In the Matter of the Petition by                                )
                                                                               )
WILLIAM T. KERNS                                                 )
1903 Washington Avenue                                      )
Golden, Colorado                                                    ) P.O.D. Docket No. 2/130
                                                                               )
for a second-class mail permit                               )
for the publication "KERNELS."                              )
                                                                               )
POST OFFICE DEPARTMENT                                  )
WASHINGTON, D. C. 20260                                   )

APPEARANCES:                                                     Thomas J. Kerwin, Esq.
                                                                               Denver Club Building
                                                                               Denver, Colorado
                                                                               for the Petitioner

                                                                               Dean M. A. Murville, Esq.
                                                                               Office of the General Counsel
                                                                               Post Office Department
                                                                               for the Respondent

Bosone, Reva Beck

DEPARTMENTAL DECISION

On February 21, 1963, an application was filed with the Post Office Department for second-class mailing privileges for a publication called "Kernels" published in Golden, Colorado, by William T. Kerns, the Petitioner.

On June 28, 1963, the Director of Classification and Special Services Division of the Post Office Department, Edwin A. Riley, denied the application on the grounds that "Kernels" hasn't a "legitimate list of subscribers but comes within the prohibition against the entry of publications designed primarily for advertising purposes or for free circulation." After the denial, a hearing was held, and a decision was rendered in favor of the Post Office Department. From that decision the Petitioner appeals.

At the time the application was filed by the Petitioner he set out that there were 400 subscribers; that 4,000 copies were issued on March 1, 1963; that there were 2,750 bulk copies. The subscription price of "Kernels", a semi-monthly publication, is $2.50 per year at 10 cents a copy.

The pertinent statute is 39 U. S. Code:

"§ 4354: Conditions for entry of publications

(a) Generally a mailable periodical publication is entitled to be entered and mailed as second class mail if it--

* * * * * * * *

(5) has a legitimate list of subscribers.

* * * * * * * * * * * *

(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."

There were two witnesses for the Petitioner, the publisher, Mr. Kerns, and a Charles E. Stevinson. At the hearing no witnesses appeared for the Post Office Department.

From reading the transcript and the briefs it is clear that the only issue in this case is: Is the publication designed primarily for free circulation?

The testimony seems clear that the number of subscribers throughout the history of the publication has not been made clear. At the time the application was made for a second class mailing privilege Mr. Kerns said there were two journals--a black one and a gray one--Tr. 309--disclosing lists of subscribers up to January of 1963. Petitioner's Exhibit 6 is a box of 818 white cards, prepared two weeks before the hearing, which the Petitioner claims shows names of subscribers. On each card is a name and an address and nothing more. The card does not show when the person's subscription began or when it would end. The testimony on the number of subscribers is confusing to say the least.

Mr. Kerns listed about twenty men who had purchased copies--largely bulk copies--of his publication and who had paid in some cases various amounts of money. To list a few: There was Mr. L. A. Whitney of Hartford, Connecticut, with whom he became acquainted after October of 1962, and who from time to time bought copies of "Kernels" in bulk and who paid different amounts of money for the publication. From July 1, 1963, through October 15, 1963, he purchased thousands of copies; he paid 16 cents ($.16) each for some and others 10 cents ($.10). In the middle of August Mr. Whitney who was never a subscriber gave a check of $1,375. The Petitioner said that Mr. Whitney had a mailing list in Hartford, Connecticut, and also gave copies away. At one time Mr. Whitney gave the Petitioner $1,500 to be paid back when the Petitioner was able. There apparently was a business arrangement made between the Petitioner and Mr. Whitney in which Mr. Whitney's company, "Kerney Company", was to receive fifty cents ($.50) of every subscription sold. The Petitioner in his testimony indicated that Mr. Whitney was interested in developing the publication to 100,000 subscribers--but the relationship with Whitney is not well defined; he bought copies in bulk at various prices and did give or loan the amount of money as set out in the foregoing, and at one time provided a place for the Petitioner to stay. According to the Petitioner, Mr. Whitney had invested $5,000 in the business but had not had time to promote it.

