In the Matter of the Petition by

THE OKLAHOMA MUNICIPAL LEAGUE,
4040 Lincoln Boulevard,
Oklahoma City, Oklahoma 73105

Denial of Application for Second- Class Mail Privileges for "OKLAHOMA CITIES & TOWNS"

P.S. Docket No. 1/137

David J. Knight Administrative Law Judge

For the Petitioner:
Donald C. Rider,
Executive Director
Oklahoma Municipal League
4040 Lincoln Boulevard
Oklahoma City, Oklahoma 73105

For the Postal Service:
D. Scott Railsback and
Arthur S. Cahn
Law Department U.S. Postal Service
Washington, D.C. 20260

For the Intervenor:
Raymond L. Bancroft,
Managing Editor
National League of Cities
1612 K Street, N.W.
Washington, D.C. 20006

INITIAL DECISION OF DAVID J. KNIGHT, ADMINISTRATIVE LAW JUDGE

The Petition and Answer

On December 6, 1971, the Oklahoma Municipal League (petitioner) applied to the Postmaster at Oklahoma City, Oklahoma, for a second class mailing permit to cover the mailing of its newsletter to some 322 cities and towns within that state. This newsletter is titled Oklahoma Cities & Towns and is issued monthly. Petitioner filed POD Form 3501, the application for the permit, with the required fee of $60.00 based on a total circulation of 2,001 to 5,000.

The Postmaster made his report on this Form and forwarded it to the Office of Mail Classification in Washington, D. C., where it was received on January 3, 1972. Almost six months later, ^1/ by letter dated June 28, 1972, the Manager of the Mail Classification Division advised petitioner that its application was denied.

The reasons for the denial were that no subscriptions were received directly by the petitioner from the persons who receive the newsletter, the subscription price being included in the service fee paid by each municipality as a member of petitioner's League. These copies are considered as gifts. This is based on 39 U.S.C. 4354, "Conditions for entry of publications" as second class mail, specifically, section 4354(a)(5) which requires a legitimate list of subscribers; and section 132.225 of the Postal Service Manual which provides that the legitimate list is made up of those who have paid or promise to pay at a rate above nominal for the newsletter. The denial also cites section 132.463 of the Manual which permits a minor portion of the list to be gift subscriptions but this would not include those copies paid for by advertisers or other interested persons to promote their own cause. Copies falling within the latter category are mailed at the higher transient second-class rate according to the Manual.

The denial also detailed the procedure for contesting the action of the Mail Classification Division and, on July 25, 1972, the petition was filed.

The essence of the petition is that the denial is based on a misunderstanding of the nature of the subscribers and of the official positions of the recipients of the newsletter. Petitioner contends that the subscriber is each city or town and the recipient of each newsletter is the officer or employee who, in that capacity, represents the municipality. Ownership of the subscription remains in the city or town and any recipient of the newsletter, such as a mayor or councilman, who vacates his office is removed from the petitioner's mailing list and the municipality designates his successor to be the recipient. Thus, contends the petitioner, the copies received by the designated officials are not gifts. The contents of the newsletter are for the use of the recipient in his official capacity and the city or town is benefited by that usage. The petition concludes that since the city or town--the subscriber--as a corporate body cannot read, its officials are the logical recipients. It asks that the denial of its application be reversed.

The respondent's (Postal Service) answer cites the statutory language and sections of the Manual referred to above and claims that none of the monthly printing of 4,000 copies is paid for by the subscribers and that 2,900 of these are paid for by third parties with the remainder distributed as free samples and in other ways. In requesting that the denial be sustained, the respondent alleges that the newsletter has no legitimate list of subscribers and is designed primarily for free circulation.

After a postponement, the hearing was held on September 26, 1972. Post hearing requests for findings and briefs were filed by the parties but not by the intervenor.

The Evidence

The League was represented by Donald C. Rider, Executive Director, who was its only witness. The League is an unincorporated association of the cities and towns within Oklahoma and is headquartered at Oklahoma City. It has been in existence for about 60 years. Since the early 1930's, the League has been staffed to carry out its purpose which, as stated in its constitution, is to promote honest, efficient and effective local self-government and the general welfare of its workers and citizens. Of the 500-odd incorporated cities and towns within the State, about 350 are members of the League. Its officers and directors are officials of local governments and at the meeting of the Board of Directors on November 4, 1971, a motion was made to publish a monthly newsletter and the motion was carried. Thus the Oklahoma Cities and Towns was born. An application for a second-class permit was submitted in December 1971 to the Postmaster at Oklahoma City.

A city or town is assessed a service fee as its membership cost to the League. This fee is computed according to the population of the city. The League bills its members once a year and this will include the cost of the newsletter. As an example of this, Exhibit 2 shows that Enid, Oklahoma, (with a 1970 population of approxi- mately 44,000) was billed for $3,559.92 and this included the 27 subscriptions to Oklahoma Cities and Towns .

The subscription cost of the newsletter is $2.50 per year and twenty-five cents for a single copy. The witness testified that the service fee would not increase or decrease based on the number of subscriptions. The service fee remains constant but a portion of it is set aside based on the number of subscriptions the city receives.

