In the Matter of the Petition by

WILLIAM R. GOOD, JR.,
Publisher, 422 Wall Street,
Los Angeles, California 90013

Proposed Revocation of Second-Class Mail Privileges for
"PATTERSON'S CALIFORNIA BEVERAGE GAZETTEER"

P.S. Docket No. 2/123

Rudolf Sobernheim Administrative Law Judge

APPEARANCES:
Roy C. Frank, Esq.
9304 Cedarcrest Drive
Bethesda, Maryland 20014
for Petitioner

Arthur S. Cahn, Esq.
Law Department U.S. Postal Service
Washington, D.C.
20260 for Respondent

INITIAL DECISION

This is a proceeding initiated by Petitioner pursuant to 39 C.F.R. Part 954 to contest the ruling by Respondent, represented by the Manager of the Mail Classification Division, Finance Department, U.S. Postal Service (hereinafter sometimes referred to as the "manager") which on 15 May 1973 annulled, subject to the outcome of this proceeding, Petitioner's second-class mail privileges in respect of "PATTERSON'S CALIFORNIA BEVERAGE GAZETTEER" (hereinafter sometimes referred to as the "GAZETTEER"). The reasons for this ruling were stated by the Manager in said letter, a copy of which is annexed to the complaint, as follows:

"Section 132.226, Postal Service Manual (sections 4351 and 4354 of Title 39 United States Code) provides that only 'newspapers and other periodical publications' constitute mailable matter of the second-class. Section 132.226, Postal Service Manual (section 4354(c) of Title 39, United States Code) provides that publications designed primarily for advertising purposes may not qualify for second-class mail privileges. Subsection (a) of that regulation provides that they include those having advertising in excess of 75 percent in more than one-half of their issues during any 12 month period. Subsection (b) of that regulation prescribes that they include those owned or controlled by individuals or business concerns and conducted as an auxiliary to and essentially for the advancement of the main business or calling of those who own or control them.

The 'Patterson's California Beverage Gazetteer' is designed primarily for advertising purposes. An examination of copies of the publication has disclosed that the advertising content exceeded 75 percent in more than one-half of the monthly issues that were published during the last 12 months. Furthermore, the publication advertises and promotes other businesses owned and controlled by Patterson's such as Patterson's Business and Realty Sales.

The 'Patterson's California Beverage Gazetteer' is not a periodical publication as that term has been interpreted by the Court and this Agency. (See Houghton v. Payne , 194 U.S. 88 (1904).) It is nothing more than a price list which is updated on a periodic basis, with the majority of material remaining the same from issue to issue.

The provisions of Title 39, United States Code, which are cited above have been carried forward by section 3 of the Postal Reorganization Act, Public Law 91-375, as implemented by Postal Service Orders 71-9 and 71-10, June 21, 1971."

Conversations between the parties appear to have followed this initial action but they came to an end when the Manager wrote to Respondent's managing editor on 10 July 1973 (Pet'r Ex. 2):

This is in reference to the action taken to revoke the second-class permit authorized for 'Patterson's

California Beverage Gazetteer.' We have noted your further comments regarding this matter. However, it does not appear that any actions taken by you would bring 'Patterson's California Beverage Gazetteer' into compliance with the Postal regulations governing second-class mail."

Petitioner thereafter initiated the instant proceeding by filing a timely complaint on 15 August 1973. A hearing was set for 14 November 1973 but was continued by agreement of the parties until after a final decision in Florists Transworld Delivery Association (hereinafter sometimes referred to as "FTD"), P.S. Docket No. 1/167, had been rendered. The final Amended Postal Service Decision in that matter was rendered on 17 September 1974 and a hearing was held in this proceeding on 6 January 1975. As copies of correspondence attached to Respondent's reply brief show, negotiations between the parties concerning a disposition of this matter, in which the Manager and his staff, Respondent's staff and counsel for both parties participated, continued at least into November 1974. In these negotiations the issues raised in this proceeding appear to have been fully discussed. In their course Respondent must have become convinced that the charge of the use of the GAZETTEER to promote the main business of Respondent (see PSM 132.226(b)) was not borne out by the facts for its was dropped at the commencement of the 6 January 1975 hearing (T 3). At the hearing both parties presented evidence and they filed briefs and reply briefs.

FINDINGS OF FACT

1. The GAZETTEER is a monthly publication owned and printed by Wolfer Printing Company, Inc. of Los Angeles, California (T 35).

