In the Matter of the Petition by

CONWAY PUBLICATIONS
2592 Apple Valley Road,
Atlanta, Georgia

for a second-class mail permit for for "INDUSTRIAL DEVELOPMENT
AND MANU-FACTURERS RECORD."

P.O.D. Docket No. 2/132

William A. Duvall Chief Hearing Examiner

POST OFFICE DEPARTMENT, WASHINGTON, D.C. 20260,

APPEARANCES:
H. M. Conway, Jr.
2592 Apple Valley Road
Atlanta, Georgia for the Petitioner

John B. O'Hara, Esq.
Office of the General Counsel
Post Office Department for the Respondent

INITIAL DECISION OF HEARING EXAMINER

On August 7, 1962, the Respondent, the Director, Classification and Special Services Division, Bureau of Operations, Post Office Department, advised the Petitioner, Conway Publications, Inc. that the publication "Industrial Development and Manufacturers Record" was no longer entitled to retain its second-class mailing permit. The Respondent also advised the Petitioner that this decision would become final subject to the right of the Petitioner to appeal the ruling in a proceeding of this type.

The Petitioner did appeal and the case came on for hearing before the undersigned Hearing Examiner in Atlanta, Georgia, on November 19, 1963. Appearances for the parties were entered as above shown.

Mr. H. M. Conway, Jr., President of the Petitioner, gave a brief history of the organization. The company was formed in 1950 and it engaged in the work of preparing industrial studies of various communities to determine their economic potential. During the early years of the company it issued a publication called "General Southern Research." The publication was issued quarterly and the circulation was somewhat less than one thousand copies. The company experienced a gradual growth, however, and changed the name of its publication to "Industrial Development." In 1956 it was merged with a publication known as "Manufacturers Record," which had been published continuously since 1882 and which had enjoyed second-class mailing privileges since some time prior to 1900. "Manufacturers Record" contained industrial information of the same general type as was published in "Industrial Development," but the publishers of "Manufacturers Record" had specialized in the Southern areas of the country, while the other publication was circulated primarily in the Eastern and Midwestern United States. Each company was expanding and the Petitioner decided to purchase "Manufacturers Record" rather than to compete with it. "Manufacturers Record" was being mailed, as has been previously indicated, under a second-class mailing permit, and the publication of the merged organization continued to be mailed under the permit which had been issued for "Manufacturers Record."

The average monthly circulation of "Industrial Development and Manufacturers Record" for the year ended June 30, 1963, was approximately 16,000, of which about 2,000 copies went to individual subscribers at the stated annual rate of $12.00. The subscription rates will be discussed later in more detail, but in order to do this it is necessary to look at the over-all operations of the Petitioner.

Mr. Conway testified that his organization is unique in several respects, not the least of which is the maintenance of a "target group" constituting the audience at which his publication is aimed. There are approximately 13,000 individuals and concerns on this list. The effort is made to reach those people in industry who are responsible for making decisions regarding the building of new facilities, plant expansion, long-range planning, and those who can contribute to the growth of the areas studied. The names comprising this audience are maintained by the Petitioner on a confidential list and the clients of the Petitioner for whom services are performed do not know the persons or concerns whose names are carried on this list.

An understanding of the principal business of the company is best obtained by reference to an actual contract entered into between the Petitioner and the United States Agency for International Development for work to be done in Colombia (Ex. P-11). This contract provides, insofar as is pertinent to the present inquiry, that the contractor --

"Will prepare a thirty-two page brochure outlining industrial development opportunities in Colombia. The brochure shall be submitted in draft to the USAID for approval prior to being printed in final form. USAID comments or suggested alternative presentation shall be incorporated into the final draft of the brochure. 42,000 copies of this industrial promotion brochure shall be printed and available for distribution on or before completion of this project. 32,000 of these brochures will be distributed to executives of industrial firms in the U.S. by the Contractor. 10,000 including 2,000 in Spanish language, will be sent to USAID for future distribution to interested parties, or delivered to designated recipients in the U.S.

"This contract, through these brochures, will provide USAID, Cooperating Government agencies, industrial development institutions, and other interested organizations, with promotional literature which can be circularized to potential U.S. investors. The industrial development report will contain preliminary information on industrial opportunities existing in Colombia, and suggestions for investment, in feasible joint-venture projects in which local capital can be combined with foreign investment and technical know-how."

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It is noted that provision is made for the distribution of considerably more than the number of persons in the target group, but it is presumed that if the consent of the Agency for International Development is obtained in accordance with the provisions of Article IVb of the contract the report will be published in the monthly publication which will reach the target group in this manner. (See, for example, Petitioner's Exhibit 8 which is a survey report of El Salvador and Petitioner's Exhibit 7 which is the June 1963 issue of "Industrial Development and Manufacturers Record" in which the first article appears to be a verbatim reprint of Exhibit 8). Sometimes, the clients indicate the persons whom they wish to receive copies of the reports, but, in the words of Mr. Conway:

"Generally, the clients recognize that we know more about this than they do. So they put themselves in our hands, and they say, 'you are better equipped than we are to decide how these findings should be disseminated. We will include in our contract with you the obligation on your part to disseminate the findings.' Now this is one of the things that we have to sell really. ***" (Tr. 27)

Another interesting feature of the Petitioner's contracts is that the contract price is estimated by the Petitioner and stated to the client in an amount which is believed to be adequate to pay not only for the furnishing to the target group of the special report which is prepared for the client, but also for a proportionate share of a subscription to the regular monthly publication which is sent by the Petitioner to the same readers. Each monthly issue of "Industrial Development and Manufacturers Record" is made up in significant proportion of articles which have been prepared in performance of contracts such as has been described above.

