In the Matter of the Petition by                                )
                                                                               )
DEADLINE DATA, INC.,                                           )
1078 Madison Avenue,                                          ) P.O.D. Docket No. 1/149
New York 28, New York,                                      )
                                                                               )
for a hearing upon its application                           )
for second-class entry of "DEADLINE                   )
DATA ON WORLD AFFAIRS."                                )

APPEARANCES:                                                     Carl L. Shipley, Esq.
                                                                                1366 National Press Building
                                                                                Washington, D. C.
                                                                                for the petitioner
                                                                                Adam Wenchel, Esq. and
                                                                                Matthias Mahorner, Esq.
                                                                                for the Director of
                                                                                Postal Services

Ablard, Charles D.

POST OFFICE DEPARTMENT Washington 25, D. C.

DEPARTMENTAL DECISION

On April 3, 1959, the petitioner, Deadline Data, Inc., filed an application with the Postmaster at New York, New York, for second-class mail privileges under 39 U.S.C. 224 and 226 ^1/ for its publication, "Deadline Data on World Affairs." The Director of the Division of Postal Services of the Post Office Department, the respondent, notified the petitioner on April 24, 1959, that he proposed to deny the application. The Director contended that the publication was a card index reference service which "consists of a group of cards, printed only on one side, which are to be filed for reference purposes" and not a periodical publication formed of printed sheets as required by the statute. The petitioner appealed from the ruling by petition and the respondent Director filed answer June 8, 1959. In the answer additional grounds for the ruling were introduced. These were that the publication was circulated at nominal rates and that the petitioner did not have a legitimate list of subscribers. The petitioner initially objected to the raising of new issues but at the hearing the parties agreed to the issues.

A hearing was held before a hearing examiner who rendered an initial decision on August 28, 1959, in which he set aside the proposed action of the Director of Postal Services and granted the application of the petitioner. This matter is now on appeal before me, the respondent Director having filed exceptions to the initial decision and the petitioner having replied.

Deadline Data is a unique publication which consists of three items:

1. a metal filing cabinet designed to hold 5 x 8 inch cards.

2. a set of approximately 3500 5 x 8 inch cards constituting background information which are divided by topic.

3. groups of 40 to 50, 5 x 8 inch cards containing information taken from current news reports and issued weekly to subscribers.

Item three consists of both additions to and replacements for the background cards which constitute item two. Second-class mail privileges are not sought for items one and two since these are shipped by express to the subscriber upon payment of the subscription fee. When a subscriber cancels his subscription the petitioner requests the return of the cabinet and the cards. When this organization began in June, 1956, there were only 2500 cards in the initial set (Tr. 90). The subscription price for the service is $250 a year. The minimum subscription price is $62.50 for three months. (Tr. 21) The price is reduced to $200 for educational institutions and for duplicate subscriptions to any single subscriber. Mr. Victor Bator, the President of the petitioner corporation, testified that the publication was begun after a market survey indicated that there was a need for a publication on world affairs to bridge the information gap between the past history encyclopedias and the reported current events of daily newspapers.

As agreed by the parties at the hearing there are four issues:

1. Is Deadline Data a periodical publication?

2. Is Deadline Data formed of printed sheets?

3. Is Deadline Data designed for circulation at nominal rates?

4. Does Deadline Data have a legitimate list of subscribers?

The examiner ruled for the petitioner on all four questions and the respondent has excepted to the findings on each.

Periodical Publication

The first issue is whether Deadline Data is a "periodical publication." The courts have seldom been called upon to define this phrase.

In Houghton v. Payne, 194 U.S. 88, 96, (1904) the Court said:

"A periodical, as ordinarily understood is a publication appearing at stated intervals each number of which contains a variety of original articles by different authors, devoted either to general literature of some special branch of learning or to a special class of subjects. Ordinarily each number is incomplete in itself, and indicates a relation with prior or subsequent numbers of the same series.... the publication must be a 'periodical publication' which means, we think, that it shall not only have the feature of periodicity, but that it shall be a periodical in the ordinary meaning of the term."

