In the Matter of the Petition by                                )
                                                                               )
TV HOST, INC.                                                        )
P.O. Box 1665                                                        )
Harrisburg, PA 17105-1665                                   )
                                                                               )
Denial of Second-Class Mail                                  )
Privileges for "TV HOST PREMIUM                         )  P.S. Docket No. 17/25
& SATELLITE MONTHLY"                                       )

APPEARANCES FOR PETITIONER:                        R. Stephen Shibla, Esq.
                                                                              Rhoads & Sinon
                                                                              410 North Third Street
                                                                              P.O. Box 1146
                                                                              Harrisburg, PA 17108-1146
                                                                              Matthew S. Perlman, Esq.
                                                                              Arent, Fox, Kintner, Plotkin
                                                                              & Kahn
                                                                              1050 Connecticut Avenue, N.W.
                                                                              Washington, DC 20036-5339

APPEARANCE FOR RESPONDENT:                      Jeffrey H. Zelkowitz, Esq.
                                                                             Law Department
                                                                             United States Postal Service
                                                                             Washington, DC 20260-1143

Cohen, James A.

POSTAL SERVICE DECISION

Petitioner has appealed from the Initial Decision of an Administrative Law Judge which affirmed the ruling of the Director, Office of Mail Classification, United States Postal Service, denying the application for second-class mail privileges with respect to the publication TV Host Premium & Satellite Monthly ("TV Host"). The

Administrative Law Judge concluded that "each edition of TV Host is 'controlled' by, and "conducted as an auxiliary to and essentially for the advancement of" the cable television companies for which they are published, within the meaning of Domestic Mail Manual (DMM) § 422.6(c) (I.D. at pp. 13, 14). However, he rejected Respondent's argument that Petitioner's application could be denied under DMM § 441.22 based on a failure to provide information, concluding that, under the particular circumstances, "it would be unfair to deny the application on this ground" (I.D. at p. 17).

Petitioner has filed 14 exceptions to the Initial Decision, to which Respondent has filed a timely reply. Petitioner's exceptions have been combined where appropriate and are discussed below.

Exception 1

"1. Petitioner takes special exception to Finding #9 as the front page of the magazine clearly denotes the name of the publisher in the largest print on the cover. . . "

In Finding of Fact 9, the Administrative Law Judge stated that

" t he front cover of each magazine gives the impression that it is published by the individual cable television company. Only a careful reading of the small print on the table of contents page reveals that the magazine is actually published by Petitioner" (I.D. at p. 5).

As Petitioner argues, the name of the publication TV Host Premium & Satellite Monthly appears in large print on the cover of most of the monthly editions of the magazine. While this title may suggest an association with the name of the publisher, "TV Host, Inc.," to those having independent knowledge of Petitioner as a business entity, the title's general language - even when read in conjunction with other information appearing on the cover - would make no such suggestion to a reader who is unfamiliar with Petitioner's business. Indeed, the opposite impression is created by the display of the name of the cable system on the cover which generally appears above the title of the publication. Moreover, som eeditions of the magazine contain a wrap-around cover which represents the publication to be the cable system program guide, without reference to the magazine title (see RX-21 & 24). Petitioner is not identified as the publisher until the "Table of Contents" page where it is identified in small print. Thus, the overall impression conveyed to the ordinary reader by the cover of the publication is that it is being distributed by the cable system.

Petitioner argues that the TV Host covers are no different from those of other publications enjoying second-class mailing privileges. While the cover of a publication is one element to be considered in determining eligibility for second-class privileges, the decision to grant these privileges to an individual publication depends on an evaluation of a variety of factors involving much more than the publication's cover format. In view of the necessarily ad hoc nature of second-class determinations, a similarity to the cover format of another publication cannot, by itself, determin whether TV Host complies with second-class requirements. Accordingly, there is no error in Finding of Fact 9.

Exceptions 2 and 3

"2. Petitioner takes exception to the use of the word 'appears' in Finding #10 as the contract, i.e. 'the purchase order agreement' form speaks for itself, . . ."

"3. Finding of Fact #11 is contrary to the testimony given by Petitioner and flies in the face of the clear wording of Respondent's Exhibit 6 the purchase order agreement form . . ."

In Finding of Fact 10, the Administrative Law Judge stated that certain language in Paragraphs 2, 3 and 6 of the purchase order agreement form used by each cable company to order copies of the magazine "appears to give the Petitioner a certain degree of control over each edition of the magazine" (I.D. at p. 6). The qualification "appears" relates to the Administrative Law Judge's further finding, in Finding of Fact 11, that " i n practice, however, Petitioner did not exercise any significant editorial control over the contents of TV Host" (id.). While Petitioner contends that the purchase order agreement should only be taken at face value, the Administrative Law Judge properly took evidence and examined the record to determine whether its terms were modified or negated in practice by the conduct of Petitioner and the various cable companies.