Mention has been made earlier of the regular subscription price for the publication, which is $12.00 per year for 12 copies per year. The regular subscription price for a 2 year subscription is $20.00 while the price for a 3 year subscription is $24.00. If, however, the subscriber is a member of the "target group," there is a 50 per cent discount in these rates. In addition, there is an organization known as "Industrial Development Research Council" for the members of which subscriptions are priced at $6.00 per year.

To further complicate the rate structure, at the end of each fiscal year a backward look is taken of the contents of the publication for the year just ended. The proportion of the pages of the publication that are made up of survey reports is determined. This proportion is stated in terms of a percentage. Next, the sums of money derived from the contracts for area surveys are totaled. Then the percentage representing the proportion of the 12 monthly issues which is comprised of the survey reports is applied to the total amount of money derived from the contracts. The figure reached by this computation is regarded as being the amount received as subscriptions to the publication sent to the target group. The number of these subscriptions is then divided into the amount of money assigned as subscription receipts to derive the amount of an individual subscription.

An illustration will best serve to explain what has been said in the foregoing paragraph. Assume that there were 100 pages in each of the 12 issues for a particular year, making a total of 1200 pages. Assume that of this total number of pages 300, or 25%, were comprised of material contained in survey reports. Next, assume that the receipts from survey contracts for the same year totaled $100,000. The 25%, derived as indicated above, is applied to the $100,000 with the result that the amount regarded as having been received as subscriptions from the target group is $25,000. If there were during this period an average of 10,000 individuals in the target group, this number is divided into the $25,000, producing an annual subscription rate of $2.50 per person. These figures are hypothetical, but Mr. Conway did state that he believed that the average annual subscription rate for individuals in the target group ranges between $3.00 and $6.00 per year. It is obvious, however, that the actual subscription price is not known until the end of the Petitioner's fiscal year.

The history of the Petitioner, the business activity of the Petitioner, its publication and the subscription rates for its publication have been examined. It is now time to measure the publication by the yardstick of the statutes and regulations governing second-class mail matter.

The reason stated by the Respondent in the notice of the proposed revocation was that "As circulated, the publication does not meet the requirements of the law, 39 United States Code 4354 as embodied in Section 132.22, Postal Manual, particularly Section 132.227. Under the provisions of this section the circulation of a publication to subscribers of all classes must constitute 65 per cent of the entire circulation." The pertinent provision of law and the section of the Postal Manual cited by the Respondent provide, respectively, as follows:

" 4354. (Title 39, United States Code) Conditions for entry of publications .

* * * * * * * *

"(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."

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132.227 (Postal Manual) Free Circulation Publications . Publications designed primarily for free circulation may not qualify for second-class privileges. Publications are designed primarily for free circulation when the total number of copies furnished during any 12-month period to legitimate paid subscribers (see 132.225) and to the purchasers of single copies constitutes less than 65 percent of the total number of copies distributed by mail at the second-class pound rates or the transient rate, by the publishers' carriers, and by other means for any purpose."

As previously pointed out, the total average circulation of this publication is between 15,000 and 16,000, of whom approximately 2,000 persons pay the regular annual subscription rate of $12.00. The Hearing Examiner cannot perceive how -- by any stretch of reason or by any liberal interpretation of the statute and regulation in question -- the remaining 13,000 or 14,000 recipients of this publication could be considered to be subscribers. Conway Publications, or Conway Research Incorporated, as the Petitioner is now known (Tr. 13), is simply selling a service that it performs. The Petitioner is, in effect, a public relations agent for the communities for which the Petitioner conducts surveys and concerning which the reports are published. The Petitioner puts these communities forward in their best light and he makes this information available to the persons on this carefully selected list in order to promote the client's wish that the reader of the report will be interested in investing in the community about which the report is written.

It is not in issue in this case, but it is not unlikely that a strong case for the revocation of this second-class permit could be predicated on the allegation that the publication is designed "primarily for advertising purposes." The recommendation set forth later herein is not based on this characteristic of the publication because the Petitioner had no notice concerning this question and, hence, no opportunity to present a defense in regard to it.

It is conceded that this publication is devoted to a most worthwhile purpose, and based upon the evidence in this case, it appears that the Petitioner performs an outstanding and efficient service for his clients, but neither of these facts serves to warrant the continuance of second-class mailing privileges for the publication "Industrial Development and Manufacturers Record."

It is found as a fact that the publication "Industrial Development and Manufacturers Record" is designed primarily for free circulation.

It is concluded as a matter of law that the publication "Industrial Development and Manufacturers Record" does not conform to the requirements of Section 4354(c) of Title 39, United States Code, and that therefore the second-class mailing permit now in effect in respect to this publication should be revoked.

It is recommended that the decision of the Director be sustained.

The substance of the proposed findings of fact and conclusions of law submitted by the Respondent have been adopted except that the proposed conclusion of law that "'Industrial Development and Manufacturers Record' is designed primarily for advertising purposes" is denied for the reason previously stated.

/s/