The Supreme Court held in Hannegan v. Esquire, 327 U.S. 146 (1945) that the second-class privilege is a form of subsidy and that all matter entitled to the privilege must strictly comply with the conditions imposed by Congress. If the matter does not fall within the provisions provided by the Congress, it must be carried at the third or fourth-class rate of postage.

In Smith v. Hitchcock, 226, U.S. 53, 58 (1912), the Supreme Court said:

"It must be taken as established that not every series of printed papers published at definite intervals is a periodical publication within the meaning of the law, even if it satisfies the conditions for admission to the second class."

The respondent has cited several persuasive authorities for the proposition that a "periodical" in the ordinary sense of the term means either a magazine or a newspaper. While there might be variations on these two types of items I do not believe that a card index reference service is a periodical within the ordinary meaning of the term.

The petitioner advertised his service as follows:

"A NEW TYPE OF REFERENCE SERVICE: A flexible card file brought up to date every week, designed for those who need quick and easy access to current and background on world affairs.*** You do not have to buy back volumes, yearbooks, or encyclopedias to get background information.*** A brief index of main events and trends begins the series of cards on each major country.*** Its more than 3000 cards, 5" x 8" in size, are shipped to you (prepaid) in a neat 4-drawer steel desk-top file cabinet.*** Index of main events and trends in Inter-American relations."

The petitioner compares Deadline Data to the United States Code and Time Magazine. He contends that while the code would not be entitled to second-class entry, Deadline Data should be since it is more comparable to a weekly periodical which may or may not be used in conjunction with the past issues. Petitioner stated that "its value lies in its current news value." (Tr. 111) I think the comparison that the petitioner draws is a valid one but I disagree with his conclusion. I think the service of Deadline Data is much more closely parallel to that of the U.S. Code than it is to Time Magazine. Like the supplement to the U.S. Code the supplements to Deadline Data make changes and bring up to date basic documents. It is rather difficult to say which is the most valuable, the basic document or the supplement.

In some respects, it all depends on when the problem is appraised. Which of the two is the more valuable to the person

who has been a subscriber to Deadline Data for approximately one week and has just received his first shipment of 40 to 50 cards? There is no doubt in my mind that at that particular stage the value to the subscriber lies in the basic set of 3500 cards and not in the supplement. The same can be said of a user of the U.S. Code. When the subscriber to the code receives the basic volumes that is all he has. At the end of the first year he receives a small supplement. Each year, he receives a new supplement which usually grows in size and scope. Finally, if no new basic volume is issued which incorporates the supplement, the supplement becomes more important than the original volume. As an example witness what has happened to Volume 39 of the U.S. Code which contains the statutes pertaining to the Post Office Department. The same might happen to an early subscriber of Deadline Data. After several years the supplemental cards would probably become the all-important part of the service rather than the original basic set of cards.

The examiner found that one could be advised as to current happenings from a perusal of the current issues without resorting to the background materials. He admitted, however, that there were references by dates of previous issues with which the reader might desire to become acquainted to refresh his recollection of related events. (Initial Decision, page 12) While one can flip through the sets of 40 to 50 cards issued each week and glean some information about happenings in the world, I cannot believe that one would subscribe to the service just for these cards since there are many publications which would have this information plus the background material in one weekly issue.

The petitioner contends that the basic document would be of no value without the current weekly supplement. While this may be true I do not believe that the current weekly supplement would be of much value without the basic cards. They are inter-related and I believe that it is one service.

Other factors which bear on this problem is that the size of the basic set has apparently been increasing in number from 2500 to 3500 in a little over three years (Tr. 74), and that the petitioner replaces lost cards for a subscriber. Some of the cards issued weekly replace old cards and others are new additions. This would seem to indicate that it is the entire service as an entity which is of value rather than the supplementary cards.