A review of the various copies of TV Host admitted into the record reflects that the main body of this publication consists of cable program listings and advertisements. The program listings are provided by the various cable channel services in accordance with the terms of the purchase order agreements which allow them to determine the program listings to be included in the customized editions of the magazine (see RX 7-9; I.D. at 4; Tr. 103, 142-43). Petitioner's testimony that it retains control over "editorial content" (Tr. 112) is called into question by the lack of content over which such control may be exercised. Petitioner does not dispute the Administrative Law Judge's finding that the bulk of the copy printed in the magazine is provided by the various premium and satellite channel companies and that the remainder is provided by the individual cable companies. The open letters to subscribers contained in the system-specific editions of TV Host indicate that the cable system possesses control over the publication's contents (see RX-16, 18-21, 24). Moreover, when asked to relate the most recent example of the exercise of control by Petitioner (see discussion of Exception 4), its president referred to discussions with one cable company which took place approximately six months prior to the hearing and which was not persuasive that Petitioner in fact possessed control.

Accordingly, Findings of Fact 10 and 11 are affirmed.

Exception 4

"4. Finding of Fact #12 is in error as same is contrary to the facts adduced at trial, i.e. that Petitioner controls the content of its magazine. . . ."

In Finding of Fact 12, the Administrative Law Judge stated that "the fact that Petitioner 'talked a cable company out of running' some pictures advertising an X-rated program (Tr. 157-58) does not constitute the exercise of control . . ." (I.D. at p. 7). Petitioner contends that the Administrative Law Judge "twists the use of tact and good business sense around" to denote lack of control when, under the purchase order agreement, Petitioner retained control over editorial content (Pet. Brief at p. 4).

The portion of the transcript cited in this finding supports the Administrative Law Judge's characterization. In response to the question " c ould you just describe for me the most recent example of a piece of copy that you rejected?", Petitioner's president testified that Petitioner "discussed" some pictures proposed by a cable system "and told them it was our opinion that we would not like to use these photographs" and "talked them out of running that material" (Tr. 157-58). Despite Petitioner's assertion that it is "the controlling factor in this relationship" (Tr. 158), the cited testimony was not sufficient to rebut the conclusion that the cable companies, not Petitioner, actually exercise control over the contents of the publication. As noted supra, the record indicates that, as a practical matter, Petitioner exercised little control over the magazine's content. Accordingly, Finding of Fact 12 is affirmed.

Exception 5

"5. Finding of Fact #13 is excepted to for the sole reason that the Administrative Law Judge again confuses the highly specialized nature of the publication in question with the question of control . . ."

In Finding of Fact 13, the Administrative Law Judge stated that " t he survival of each edition of TV Host depends upon financial support and assistance from the cable company for which it is published . . ." (I.D. at p. 7). In support of this finding, he noted that the cable system purchases virtually the entire output of TV Host, thus directly providing Petitioner with its subscription revenue and a ready-made market for the publication, and also provides the entire list of TV Host subscribers on a monthly basis.

Petitioner does not appear to dispute these underlying factual findings, which are supported by the portions of the record cited. Rather, it contends that its business is to produce a magazine compatible with customer needs. However, the customers Petitioner refers to are the cable companies - not the readers of its magazines. The identification of the cable companies as Petitioner's customers is relevant to determining the overall nature of Petitioner's relationship with these cable companies. The nature of this relationship is important in determining where "control" resides. Thus, we find no error in Finding of Fact 13.

Exceptions 6 and 7

"6. Finding of Fact #14 is not denied, however, the fact that cable company benefits financially from advertising, local and national, in no way should be construed to denote control, and if same was intended, then it is excepted to."

"7. Finding of Fact #15 is excepted to only because of the negative connotations contained therein. The Petitioner specifically takes exception to any of the items mentioned in Finding #15 as rising to the level of control prohibited by DMM ?422.6(c)."

In Finding of Fact 14, the Administrative Law Judge stated that " e ach cable company receives part of the revenue from its edition of the magazine" (I.D. at p. 7). In Finding of Fact 15, he stated the ways in which TV Host benefits each of the cable companies for which it is published (I.D. at p. 8).

Petitioner does not contest the factual bases for these findings. Rather, it contends that the benefits flowing to the cable companies are not factors which should be considered in determining the elements establishing control under DMM § 422.6(c). The degree of benefit derived by the various cable companies through the publication of TV Host is a part of their relationship with Petitioner and may be considered with other factors in determining the issue of "control." Moreover, these findings are relevant to whether TV Host was "conducted as an auxiliary to and essentially for the advancement of the main business or calling" of the individual cable companies, within the meaning of DMM § 422.6(c). Accordingly, these exceptions are rejected.