Each man on the list of twenty referred to in the testimony seems to have a personal axe to grind in buying the copies of the publication. In June of 1962 a Mr. Bunzell, an owner of a bowling alley and some real estate in Golden, Colorado, paid $100 for a thousand copies of the publication which were passed out in his bowling alley where customers could just pick up a copy.--Tr. 199. Mr. Bunzell purchased bulk copies on a number of occasions. On July 15, 1962, he bought 8,000 copies which he mailed through the Golden, Colorado, post office. Bunzell, as were the other purchasers of bulk copies, was sympathetic with the ideas expressed in the copies perhaps because he is a heavy taxpayer. On June 15, 1962, he purchased 1,200 copies. In this issue was a story on Mr. Bunzell and his liquor license. Mr. Bunzell was not a subscriber.--Tr. 211.

A Mr. Diminico of the C. and H. Sales Company bought 150 copies at $15. C. and H. Sales Company is a beer distributorship that sold beer to Mr. Bunzell.

Mr. Robert Hackstaff of Denver, Colorado, was another purchaser of copies in different amounts. The Petitioner said that Mr. Hackstaff bought 70 subscriptions and those names are listed in Exhibit 6--on the white cards. The Downtown Improvement Association of Denver, Colorado, purchased 750 copies on March 1, 1963, which Mr. Hackstaff circulated. The Downtown Improvement Association is a group of five real estate men--Mr. Hackstaff being one of them. He is also president of the Rose Investment Company. The Petitioner said he did some research for Mr. Hackstaff for which he received consultant fees amounting to five or six hundred dollars.--Tr. 277.

Coors Brewery purchased 4,000 copies in the month of March 1963.--Tr. 245 and 246. The Petitioner hired someone to distribute them in Golden, Colorado. The Petitioner inferred--Tr. 246--that a comment he made one time about "a school board liquor hearing" may have caused Coors' interest. He also received $2,000 from Coors Brewery as a consultant in public relations.

Charles Stevinson is a subscriber who purchased 2,000 copies between July 1 and October 31, 1963. At this time Mr. Stevinson was interested in the Rozek affair at the University of Colorado. The Petitioner's publication opposed the position taken by Mr. Newton in his administration. Mr. Stevinson was sympathetic to Professor Rozek.--Tr. 235. A Mr. Hartzell, a Consultant Engineer living in Boulder, Colorado, purchased 250 copies. He also was interested in the problem at the University of Colorado and was in sympathy with the Petitioner's anti-Mr. Newton position.

Mr. John Jump purchased 170 copies in August 1962 when he was running for re-election as county commissioner. A Dr. Kier on November 15, 1963, purchased 1,100 copies that were given to the Denver Medical Society "because in this issue is where we had our Denver General and Colorado General Hospital problem."

There was a Dr. Candlia who purchased 100 copies on June 15, 1963; a Dr. Gladney of Baton Rouge, Louisiana, who purchased 100 copies July 1, 1963; and a few other people who did not reside in Colorado bought copies.

The Petitioner for the November 1, 1963, issue ordered 7,000 copies of his publication printed. One Joseph Carpenter of Denver had purchased 5,000 copies because Mr. Carpenter had understood that the Petitioner was going "to start an article on Denver School Board in reference to school administration money policies, and since he is presently opposed to the school board, he came to me the other day and called me on the telephone and told me that he had heard that." Those copies were to be delivered to the home of Mr. Carpenter who didn't want the Board to know that he was buying them "because the nature of the article is such that his relationship with the school board would be in danger." Mr. Carpenter paid the Petitioner $280 before publication. Carpenter paid 5.9 cents a copy.--Tr. 265.

The Petitioner--Tr. 57--said the purpose of his publication "is to express my editorial opinion on various issues in the local area, state area, and the Federal area. In addition to mine, we have several people who write small columns to give their opinions. It is mainly political opinions." He said his procedure was to make calls on people to solicit purchasers of his publication and that when he was asked not to print an article on any subject he replied "my penmanship is not for sale to anyone for anything."--Tr. 231. Yet--Tr. 291--in answer to the question "You testified that you presell the issues. Does it mean that before you print an issue you attempt to sell it to someone or sell some of the ideas to someone, or some of the contents of the issue to someone?" He answered, "Yes, sir. I understood you said presell."

From the foregoing facts one must conclude that the Petitioner's publication is designed primarily for free circulation or for circulation at nominal rates and therefore should not be admitted as second class mail under section 4354(c), 39 U. S. Code. One might argue also--but this is not necessary here--that the publication is designed primarily for advertising purposes.