2. It began publication in 1941 (T 36) and in 1964 or 1965 was designated as a periodical for the publication of alcoholic beverage fair trade prices for Southern California (T 36; WEST'S ANN. CAL. BUS. & PROF. CODE, sec. 24755(j), 24875; 4 CAL., ADM. CODE, sec. 99.2(2) (Rules and Regs, Alcoholic Bev. Control Act).)

3. Although Respondent placed four issues of the GAZETTEER in evidence (Resp. Ex. 1 through 4), the parties addressed themselves only to the content of the October 1974 issue (Resp. Ex. 4). Inspection of the four issues indicates, however, that they are identical in structure and mutatis mutandis similar in content. Moreover, the parties stipulated at the hearing (T 6-7) that findings and determinations regarding a particular issue would be applicable, again mutatis mutandis , to all relevant issues of the GAZETTEER. The record contains no evidence to the contrary and I so find.

4. The October 1974 issue of the GAZETTEER (Resp. Ex. 4) is a volume about 8 1/2 by 11 inches in size and about 3/4 to 7/8 inches thick. Including the covers it contains 546 pages by Petitioner's count and 531 pages by the revised count of Respondent's senior mail classification specialist.

5. The October 1974 issue is divided into three parts: an editorial section of 99 numbered and 1 unnumbered pages for a total of 100 and not 102 as Petitioner contends in his brief; a "white" section which Petitioner and the mail classification specialist until the end of the hearing counted as 394 and Respondent in its brief recounts as 381 pages; a green section (including the back cover) which both parties count as 50 pages. I find on the basis of the figures proffered that the October 1974 issue has 544 pages.

6. The first section contains ten to fifteen short stories, either writing up a particular restaurant, bar, trade affair or kind of alcoholic beverage, or discussing alcoholic beverage industry or trade matters, interspersed by a substantial amount of advertising. These short articles or stories are preceded by a table of contents which includes a short statement about the publication from which the following is extracted:

"Serving the beverage industry throughout the states of California and Hawaii with a circulation of 22,050 to licensees and members of the alcoholic beverage industry. *** Patterson's is restricted to members of the alcoholic beverage industry. Subscribers are forbidden to permit inspection of their copies by anyone not engaged in the industry. Subscriptions are accepted on this basis only. Entered as second class matter March 5, 1949 at the U.S. Post Office, Los Angeles, California."

7. On the basis of the record 35 out of 100 pages in the first section of the October 1974 issue are to be classified as advertising.

8. The second part of the issue (Resp. Ex. 4) consists admittedly of at least 358 pages of advertisements by sellers of alcoholic beverages (wholesalers, importers and other intermediaries) to licensees (retailers, bars, restaurants etc.). Interspersed are 36 pages with occasional free space for memoranda, the publisher's caution that it takes no responsibility for errors, so-called public service ads by e . g . the National Safety Council (opposite pages 134-A and 264-A), the U.S. Navy (Navy Opportunity Information Center) (opposite page 109-A), and some twelve pages of indices to (i) items or sizes new for October 1974, (ii) changes in fair trade prices for November 1974, (iii) alcoholic beverage sellers' representatives and brokers, (iv) breweries' branches and agents, (v) associations, bureaus etc., and (vi) display advertisers and sellers.

a. The advertisements by the firms selling alcoholic beverages list items for sale and their prices and are paid for by the sellers. Some of these advertisements cover many pages: NDC Distributors occupies ten pages, Mission Cellars International five pages, Don W. Snyder Company twelve pages.

b. The public service advertisements are inserted by Petitioner without compensation by the inserting activities.

9. Of these 36 pages, claimed as non-advertising by Petitioner, Respondent would allow only 6, since it considers the public service ads and indices to be advertising.

10. The third section of the October 1974 issue of the GAZETTEER consists of 48 green (formerly yellow) pages and the back cover which is concededly occupied by advertisements. The green pages, published by Petitioner without compensation from the sellers, consist of 36 pages listing all distilled spirits in the Southern California market in alphabetical order. For each spirit the entry gives name and proof, the quantities in which it is sold (gals., quarts, pints, ounces etc.), the price per unit (bottles, cases, packs) to the licensees and cost to the public. Beneath each item or group of related items Petitioner lists the sellers of the item to Southern California licensees and - mostly - the page where the sellers' price advertisement of the item is found. Sometimes no page number in the second section is given. The record furnishes no explanation why, although in some cases perhaps because the item does not appear in the sellers' price advertisement. In any event, every seller listed in the green pages, has a price advertisement in the second section. The green pages also contain eleven (11) pages of indices and directories and one page of admitted advertising.

