In the Matter of the Petition by

MARVIN LEVIN, Publisher
8453 S.W. 132nd Street
Miami, FL  33156

P.S. Docket No. 1/28

Initial Decision

Denial of Application for Second-Class Mail Privileges for "EXECUTIVE BEVERAGE JOURNAL"

Marvin Levin, pro se, Petitioner

Arthur S. Cahn, Esq., Law Department, U.S. Postal Service, for Respondet

Before: John Lewis, Administrative Law Judge

STATEMENT OF PROCEEDINGS

            This proceeding was initiated by the filing of a petition, pursuant to §954.8 of the Rules of Practice in Proceedings Relative to the Denial, Suspension or Revocation of Second-Class Mail Privileges, by the above-named publisher (referred to herein as Petitioner) appealing a ruling made by the Director, Office of Mail Classification of the United States Postal Service (referred to herein as Respondent) denying Petitioner's application for second-class mail privileges for the above-named publication pursuant to §4354 of Title 39, U.S. Code, and §132.22 Postal Service Manual.  Following the filing for an answer by the Respondent, and pursuant to notice duly given, a hearing was convened before the undersigned hearing officer, at which hearing testimony and other evidence were offered in support of and in opposition to the petition.  Both parties participated in the hearing and were afforded full opportunity to examine and cross-examine witnesses.  Petitioner was the sole witness on his behalf and offered certain documentary evidence in addition to his own testimony.  The Manager of the Mail Classification Branch testified on behalf of Respondent.  Following the close of the reception of evidence, proposed findings of fact and conclusions of law were submitted by both parties.  Certain additional documents submitted by Petitioner following the close of the hearing were also received as part of the record pursuant to order of the undersigned.

            After having carefully reviewed the evidence in this proceeding, and the proposed findings and conclusions submitted by the parties,^[1] and based upon the entire record, including his observation of the witnesses, the undersigned makes the following:

FINDINGS OF FACT

            1.  The publication here at issue, "Executive Beverage Journal" (hereinafter sometimes referred to as EBJ), is published by Southern Beverage Journal, Inc., a Florida corporation, which is wholly owned and controlled by Petitioner herein and his wife (Tr. 46).^[2]

            2.  Petitioner, through the corporation wholly owned and controlled by him and his wife, also publishes Southern Beverage Journal (hereinafter sometimes referred to as SBJ).  SBJ is a trade magazine which is circulated monthly, primarily to licensed retail liquor dealers in nine states located in the southern United States (Tr. 47; PX 1-3, 4).  There are 35 separate editions of SBJ, each of which is circulated in a different trade or geographic area of the south (Tr. 26).

            3.  SBJ consists of feature articles and editorial material regarding the distilled beverage industry, plus display advertisements and price lists.  The various edition of SBJ differ principally in terms of the price-list information.  The news and editorial content in each of the geographic editions is identical.  With minor exceptions the display advertisements, which are inserted on behalf of distillers or importers, are the same for each edition.  The price lists are those of the wholesalers who distribute a particular brand or brands in the geographic area where the particular edition of SBJ is circulated.  The price lists differ in the various geographic editions, depending on the wholesalers who distribute in a particular area and the prices applicable therein (PX 1-4, 6).

            4.  SBJ is circulated by mail to licensed retail liquor package stores, taverns, clubs, restaurants and hotels in nine southern states. It is distributed without charge to its recipients.  Its revenues are derived principally from advertising payments made by (a) the regional wholesalers for insertion of their price lists in the regional editions, and (b) distillers and importers for insertion of display advertisements (Tr. 48).  The amount paid by advertisers varies from edition to edition, in accordance with the circulation of each particular edition.^[3]  Approximately 22,000 copies of the various editions of SBJ are mailed monthly (Tr. 65).  SBJ has been accepted for mailing as a controlled circulation publication for a number of years, since it is designed primarily for free circulation and is considered to meet the other requirements of a controlled circulation publication, such as frequency of circulation and percentage of editorial content (Tr. 28, 67, 72).

            5.  EBJ consists essentially of a compilation of material appearing in the various regional editions of SBJ.  The front portion of EBJ consists of feature articles and editorial material which is identical to that appearing in the various editions of SBJ.  The display advertisements, with minor exceptions, are the same as those appearing in SBJ.  The balance of EBJ consists of price lists compiled from 16 or more of the 35 editions of SBJ.  EBJ comprises approximately 500 pages, compared to approximately 50-75 pages in the various SBJ editions (Tr. 36-7, 50-2).