The Judicial Officer does not agree with the Petitioner when he says "the language of the statute concerning publications designed primarily for advertising purposes is in pari materia with the language regarding publications designed primarily for free circulation"--page 6, Petitioner's appeal brief--because the conjunction "or" sets out a clear and distinct choice. If the conjunction were "and" the Petitioner would be correct; "or" disjoins--it does not join. The Judicial Officer, however, does appreciate the reasoning of the Petitioner--but his reasoning is not the statute. The Judicial Officer appreciates the reasoning of the Petitioner when he says "there is no statute or regulation prohibiting purchasers of copies of second-class publications from redistributing copies to others which they themselves have paid for." Much may be said for this type of statement but not when there is a set of facts as described above.

In a letter--Petitioner's Exhibit 7--Mr. Steven Wagner under date of January 28, 1963, said the records of the Petitioner's company "indicate that as of December 31, 1963, unexpired paid subscriptions to the aforementioned periodical exceeded 250 in number." Even though the subscription list is far in excess of 250 the number does not compare with the thousands of copies that were passed out and mailed out to readers who were not subscribers.

When as in this case the number of subscriptions are around 20% of the copies printed while the bulk copies represent up to 90% of those printed and have always amounted to more than the subscriptions there is a violation of the statute.

The cases in point hold that there must be a greater number of copies sent to subscribers than the number that is distributed as gifts--Lewis Pub. Co. v. Wyman, 182 F. 13.

In Pool Publications, P.O.D. Docket No. P.O.D. Docket No. 1/143, it appears that the number of people receiving the publication without paying for it far exceeded the figure of paid subscribers.

In Channel Northwest Inc., H.E. Docket No. 5/178, the publication "Channel" informs the customer-reader that it is "Your Free Guide" to television programs and that the purpose of the publication is an advertising device to attract customers to over 800 drugstores. The Initial Decision found that "there are 806 subscribers, but approximately 160,000 copies of the publication are distributed without cost to the ultimate recipient" ........ "and the 160,000 copies which are distributed without cost far exceed a 'minor' proportion of the printing of each issue." It was held that the publication "Channel" was designed primarily for free circulation and for advertising purposes.

In Conover-Mast Publications, Inc., H.E. Docket No. 5/173, 168 business firms sent a list of names of persons to whom the magazine "Mill and Factory" was to be sent. The publisher then later billed the companies for the number of copies so ordered. Roughly 87% of the total printing of this publication was distributed as described in the foregoing. It was held that the publication "Mill and Factory" was designed primarily for free circulation and primarily for advertising purposes.

More recently in 1964 in the Conway Publications, P.O.D. Docket No. 2/132, where the total average circulation was between 15,000 and 16,000 while there were 2,000 regular subscribers, it was held that the publication was designed primarily for free circulation. The Departmental Decisions of the Post Office Department support the foregoing decisions.

In Myrick v. U. S., 219 F. 1, even though the decision in this case was written in 1915 it is still good law. It held that "while the fact that some subscription contracts may be overdue would not render such subscriptions illegitimate, nevertheless, if it appears as to a substantial number of subscribers that they are overdue, or that the price paid or authorized to be paid for them is nominal, or that they are paid for by others than the recipients of the publication, or that they were obtained by the payment of large commissions, or in connection with an offering of a premium, prize, or any other consideration, such facts would be material evidence for the Post Office Department to consider in determining whether the publication was primarily designed for advertising purposes, for free circulation, or for circulation at nominal rates, so that the entire publication should be excluded from the second class privilege of 1 cent a pound." Considering the facts as they were delineated in the hearing it seems clear to me that the law in this case is applicable to the present one.

It is stated by the Petitioner that the Postmaster General has gone beyond his authority in making the postal regulation, section 132.227 of the Postal Manual, Payne v. U. S., 20 App. D.C. 581, because in that case it was held that the Postmaster General did exceed his authority; but Payne v. U. S. can be distinguished from the present case. Furthermore, there is no need to reach this question since the number of copies sent to subscribers constitute such a small percentage of the total number circulated.

In the present case the statute, 39 U. S. Code 4354(c), provides that "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" itself has the clarification "primarily." Whatever that term may mean it is clear that the circulation of 80% to others who are not subscribers indicates that the publication is designed "primarily" for free circulation.

In the light of the decisions within the Post Office Department and those of the court the Initial Decision of the Hearing Examiner in this case is hereby affirmed. The application for the publication "Kernels" for a second-class mailing privilege is denied.