When the bill is rendered to a city, a form is also sent. This asks that the officials of the municipality be listed according to name and title and where they want the newsletter sent. It may be sent to either the home or office. Of about the 4,000 copies of the newsletter, 90 percent are sent to these officials and almost all of the remainder are sent to non-member cities in the League's drive for membership. If the city does not return the roster, it is sent three copies of the newsletter monthly. Two subscriptions are by persons not associated with any city.

Since its inception, the newsletter has been a four-page paper of federal and state legislative and administrative happenings affecting local governments. No advertising is carried. The League's tentative budget for 1972-1973 shows $4,037 assigned to the newsletter's expense. Income for this period assigned to "Publication sales, Subscriptions & listings" is $1,600 and service fees (membership) income is $139,000.

The respondent's sole witness was the Manager of the Mail Classification Division of the Postal Service, Darwin Sharp, who originally denied the League's application. He testified that since the $2.50 subscription cost is merely a bookkeeping transaction, there is no real or identifiable subscription price and, therefore, the copies being sent to the recipients are free. Further, since the copies could be sent to individuals at addresses other than an office, the Postal Service cannot determine whether the subscription is received by the city and given away or is subscribed to by the city for reading by its officials in that capacity.

In this witness's opinion, the statutory and regulatory requirement for other than a nominal subscription price was missing. And since the city is the subscriber, it cannot be determined whether that list of cities is legitimate for the identification of the recipient as an official of the city to read the newsletter in that capacity is not known. Thus, the city may subscribe to give the newsletter away.

The Issues

For purpose of second-class entry:

1) Whether the subscription price--since it is included in the service fee which, in turn, is not affected by the number of subscription--may be considered as free or nominal; and .

2) Whether it is permissible for the city as the subscriber to receive copies at other than official city addresses.

Discussion and Findings of Fact

1) As to the $2.50 subscription price:

The statute, 39 U.S.C. 4354(c), states, "A periodical publication designed. . .for free circulation or for circulation at nominal rates is not entitled to be admitted as second class mail under this section". The evidence shows that there is no agreed subscription price. Whether a city receives one or 10 copies of the newsletter monthly, its service fee is unaffected. The fee is neither increased nor decreased regardless of how many copies it does receive. And this is the situation applicable to 90 percent of the newsletter's circulation. Thus, at best the subscription price is an unknown factor and at worst it is free. All the city need do is to name those persons it wants to receive copies. If it names none, any member-city will receive at least three copies.

While a $2.50 subscription price is set by the publisher, there is no evidence that this amount has been paid as a subscription price . Rather, the service fee includes whatever number a city requests and, if it receives the minimal number, there is still no change in the service fee caused by subscriptions to the newsletter.

These circumstances run afoul of the statutory require- ment. The subscription price must be definite and real. It certainly must be identifiable. In Myrick v. United States , 219 F. 1 at page 4, the Court clearly indicates that the subscription price must be paid or that the subscriber must agree to pay this price. Further, if the subscription price is obtained by payment of large commissions or in connection with an offer of a premium or other consideration , this would be material to the issue of whether the publication is free. Here, it appears that the newsletter is sent in consideration of membership to the League. I find that the Oklahoma Cities & Towns is designed for free circulation to those municipalities which become members of the League and that this type of circulation accounts for 90 percent of the monthly copies of the newsletter. .

2) As to the addressing of the copies:

Again in Myrick v. United States , supra , the Court states at page 4 that if the subscription is paid for by other than the recipient, this is evidence that the publication may be for free circulation. In this case, there is no question that the city is the subscriber. But, if the copies which it receives are given away, i.e., if it relinquishes title upon receipt, the publication could be held to be for free circulation and not entitled to second-class entry. On the other hand, if the city subscribes and requires the reading of the newsletter by its officials as representing the city, the city is the legitimate subscriber within the meaning of the statute, 39 U.S.C. 4354(a)(5) which requires a legitimate list of subscribers as one facet of second-class entry.

The evidence shows that the cities in the main do not receive bulk delivery and then distribute the copies. Rather, they are mailed directly to an official--addressed by title--either at the office or at the home address. The respondent's witness testified that the Postal Service must be able to trace the copies after delivery to be sure that copies are not given away but are used by the reader in some representative capacity. The petitioner's system does seem to take this into account. Copies are mailed to persons by name and title. Those leaving office are deleted from the mailing list when this fact becomes known. There is no contention that mailing to an official at a home address alone is fatal to second-class entry.

I find that the city which subscribes is a legitimate subscriber within the meaning of the statute and that the copies are mailed to officials of that city who receive them as part of their representative functions.

Conclusions

I conclude that the denial of the second-class entry should be affirmed because the publication is designed for free circulation or circulation at a nominal rate in violation of 39 U.S.C. 4354(c). However, both the petitioner and respondent in their respective post hearing requests have proposed suggestions for curing the deficiencies to permit the second-class entry. Thus, I recommend that no order be entered at this time but that this matter be suspended for a period of 90 days to provide an opportunity for the parties to determine whether a solution is possible by agreement. Within that time, the parties should notify me when the matter is resolved or their inability to reach an agreement.

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1/ This delay may not be normal but was occasioned--as the testimony later shows--by the crush of other work faced by the Classification Division of the Postal Service (Tr. 68-70).