            6.  EBJ is circulated almost entirely to executive officials of various producers and importers of distilled beverages.  It has a monthly circulation of 434 copies out of a potential market of approximately 600 subscribers (Tr. 30).  EBJ obtains its revenues mainly from the subscription fees paid by the recipients of the publication.  The annual subscription fee is $25.00 for subscribers within the United States and $40.00 for subscribers in Europe (Tr. 39).  The publication enables subscribers to keep informed concerning the brands of liquor which are being distributed in the southern part of the United States and at what prices and through which wholesale distributors (Tr. 31).

            7.  Petitioner filed an application for second-class mail privileges for EBJ on January 29, 1971.  Such application was denied by Respondent by letter dated May 19, 1971, advising Petitioner, in essence, that EBJ did not qualify for second-class mail privileges since "it is designed primarily for advertising purposes and it does not constitute a periodical within the meaning of the above law", i.e., §4354 of Title 39, U.S. Code, and §132.22, Postal Service Manual.  Following further correspondence from Petitioner seeking a review of this ruling, Respondent advised Petitioner on July 14, 1971, that he adhered to the decision contained in his letter of May 19, 1971, and added as an additional ground for denial of second-class mail privileges, the fact that EBJ was "designed primarily for free circulation and therefore, it would not qualify for second-class entry under the provisions of section 132.22, Postal Service Manual" inasmuch as it and SBJ (which was circulated free) were deemed to be essentially the same except for the names and the fact that the 'SOUTHERN BEVERAGE JOURNAL" is prepared for regional distribution."  Following the foregoing decision by Respondent, Petitioner filed its petition herein.

CONTENTIONS AND CONCLUSIONS

            1.  The denial of second-class mail privileges for EBJ was based on the grounds that (a) it is designed primarily for free circulation, and (b) it is designed primarily for advertising.  Both of these grounds stem from Respondent's contention that EBJ is merely another edition of SBJ by reason of the commonality of ownership and identity of content of the two publications. Thus, although substantially all copies of EBJ are paid for by a regular list of subscribers, Respondent contends that it is designed primarily for free circulation because it is part of SBJ which is distributed free of charge to approximately 22,000 retail outlets (Tr. 6-7).  Similarly, Respondent contends that EBJ consists primarily of advertising because of its inclusion of the price lists of the regional wholesalers, which are paid for as advertising in SBJ but are admittedly not separately paid for in EBJ (Tr. 15-17).

            2.  It seems evident that the basic issue here presented is whether EBJ and SBJ can be considered to be essentially one and the same publication.  Counsel for Respondent conceded at the hearing that if EBJ were considered to be a separate publication, it would meet the circulation requirements of the law and the regulations since it is distributed to a regular list of subscribers, substantially all of whom pay for it.  Similarly, he conceded that if EBJ were owned by someone else and if it was not considered to be a part of SBJ, the price lists would not be deemed to constitute advertising when incorporated in EBJ, and EBJ would not be deemed to be designed primarily for advertising.  Except for the two above-stated grounds for disqualification, counsel for Respondent conceded that there was no other basis for denying Petitioner second-class mail privileges for EBJ (Tr. 12-15, 18-19, 22).

            3.  While commonality of ownership and similarity of content are strong indicia of the identity of the two publications, these factors are not conclusive on this issue.  The Post Office has, in the past, recognized that substantially identical publications of the same publisher may, under appropriate circumstances, receive different treatment for mail classification purposes if there is a legitimate basis, grounded in customary trade practices for classifying them separately.  Thus, in the case of a publication normally entitled to second-class entry, but whose publisher sought to distribute a large number of copies free for advertising purposes, Respondent's predecessor expressed the opinion that this might be accomplished, stating:

            "…if they [the publishers] can demonstrate by customary journalistic standards that the contents are prepared for circulation to a different audience and community than covered by the paid circulation newspaper, the free newspaper might be considered independent for postal purposes."^[4]

While the foregoing opinion expressed doubt that the necessary showing had been made in the situation there presented, the facts in the instant case do, in my opinion, establish a rational basis for distinguishing between the two groups of publications.

