B-167460, AUG. 7, 1969

B-167460, AUG. 7, 1969

POSTAL MATTERS - RATE PROPRIETY DECISION ON BEHALF OF PUBLISHER OF THE KERNERSVILLE NEWS (N.C.) CONCERNING DEBT REPRESENTING DIFFERENCE BETWEEN SECOND-CLASS RATE FOR NEWSPAPERS AND HIGHER TRANSIENT RATE FOR ADVERTISEMENTS. ON REVIEW OF RECORD IT IS CONCLUDED THAT NEWSPAPERS WERE NOT GIFT SUBSCRIPTIONS BUT FOR ADVERTISING PURPOSES AND HIGHER POSTAGE RATE WAS APPLICABLE.

TO MR. C. EDWIN ALLMAN:

YOUR LETTER OF MAY 26, 1969, ON BEHALF OF MR. FRED P. CARTER, PUBLISHER OF THE KERNERSVILLE NEWS, REQUESTS A HEARING CONCERNING THE MATTER OF THE REPORTED INDEBTEDNESS OF YOUR CLIENT TO THE POST OFFICE DEPARTMENT IN THE AMOUNT OF $2,338.27. THIS SUM WAS STATED IN OUR CLAIMS DIVISION SETTLEMENT Z-2365722, APRIL 21, 1969, AND REPRESENTS THE AMOUNT DUE THE UNITED STATES BECAUSE OF A POSTAL DEFICIENTY IN CONNECTION WITH THE MAILING OF THE KERNERSVILLE NEWS DURING THE PERIOD FEBRUARY 10, 1966, TO NOVEMBER 24, 1966.

THE FACTS GIVING RISE TO THIS MATTER ARE REPORTED HERE AS FOLLOWS:

THE FORMER POSTMASTER AT KERNERSVILLE REPORTED THAT WITH THE ISSUE OF FEBRUARY 11, 1966, THE CIRCULATION OF THE KERNERSVILLE NEWS INCREASED APPROXIMATELY 35 PERCENT. INVESTIGATION DISCLOSED THAT THIS INCREASE WAS OCCASIONED BY THE PURCHASE OF 1,000 SUBSCRIPTIONS TO THE KERNERSVILLE NEWS BY MR. W. R. BARRIER, MANAGER OF THE ADVERTISING AND PROMOTION DEPARTMENT OF BI-RITE SUPERMARKET ENTERPRISES, GREENSBORO, NORTH CAROLINA. ON JUNE 2, 1966, A RECEIPT IN THE AMOUNT OF $2,500 WAS ISSUED IN PAYMENT FOR THESE SUBSCRIPTIONS AND ON THE SAME DATE A CHECK IN THE AMOUNT OF $1,250 WAS DRAWN TO THE ORDER OF MR. BARRIER WHICH IT IS REPORTED WAS IMMEDIATELY DEPOSITED TO THE BI-RITE ACCOUNT. YOUR CLIENT ADVISED THAT 50 PERCENT OF THE SUBSCRIPTION PRICE IS THE STANDARD FEE PAID TO SUBSCRIPTION AGENTS.

ACCORDING TO MR. BARRIER, THE MATTER OF THESE SUBSCRIPTIONS WAS FIRST DISCUSSED WITH A MR. W. O. BARRETT, FORMER ASSOCIATE EDITOR OF THE KERNERSVILLE NEWS, SOME THREE TO FOUR MONTHS PRIOR TO JUNE 2, 1966, THE DATE PAYMENT WAS MADE. MR. CARTER ACTUALLY HANDLED THE TRANSACTION AND FURNISHED MR. BARRIER TWO LISTS OF NAMES, ONE OF WHICH WAS A LIST OF THE THEN SUBSCRIBERS TO THE KERNERSVILLE NEWS. AN EMPLOYEE OF BI RITE COMPARED THE TWO LISTS AND MARKED OUT NAMES AND ADDRESSES OF EXISTING SUBSCRIBERS.

MR. BARRIER STATED THAT IT WOULD OBVIOUSLY BE OF NO VALUE TO THE STORE TO SEND THE PAPER TO PERSONS ALREADY SUBSCRIBING AND THAT THE PRIMARY PURPOSE OF THE SUBSCRIPTIONS WAS TO GET THE STORE'S ADVERTISING IN THE HANDS OF MORE PEOPLE. THE COST OF THE SUBSCRIPTIONS WAS CHARGED TO COMPANY RECORDS AND, ACCORDING TO MR. BARRIER, THE GIFT SUBSCRIPTIONS WERE FOR ADVERTISING PURPOSES.

DURING THE PERIOD FEBRUARY 10, 1966, TO NOVEMBER 24, 1966, INCLUSIVE, AN AVERAGE OF 925 COPIES OF THE WEEKLY ISSUE OF THE KERNERSVILLE NEWS WAS SENT TO PERSONS WHOSE SUBSCRIPTIONS WERE PAID FOR BY BI-RITE. A TOTAL OF $121.98 WAS PAID AS POSTAGE FOR THESE MAILINGS AT THE POUND RATE AND THE POST OFFICE DEPARTMENT TAKES THE POSITION THAT THE CORRECT CHARGE FOR THESE MAILINGS, AT THE TRANSIENT RATE IS $2,460.25. ACCORDINGLY DEMAND HAS BEEN MADE AGAINST YOUR CLIENT IN THE AMOUNT OF $2,338.27.