Applying the test laid down in Houghton v. Payne, supra, I believe that Deadline Data is basically a reference service and that the weekly supplements are similar to supplements of the U.S. Code in that they only correct and bring up-to-date the basic document. While I agree with the hearing examiner that the subscribers to Deadline Data probably provide immense segments of

the public with valuable information and probably more people receive information from this publication as printed rather than if it were printed in a more conventional form, I do not agree with his conclusion that Deadline Data is a periodical publication within the meaning of the statute and the applicable judicial decisions. ^2/ The exception of the respondent is allowed.

Printed Sheets

The respondent excepts to the finding of the hearing examiner that Deadline Data is formed of printed sheets. The statute provides that a periodical publication "must be formed of printed sheets" to be admitted to the second-class. Prior to an amendment in 1958, ^3/ Section 226 of the Code read as follows:

"It must be formed of printed paper sheets without board, cloth, leather or other substantial binding, such as distinguish printed books for preservation for periodical publications."

The legislative history of this act reveals that Congress made the pertinent amendment which deleted the word "paper" because:

"There is an increasing use of foil laminates and other material not constituting 'printed paper sheets' for advertisement purposes. The proposed elimination from the law by sections 203(e) and 203(f) of the Senate amendment of the requirement that the second-class mail publication sheets be of paper will permit the Post Office Department to revise its rulings in this area in keeping with existing circumstances and conditions and modern practices." ^4/

The petitioner contends that the purpose of this amendment was to express a clear intention to liberalize the requirements for entry to the second-class. On its face the statute does not warrant such a construction and in view of the above language of the Congress I cannot construe the amendment so broadly.

Webster's New International Dictionary, Second Edition, unabridged, page 2308 defines "sheet" in the pertinent connotation as follows:

"A broad piece of paper, whether folded or unfolded, blank or written or printed on; esp. a single piece of any of the sizes prepared for writing on or printing on," or "In general, a piece of any thing, or an extent of some substance, that is usually very thin in relation to its length and breadth; as a sheet of paper.."

The same dictionary defines "card" on page 404 as follows:

"A flat, stiff, usually rectangular, piece of paper or thin pasteboard, used for various purposes, as for writing or printing on..."

Deadline Data is printed on pages of heavier than ordinary paper, measuring approximately 5 x 8 inches. The 8 inch measurement is the width of the card and the 5 inch is the length. It is stiffer than ordinary paper and is rectangular.

The respondent contends that the publication is not entitled to entry because the cards do not contain printed matter on both sides. The hearing examiner perused the cards on a particular subject and discovered that twenty percent of them are printed on both sides. While he is correct that some of the cards are printed on both sides, the fact remains that most of the cards are not printed on both sides. Postal regulations on the subject, Section 132.483 of the Postal Manual (39 C.F.R. 22.4(h)3) provides that "blank sheets may not be carried as pages." No percentages are enumerated.

From the use of the service provided by Deadline Data I believe that it consists of separate printed cards intended to be used as future reference service by the subscribers when they are filed in the cabinet. Thus the set of cards issued weekly does not form a single unit but is only part of the larger unit contained in the steel filing cabinet. When the subscriber receives his set of 40 to 50 cards, he does not file this away as a single document but rather he separates them by topic and puts them in their proper place in their filing cabinet. I conclude that the part of Deadline Data for which entry is sought is not "formed of printed sheets" within the meaning of the statute. The exception is allowed.

Nominal Rates

The respondent excepts to the finding that Deadline Data is not circulated at nominal rates. He contends that the principal value of the Deadline Data service is in the filing cabinet and the antecedent cards. Mr. Bator testified that he purchased the filing cabinets at a cost of $5.20 each. He also testified that the initial cards were of no value without the subsequent weekly issues and that the entire set of 3500 cards could be reproduced

for approximately $15.00. The respondent contends that the witness disregarded the cost of compiling the data which goes on the cards and that when this is taken into consideration the basic set of cards and the filing cabinet constitute the major part of the cost of the publication.