            4.  This is not a case where a publisher has sought to artificially combine or separate essentially the same publication, in order to obtain a more favorable mail classification.  Despite the substantial identity of content, the two publications have a different purpose and genesis, and serve a different trade segment.  SBJ is obviously designed as a free circulation publication to serve the local wholesale-retail segment of the liquor industry, by making the wholesalers' prices available to their retail customers.  The wholesalers have the paramount economic interest in this relationship, and are willing to pay to have their price lists distributed in the form of advertising to their customers and potential customers.  EBJ was later developed to respond to the needs of the top functional level of the liquor industry, the distillers and importers, who wished to have available to them information as to the brands, prices and wholesalers of liquor in the southern part of the United States.  Unlike SBJ, where the subscribers are not willing to pay for the publication because the price lists would presumably be otherwise made available to them by their suppliers, the subscribers of EBJ are willing to ay for the publication because it gives them access to trade information which would not otherwise be readily available to them.

            5.  In the case of SBJ the price lists are clearly paid for by the wholesalers as advertising.  However, when they are incorporated in EBJ they serve a different purpose.  They serve not as advertising, but as trade informational material which may be helpful to distillers and importers in the sale and distribution of their products in competition with others selling at the same functional level.  The fact that the price lists are paid for as advertising in SBJ does not, in my opinion, convert them into advertising when included in EBJ.  The distillers and importers are not selling to the local retailers and the price lists do not serve as advertising to them, as they do to the subscribers of SBJ.  While it is true, as Respondent argues, that the price lists would not appear in EBJ unless they were first paid for as advertising in SBJ, this does not necessarily lead to the conclusion that the price lists occupy the same status in EBJ as they do in SBJ.  As above noted, they serve a different function in each publication.  Moreover, there is no understanding that the amount which the advertiser pays for insertion of the price lists in SBJ covers inclusion of the price lists in EBJ.  The advertiser in SBJ, i.e., the wholesaler, does not sell to the subscribers to whom the price lists are circulated.  If anything, he is a customer, or potential customer, of the subscribers.  There is no showing that he obtains any benefit from the insertion of his price list in EBJ.  As previously noted, the amount paid for advertising in SBJ may vary with the particular geographic edition, depending on the number of customers and subscribes in the area.  However, in the case of EBJ the number of subscribers is identical since there is only one edition, so that it is obvious advertising charges for SBJ insertion are not related to EBJ insertion.

            6.  In accordance with the foregoing views, it is concluded and found that the contention of Respondent that EBJ and SBJ must be deemed to be one and the same publication by virtue of commonality of ownership and identity of content is without merit.  Respondent having conceded that its decision to deny Petitioner second-class entry, on the ground that EBJ is designed primarily for advertising and for free circulation, was based essentially on the commonality of ownership and substantial identity of content with SBJ, it follows that the grounds of denial of second-class entry for EBJ are without valid foundation.

CONCLUSIONS OF LAW

            1.  Petitioner has established by a preponderance of the evidence that its publication "Executive Beverage Journal" is not designed primarily for advertising purposes and is not designed primarily for free circulation, in contravention of §§132.226 and 132.227 of the Postal Service Manual.  These being the only grounds upon which its petition for second-class mail privileges for "Executive Beverage Journal" were denied, it follows that Petitioner is entitled to a second-class mail permit for the publication "Executive Beverage Journal."

            2.  Respondent's denial of a second-class permit for "Executive Beverage Journal" was erroneous and is hereby reversed.

            3.  Subject to an administrative appeal as provided by regulation, a second-class permit should be issued by Respondent to Petitioner for the publication "Executive Beverage Journal."

                                                                                    John Lewis
                                                                                    Administrative Law Judge

[1] Proposed findings not herein adopted, either in the form proposed or in substance, are rejected as not supported by the evidence or as involving immaterial matters.

[2] The following abbreviations are used in referring to the evidence in the record:  "Tr.", for the transcript of testimony; and "PX", for Petitioner's exhibits.

[3] See letter of Petitioner to undersigned, dated January 27, 1972, as modified by letter of April 26, 1972, incorporated into record by undersigned's order of October 19, 1972.

[4] See memorandum from Edwin A. Riley, Director, Classification and Special Services Division, to Postmaster, Portland, Oregon, subject "TV Prevue," dated April 24, 1969, added to record by undersigned's order of October 19, 1972, on motion of Petitioner.