Exceptions 8, 9, 10 and 12

"8. Finding of Fact #16 is excepted to as it is a conclusion which is not based upon a clear reading of the record. Additionally, it is excepted to because it tortures the clear meaning of the word 'control' . . ."

"9. Conclusion of Law #2 is excepted to as it is contrary to law . . ." 

"10. Conclusion of Law #3 is excepted to for the reasons more fully set forth in exception 9 . . . Additionally, Petitioner excepts to the negative connotations drawn by the Administrative Law Judge as to the practical fact that Petitioner and the cable systems it publishes for enjoy a mutually profitable relationship . . ."

"12. Conclusion of Law #5 is excepted to as same is arbitrary and capricious and ignores the clear language of Respondent's own exhibit (Exhibit 6) . . ."

In Finding of Fact 16 and Conclusions of Law 2, 3 and 5, the Administrative Law Judge stated and gave his reasons for concluding that each edition of TV Host is controlled by the cable company for which it is published.^*/ Specifically, the Administrative Law Judge cited the editorial restrictions placed by the individual cable companies on the format and content of TV Host, concluding that "Petitioner is essentially a printing company which primarily performs a layout function assembling certain predetermined sections of copy pursuant to the directions of each individual cable company" (I.D. at p. 13). He also noted that: each edition of TV Host "gives the overall ipression of being published by the cable company;" each edition's economic survival depends on the customer company's financial support and assistance; and advertising revenues are either shared by or totally retained by the cable company (I.D. at pp. 13-14). In Conclusion of Law 5, the Administrative Law Judge stated that his determination of control is not offset by the purchase order agreement form which, while purporting to give Petitioner considerable editorial control, "does not reflect the realities of the relationship between the publisher and the cable companies" (I.D. at p. 14).

DMM § 422.6(c) provides that, in order to meet second-class mail eligibility requirements,

" t he publication must not be owned or controlled by one or more 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 it, ..."

The DMM does not define "control." Petitioner cites the dictionary definitio of "control" and contends that the normal, everyday meaning of this term should be used. Petitioner argues that the Administrative Law Judge's conclusion regarding control is contrary to this meaning as well as the record in this case.

The Administrative Law Judge's finding of control by the cable companies is consistent with the dictionary definition cited by Petitioner - "to exercise authority over; direct or command" (Pet. Brief at p. 5). The word "control" is defined in Webster's Third New Inter. Dictionary, 496 (Unabridged Ed. 1968), as "power or authority to guide or manage." A review of the record supports the Administrative Law Judge's conclusions that the cable companies determine nearly all of the publication's content, who receives it, and its continued financial viability. This say over content and audience at least constitutes an exercise of power or authority to guide or manage the publication.

No direct relationship exists between Petitioner and the ultimate recipients of the magazine except for the mechanical act of mailing copies to names furnished by the cable companies. Rather, the relationship which exists is between Petitioner and the cable companies. While this relationship may be "mutually profitable" it does not alter the fact that control over the publication is exercised by the cable companies.

In Exception 9, Petitioner asserts that no control can exist absent common ownership between the publisher and the various cable systems, citing an Initial Decision in Willamette TV & Cable Guides, P.S. Docket No. 16/97 (I.D. March 8, 1984) at p. 29. DMM § 422.6(c) makes clear that common ownership is not required for a finding of control, since it states that "the publication must not be owned or controlled by one or more individuals or business concerns . . ." (emphasis added). Control and ownership are not synonymous. Control may, as here, be exercised by agreement of the parties as manifested by their conduct. To the extent that the Initial Decision in Willamette indicates otherwise, it will not be followed.

As noted supra, the Administrative Law Judge's finding of control is not precluded by the language contained in the purchase order agreements between Petitioner and the individual cable companies, since the actual conduct of the parties is more persuasive. Under the facts presented, the Administrative Law Judge's findings and conclusions that "control" by the cable companies exists within the meaning of DMM § 422.6(c) is supported by the record. Accordingly, Finding of Fact 16 and Conclusions of Law 2, 3 and 5 are affirmed.

Exception 11

"11. Conclusion of Law #4 is excepted to for the reasons more fully set forth in exception #10 above, . . ."

In Finding of Fact 16 and Conclusion of Law 4, the Administrative Law Judge stated that TV Host is conducted as an auxiliary to and essentially for the advancement of the individual cable television companies, thus falling within the second half of the prohibition contained in DMM § 422.6(c). In support of this determination, he characterized the publication's content as keyed to and favorably describing the individual cable companies' programs and services. He also cited the publication's encouragement of existing cable subscribers to renew and purchase cable services as well as its use as an advertisement for potential cable customers (I.D. at p. 14).