While this would seem to be a good argument, no proof was offered as to the cost of compiling this data. Very little concrete testimony was elicited, admittedly difficult for the respondent to do, about the cost of compiling the basic material. While this cost factor should not be completely disregarded, it would seem that as of any given date the basic estimated cost would depend more on the cost of research and compilation of data to go on future cards than in reprinting old cards for which the information had already been compiled or for the cost of compiling the data for these cards. In addition, we have the testimony of Mr. Bator that the purpose of the operation was to make a profit. No advertising is carried by Deadline Data so the publication is not one primarily for advertising purposes, the traditional type which is distributed at nominal rates. ^5/

I conclude that although the owner of the petitioner corporation probably did not give full consideration to the cost of compiling the basic cards, the bulk of the income received from subscribers would be spent in research and compilation of future cards to be issued weekly. The exception of the respondent is disallowed.

List of Subscribers

The statute requires that a second-class publication have a "legitimate list of subscribers." Section 132.225 of the Postal Manual (39 C.F.R. 22.2(b)5) states that "publications must have a list of persons who have subscribed by paying or promising to pay for copies to be received during a stated time." One of the reasons for finding that a publication does not have a legitimate list of subscribers is the fact that the list is made up of persons who subscribe at a nominal rate. This matter has been previously discussed and, in view of the finding that this publication is not primarily for circulation at nominal rates, this ground for a finding for a lack of legitimate list of subscribers is not meritorious. The petitioner introduced into evidence a list of its 232 subscribers which consists of 33 domestic and 12 foreign newspapers, 50 educational institutions, 20 foreign embassies, 10 individuals, 12 governmental organizations and a variety of others. In Myrick v. U.S., 219 Fed. 1, 4, (C.A. 1, 1915), the Court said:

"The phrase 'a legitimate list of subscribers' evidently means a list of subscriptions taken at more than a nominal price, and the price must have been paid, or the subscriber, or someone in his behalf, be under obligation to pay the agreed price; and that subscriptions taken at a nominal price, or without price, do not answer the requirements of the statute in this particular and cannot be counted in making up a legitimate list."

The respondent contends that the burden is on the publisher to show that he is in compliance with the statute, and to show the legitimacy of the list of subscribers. I believe that the petitioner fulfilled his obligation to the Director by furnishing the list of subscribers and absent a showing that the subscriptions are at a nominal price or some other valid reason the list should be presumed legitimate. Although it is true that many of these subscribers are governmental organizations and private institutions, this does not prove that the list is not legitimate. I am at a loss to understand exactly what else the respondent would have expected the petitioner to prove on this point.

The respondent urges that since the persons did not buy all of the cards or the filing cabinet but rather they were leased or loaned to the subscriber that they are not subscribers. Section .225 which has been quoted above does not seem to require that the subscriber acquire title to the publication but merely says that the copies are "to be received during a stated time." The exception is disallowed.

All findings of the hearing examiner in his initial decision not inconsistent with this decision are affirmed; all those which are inconsistent are reversed. The application of the petitioner for second-class entry is denied.

1/ 224. Mailable matter of the second class shall embrace all newspapers and other periodical publications which are issued at stated intervals, as frequently as four times a year and are within the conditions named in Sections 225 and 226 of this title. 226. Except as otherwise provided by law, the conditions upon which a publication shall be admitted to the second class are as follows: First. It must regularly be issued at stated intervals, as frequently as four times a year, and bear a date of issue, and be numbered consecutively. Second. It must be issued from a known office of publication. Third. It must be formed of printed sheets: Provided, that publications produced by the stencil, mimeograph or hectograph process or in imitation of typewriting shall not be regarded as printed within the meaning of this clause. Fourth. It must be originated and published for the dissemination of information of a public character, or devoted to literature, the sciences, arts or some special industry, and having a legitimate list of subscribers. 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 at nominal rates.

2/ A comparable though not quite analogous case resulted in the denial of second-class entry to a dressmaker pattern service. U.S. ex. rel. Reinach v. Cortelyou, 28 App. D.C. 570 (1907).

3/ Act of May 27, 1958, 72 Stat. 134, 139.

4/ Conference Report on the Postal Policy Act of 1958, 1958 U.S. Code Congressional and Administrative News, page 2526.

5/ See Departmental Decision in High Fidelity Broadcasting Corporation, POD Docket 1/8.