11. The prices given in the green pages are described as the licensee's bottle and case cost and the fair traded consumer price. There is no statement in the green section that the prices listed therein are those filed with the California ABC authorities pursuant to law or that they are published in the GAZETTEER pursuant to regulations governing monthly publication of posted alcoholic beverage prices in the GAZETTEER and certain other publications.

12. Because of the tie-in between the items and sellers listed in the green pages and the sellers advertising in the second section of the GAZETTEER, Respondent treats the 36 pages of listings as well as the attendant indices and directories as advertising. Respondent, on the other hand, contends that it performs a legal duty in publishing the green pages and that they are not advertising since not paid for by advertisers.

13. a. In sum, the October 1974 issue of the GAZETTEER looks as follows:

                         Total Pages      Advertising Pages      Per Pet'r.      Per Resp.
First Section            100                       35                        35
Second Section       394                     358                      388
Third Section             50                         3                        50
                                544                     396(72.8%)         473(86.5%)

b. It follows from the foregoing table that if all pages of the third section or if only the 36 price list pages thereof were treated as advertising pages, the total of the latter category of pages would exceed 75%. A like result would seemingly follow as to all issues (June '74 through January 1975) for which Petitioner has furnished its own estimate of advertising pages on the record of this proceeding.

14. a. On the record as a whole and the detailed findings of fact made herein I find that the GAZETTEER is a trade publication, devoted to the alcoholic beverage industry and published for the purpose of providing (i) licensees with the prices at which they can buy alcoholic beverages from sellers and including the fair trade prices below which the licensees many not sell to the public, and (ii) sellers with a forum for placing their wares and prices systematically before the eyes of the licensees. All of this is provided for the trade only, shielded from the eyes of the consuming public.

b. It is obvious that both licensees and sellers deem the availability of a publication, such as the GAZETTEER, important to the conduct of their business and that, contrary to the impression which Petitioner's managing editor sought to leave in his testimony, the advertisements of sellers are the key to the GAZETTEER's business success rather than the mere publication of the green pages.

c. There can be no doubt that the price listings in the green pages arranged alphabetically by product and referring to the sellers (advertisers in the second section) either by page or through the index, in fact subserve the advertising function of the GAZETTEER when realistically viewed. That Petitioners keep price listings current is obviously in the sellers' and also in the licensees' interest and is necessitated by the fair trade-posted price system which the alcoholic beverage industry enjoys in California and not by Petitioner's zeal of duty in serving any command of the law.

CONCLUSIONS OF LAW

1. Respondent has asserted a dual basis for its proposed revocation of Petitioner's second-class mail privileges as regards the GAZETTEER: (a) that it is not a periodical publication within the meaning of Postal Service Manual (PSM) 132.211 and its precedessor statutory provision, as interpreted in Houghton v. Payne , 194 U.S. 88 (1904) and applied in numerous court and administrative decisions since; (b) that it is a publication "designed primarily for advertising purposes" under PSM 132.226, as having advertising in excess of 75 percent in more than one-half of its issues during any 12-month period.

2. PSM 132.226 itself does not define the term "advertising." Chapter 1 of the Postal Service Manual, however, defines or refers to advertising matter in the provisions of Subchapter 120 on preparation for mailing and in Subchapter 130 on mail classification and rates.

3. Section 125.51 provides in regard to second-class bulk mailings that a copy of each issue of the publication must be filed at the original or additional entry office "marked by the publisher in such manner that advertisements can be verified when necessary" (PSM 125.512, 1st sent.). Such verification may become necessary to determine whether proper postage has been paid on the advertising portion of publications mailed for delivery outside the county of publication and entry (PSM 132.12).

4. The term "advertisements" is defined in PSM 125.52 to include "display, classified and all other forms of advertisements" and also "any editorial or other reading matter for the publication of which money or other valuable consideration is paid, accepted, or promised."

5. In regard to second-class mail (PSM Part 132) section 132.7 contains a provision paralleling section 125.512 (Concl. of L. 3, supra ), reading as follows:

".71 Editorial or other reading matter contained in publications entered as second-class mail and for the publication of which a valuable consideration is paid, accepted, or promised shall be marked plainly advertisement by the publisher.

* * * * * * *

.73 Each paid editorial or reading article which occupies all or any part of one page must be marked plainly advertisement . Each paid editorial or reading article which occupies more than one page must be marked plainly advertisement on each page or part of a page which it occupies."

6. The foregoing provisions of sections 125.52, 132.71 and 132.73 of the Postal Service Manual raise a serious question whether in determining the meaning of 'advertising," as used in section 132.226, publication content which from a business or economic viewpoint may be advertising, i . e . promotion of goodwill or trade activities of the named enterprise, is, nevertheless, excluded from "advertising" for mailing and mail classification purposes since no money or valuable consideration has been or will be received for is inclusion in the publication. Moreover, in context the question may be raised whether incidental public service advertising in a publication is the kind of advertising to which PSM 132.226 is addressed and, hence, a page on which such advertising appears classifiable as an advertising page.

