasis supplied).