A review of the record supports the Administrative Law Judge's determination. The content and format of the magazines are designed to promote the cable companies' services. See Exceptions 2 and 3, supra. The facts reveal Petitioner as little more than a conduit for printing the system-specific editions of TV Host and distributing them to cable comapnies' subscribers as part of the companies' services (Tr. 156) and for the companies' benefit. Moreover, Petitioner has failed to present rebuttal evidence showing that the essential purpose in publishing TV Host is other than as an auxiliary to and essentially for the advancement of the individual cable companies. Accordingly, the portion of Finding of Fact 16 setting forth this determination, and Conclusion of Law 4 are affirmed.

Exception 13

"13. Conclusion of Law #6 is excepted to as the Administrative Law Judge has, by ignoring the simple fact that Petitioner's competitors put out identical magazines for other systems and enjoy second-class mail privileges, denied your Petitioner equal protection as guaranteed by the due process clause of the Fifth (5th) Amendment of the United States Constitution . . ."

In Conclusion of Law 6, the Administrative Law Judge stated that

" w hether a particular publication is controlled by another company and conducted as an auxiliary to and essentially for the advancemen tof that company is a question of fact which must be determined on a case-by-case basis . . . even if similar magazines have been granted privileges, there is no evidence of record that these magazines are controlled by the cable companies which they serve" (I.D. at p. 15).

The Administrative Law Judge's statement regarding the case-by-case nature of second-class mail determinations is correct. In reviewing applications by individual publications, the Postal Service must consider the entire available record and a variety of factors which, together, determine second-class mail eligibility. In this regard, the United States Supreme Court has recognized that the Postmaster General makes "a searching investigation of the character of a publication . . . under rules and regulations prescribed by him . . ." before issuing it second-class privileges. United States ex rel. Milwaukee Social Democratic Publishing Co. v. Burleson, 255 U.S. 407, 415 (1921). See also Holmes Management Co., P.S. Docket No. 4/71 (P.S.D. Oct. 22, 1976) at p. 7-8.

There is nothing in the language of National Rifle Ass'n v. United States Postal Service, 407 F.Supp. 88 (D.D.C. 1976), cited by Petitioner, which would require a different practice. That case states that due process is satisfied by allowing an applicant for special postal rates to fully present its evidence (id. at 95). Petitioner has been afforded this opportunity. It has not shown that the same factors on which the finding of "control" was based also existed with respect to the other publications admitted into the record. Accordingly, Conclusion of Law 6 is affirmed.

Exception 14

"14. Conclusions of Law #7 and #13 are excepted to for all of the reasons set forth in exceptions 1-13 above, . . ."

In Conclusion of Law 7, the Administrative Law Judge restated his conclusions that each edition of TV Host is controlled by and conducted as an auxiliary to and essentially for the advancement of the individual cable companies. In Conclusion of Law 13, he sustained the denail of Petitioner's application for second-class mail privileges.

The propriety of these conclusions has already been addressed in connection with Petitioner's other exceptions. As previously stated, the Administrative Law Judge properly concluded, based on the evidence in the record, that the editions of TV Host are not entitled to second-class mail privileges under DMM § 422.6(c), since they are controlled by the cable companies for which they are published and are an auxiliary to and essentially for the advancement of those companies. Accordingly, Conclusions of Law 7 and 13 are affirmed.

CONCLUSION

After having considered the entire record and Petitioner's arguments, it is concluded that Petitioner's publication is controlled by the various cable companies for which it is published. This conclusion is based on consideration of the actual overall relationship between TV Host and the cable companies, as presented in the record, including the impression conveyed through the magazine's format and content regarding the publisher's identity; the exercise of editorial discretion over the format and content; the publication's economic dependence on support by the various cable companies; the degree and type of benefit derived by the cable companies from the publication, including distribution of advertising revenues; and the degree and type of direct relationship between Petitioner and readers of the publication.

It is further concluded that Petitioner's publication is conducted as an auxiliary to and essentially for the advancement of the various cable companies for which it is published. This conclusion is based on an examinatio of the factors presented in the record including the purpose of TV Host, specifically the degree to which the publication's format and content are designed to promote the cable companies services, whether for the purpose of obtaining new cable users or user renewals and purchase of additional cable services by current cable users; the dependent of Petitioner on the cable systems; the financial benefits of advertising flowing directly to the cable systems; and Petitioner's failure to present rebuttal evidence showing that its essential purpose in publishing TV Host is other than as an auxiliary to and essentially for the advancement of the individual cable companies.

Accordingly, Petitioner's publication does not conform to the DMM provisions for second-class mail. Petitioner's appeal is therefore denied.

*/ The portion of Finding of Fact 16 which states that TV Host is conducted as an auxiliary to and essentially for the advancement of the cable television company's business is discussed infra, under Petitioner's Exception 11.