7. The parties have in their briefs presented little background of the history of these regulations or of the arguments justifying either an affirmative or negative answer nor have they cited any decisions applying the cited sections. The argument, adumbrated in the testimony of Respondent's mail classification specialist (T 28), that price lists, for instance, are not reading matter can, however, hardly be taken seriously, especially in view of the very precise distinction in Part 132 between a "reading article" (PSM 132.73) and "other reading matter" (PSM 132.71).

8. In this proceeding these issues are not material ones (5 USC 557(c)) and, therefore, need not be decided unless it is first determined that the GAZETTEER is a periodical publication entitled to second-class mail privileges. If not, all other issues fall by the wayside. Hence, this issue must now be addressed. The answer on this point is not, however, in doubt. For it is governed by the Amended Postal Service Decision in the FTD case, supra , as the parties themselves initially recognized in their stipulation for postponement of the hearing herein until FTD was decided.

9. The publication in the FTD case contained a number of articles which occupied 4.9% of total pages in the FTD News (Am. P.S. Dec., p. 11). Hence, there existed in the FTD case a minimal basis for classifying the publication involved as "periodical publications" within the definition of Houghton v. Payne , supra . Nevertheless, the Acting Judicial Officer held that FTD News was not a periodical publication within the meaning of PSM 132.211 and predecessor regulations and statutes as interpreted in Houghton v. Payne , supra . He adopted the finding of the Administrative Law Judge in his initial decision:

"The existence of the articles appearing in the first section of the FTD News , cannot qualify it as a periodical." (Am. P.S. Dec., pp. 23-24)

He further adopted and made his own the finding that the FTD News listing of the FTD membership and supplemental "card" advertisements made the publication a catalogue or directory, serving as a listing or compendium of florist shops who were members of the FTD Association and through whom florists in one city could execute orders for delivery in another. Significantly, circulation of the FTD News was limited to the Association membership (Am. P.S. De. Dec., pp. 5-10, 24-25).

10. The GAZETTEER carries a larger percentage of articles (11.9% of all pages) that the FTD News but not sufficient to make the articles the dominant characteristic or apparent purpose for publishing the GAZETTEER. The GAZETTEER is obviously and on its face published to afford sellers of alcoholic beverages an opportunity to advertise their wares and prices. In supplementing these advertisements with a list of state-posted prices, collated by its staff alphabetically for the distilled spirits and cross-indexed to the advertisements of the sellers, Petitioner acts as much to facilitate communication between its advertiser-sellers and subscriber-licensees as to perform a public function which to perform it volunteered in its own interest. Hence, the publication of the green pages adds to rather than detracts from the character of the GAZETTEER as a directory of sellers of alcoholic beverages in Southern California, a catalogue of the beverages which they sell and of the prices at which they are sold.

11. The only real distinction between the GAZETTEER and the FTD News is that the latter listed florist-sellers willing to execute orders of other florists for the latters' customers, while the GAZETTEER lists sellers of alcoholic beverages, their wares and importantly their prices. The initial decisions in National Auto Research Publications, Inc. , P.S. Docket No. 2/131(1975) and in National Automobile Dealers Used Car Guide Company , P.S. Docket No. 2/183 (1975), establish that FTD , supra , applies to price listings as well as listings of dealers. See also Northwest Missouri State University , P.S. Docket No. 3/42(1975) (university course catalog).

As to the need for articles see also Shepard's Citations, Inc ., P.S. Docket No. 1/88 (1974); Board of Publications of the Christian Reformed Church , P.S. Docket No. 2/101(1975).

12. It might perhaps be well to point out that the determination that a particular publication is a catalog or directory not entitled to be mailed at second class postage rates is not dependent on a particular percentage of " Houghton v. Payne " content as such but on the character of the publication as a whole. On the other hand, if a publication is a periodical publication under PSM 132.21, as interpreted in Houghton v. Payne , supra , and subsequent decisions and thus entitled to second-class mail privileges, it does not lose them because it also contains advertising unless the advertising matter exceeds the percentage bounds of PSM 132.226a.

13. Since I have here reached a decision adverse to Petitioner on the first point I do not reach the second which has lost its materiality. Accordingly, the ruling of the Manager was correct and Petitioner's second-class mail privileges in respect of the GAZETTEER should stand revoked.