SUBSECTION 4354 (A) (5) OF TITLE 39 OF THE U.S.C. PROVIDES THAT GENERALLY A MAILABLE PERIODICAL PUBLICATION IS ENTITLED TO BE ENTERED AND MAILED AS SECOND CLASS MAIL IF IT HAS A ,LEGITIMATE LIST OF SUBSCRIBERS.' UNDER 39 U.S.C. 4362 (3), THE HIGHER TRANSIENT POSTAGE RATE APPLIED TO COPIES OF PUBLICATIONS HAVING SECOND CLASS ENTRY MAILED "BY THE PUBLISHERS TO PERSONS WHO MAY NOT BE INCLUDED IN THE REQUIRED LEGITIMATE LIST OF SUBSCRIBERS.'

IT IS YOUR POSITION THAT SO FAR AS YOUR CLIENT AND HIS NEWSPAPER IS CONCERNED, THE NEW SUBSCRIPTIONS PURCHASED BY BI-RITE WERE FOR THE PURPOSE OF PROMOTING THE KERNERSVILLE COMMUNITY IN GENERAL AND WERE NOT FOR ADVERTISING PURPOSES. IN SUPPORT OF THIS POSITION YOU STATE THAT:

(1) BI-RITE AT NO TIME INFORMED YOUR CLIENT THAT THE PURPOSE OF PURCHASING THE SUBSCRIPTIONS WAS TO INCREASE THE ADVERTISING COVERAGE OF BI-RITE;

(2) BI-RITE DID NOT MATERIALLY INCREASE ITS ADVERTISING IN THE KERNERSVILLE NEWS DURING THE PERIOD INVOLVED;

(3) BI-RITE WAS NOT GRANTED A REDUCTION IN ITS ADVERTISING COSTS BY THE KERNERSVILLE NEWS; AND (4) THE GIFT DONEES WERE NOT INFORMED AS TO THE NAME OF THE GIFT DONOR.

WHILE THE ARGUMENTS MADE BY YOU WOULD BE PERTINENT IN THE CONSIDERATION OF A MATTER WHERE THE INTENTION OF YOUR CLIENT WAS A FACTOR, SUCH IS NOT THE CASE IN THE PRESENT CONSIDERATION. THE SINGLE ISSUE AT HAND IS WHETHER IN FACT NEWSPAPERS OTHERWISE ENTITLED TO THE SECOND-CLASS RATE UNDER 39 U.S.C. 4354 WERE, BECAUSE OF THE MANNER IN WHICH PURCHASED, REQUIRED UNDER 39 U.S.C. 4362 TO BE SENT UNDER THE HIGHER TRANSIENT RATE. DETERMINATIVE IN THIS ISSUE IS WHETHER NEWSPAPERS PAID FOR BY BI-RITE WERE SENT TO PERSONS WHO MAY NOT BE INCLUDED IN THE REQUIRED LEGITIMATE LIST OF SUBSCRIBERS.

THE POST OFFICE DEPARTMENT IN ITS REGULATIONS RECOGNIZES THAT SOME GIFT SUBSCRIPTIONS MAY BE INCLUDED ON A SUBSCRIPTION LIST. SPECIFICALLY SECTION 132.463 OF THE POSTAL MANUAL READS THAT:

"A MINOR PORTION OF THE SUBSCRIPTION LIST MAY CONSIST OF PERSONS WHOSE SUBSCRIPTIONS WERE PAID FOR AS GIFTS.' HOWEVER THE CITED REGULATIONS GOES ON TO PROVIDE THAT:

"SUBSCRIPTIONS PAID FOR BY ADVERTISERS OR OTHER INTERESTED PERSONS TO PROMOTE THEIR OWN INTERESTS * * * ARE NOT GIFT SUBSCRIPTIONS; POSTAGE AT THE TRANSIENT RATE * * * MUST BE PAID ON THESE COPIES.'

ON THE FACTS OF RECORD THE POST OFFICE DEPARTMENT HAS DETERMINED THAT THE TRANSIENT RATE OF 39 U.S.C. 4362 APPLIES. A COMPLETE REVIEW OF THE RECORD BEFORE US HAS BEEN MADE, INCLUDING YOUR ARGUMENTS ON BEHALF OF YOUR CLIENT, AND AT THIS POINT WE AGREE WITH THE DETERMINATION OF THE POST OFFICE DEPARTMENT. WHATEVER MAY HAVE BEEN YOUR CLIENT'S UNDERSTANDING AS TO THE INTENTION OF BI-RITE IN PAYING FOR THESE SUBSCRIPTIONS, BI-RITE READILY ADMITS THAT ITS PURPOSE WAS TO PROMOTE ITS BUSINESS. WITH REGARD TO YOUR REQUEST FOR A HEARING WE DO NOT USE A FORMALIZED HEARING PROCEDURE IN OUR WORK. HOWEVER, OUR ATTORNEYS HANDLING THIS CASE WILL BE GLAD TO MEET WITH YOU TO DISCUSS IT. IF YOU WISH TO DO THIS PLEASE CALL MR. JAMES MASTERSON, PHONE-386 5421.