R2000-1 Ends with MPA Presenting Detailed Legal and Factual Arguments
In Favor of a Single-Digit Increase

In a comprehensive set of legal briefs, filed with the Postal Rate Commission on September 13 and September 22, MPA and its Periodicals Coalition partners (the Alliance of Nonprofit Mailers, American Business Media, Coalition of Religious Press Associations, Dow Jones & Company, Inc., the National Newspaper Association, the McGraw-Hill Companies, Inc. and Time Warner Inc.) set forth thorough arguments in favor of a single-digit increase for periodicals.

As the Coalition explained to the Commission, R2000-1 "has been an unusual case for Periodicals Mailers," beginning, as it had, with the shocking news that the Postal Service was proposing "increases in the range of 14-16 percent, and in some cases in excess of 20 percent" – an average increase that "was more than twice the average increase proposed for other types of mail, more than three times the increase in the CPI since the last rate increase, and more than twice what Periodicals Mailers believe is necessary or appropriate" under the law.

Over the course of the eight months since its filing, the Coalition said, Periodicals Mailers had "painstakingly" introduced evidence "that establishes that substantial cost savings and reductions" will in fact be achieved by the Postal Service in the near future. These documented savings fully support "a recommended average increase for Periodicals that is no greater than the system-wide average increase." Indeed, the Coalition said, one of the Postal Service’s own witnesses testified that "the Periodicals cost savings" identified on the record in R2000-1 "permit a much smaller overall increase for Periodicals than was originally proposed by the Postal Service," and further testified that the Service "would support a recommended increase for Periodicals that, on average, does not exceed ‘single digits.’" A second Postal Service witness "acknowledged that the record supports more than $200 million in cost savings and reductions."

Additionally, the Coalition argued strenuously that the "Postal Service’s claimed revenue requirement for Periodicals should be reduced substantially to reflect cost savings that [the Service] now agrees will occur, additional cost savings beyond those to which the Postal Service has agreed, and cost redistributions." In conclusion, the Coalition argued, because "the periodicals industry plays a special role in American life," bringing "to their millions of readers fiction and factual matter of every type, nature and description," they "have extraordinary value to their recipients." Given this value, "it was particularly inappropriate for the United States Postal Service to have sought from the . . . industry a devastating rate increase that . . . is excessive by any measure." While the Coalition is "gratified that the Postal Service has been willing . . . to suggest, recognize and agree to some of the ways in which the proposed increase should be reduced," the Coalition has shown "that it has not gone far enough."

MPA and other Periodicals Mailers Coalition members remain confident that the detailed analyses and arguments provided in the Initial Brief (as well as in our subsequently filed Reply Brief) have given to the Postal Rate Commission "both the will and the means to recommend a percentage increase for Periodicals that is no greater than the overall percentage increase recommended for the Postal Service."

The decision from the Rate Commission is due in mid- November.

As R2000-1 Ends, MPA Launches Phase II of its Postal Campaign

Even before the Rate Case ended, MPA representatives began formulating Phase II of its Postal Campaign, during which we will:

• meet with senior Postal Service officials to ascertain the Service’s plans for the future – particularly as they relate to magazines – and evaluate the workability of all such plans;
  
  
• meet with our suppliers (printers and shippers) to ascertain their plans for the future, and evaluate who is ultimately best suited to perform each of the steps in preparing, distributing, transporting and delivering magazines;
  
  
• work with the Postal Service to "rationalize" the rate structure, to ensure that appropriate price incentives are provided;
  
  
• formulate a legislative gameplan (1) to ensure strong Congressional support for our Phase II efforts and (2) to determine whether – and to what degree – postal reform legislation is needed, and work with Capitol Hill to achieve our objectives.
  

As a first step, there will be an industry/USPS exploratory meeting in November, during which we will discuss the Service’s concept of optimal magazine preparation and methods, as well as possible ways in which rates might be restructured. The meeting will be attended by representatives from MPA, as well as by representatives of business and newspaper publishers. Additionally, because of the success of our work with the industry-wide coalition during Phase I of the campaign (particularly with regard to the Rate Case), MPA will continue to seek common ground solutions that benefit – and will receive support from -- all members of the industry. In an extremely significant step, a first-ever joint meeting between MPA and the American Business Media’s postal committee has been scheduled for December.

The progress of Phase II will be detailed in future issues of the Newsletter.

Digital Technology Raises Digital Challenges

Digital technology and the explosive growth of the Internet are not only presenting the traditional "content" industries (including magazines, books, movies and music) with unprecedented challenges and opportunities, but, as a result, are forcing Congress and the United States courts to re-examine the fundamental principles of three centuries of copyright law. As happened in medicine and other fields in the last century, "content" technology now has gotten ahead of the law, raising questions no one even a decade ago thought to ask – let alone answer.

Already in court are two industry-critical copyright cases, both of which arose as a result of technology (in these instances, digital libraries and the CD-ROM), as well as lawsuits challenging new ways of doing old business:

• In New York, a group of freelance writers sued not only several major news organizations but also such "electronic" libraries as Lexis-NEXIS, claiming that the inclusion of their articles (which originally appeared in the paper pages of the news organizations' periodicals) in the "electronic" copies of those periodicals constitutes infringement of their copyrights. After losing at the trial level, the writers won on appeal. A second appeal – to the Supreme Court of the United States – may be heard later this year. Do the publishers own the whole editions? Or do the writers own the individual pieces?
• In Florida, a free-lance photographer sued the National Geographic on grounds that its inclusion of his photographs in the CD-ROM collection of a century of the issues of the magazine violated his copyright in the pictures. His appeal of a trial court loss was heard by the United States Court of Appeals for the Eleventh Circuit earlier this month; a decision is likely to be issued next year. Do publishers have the right to sell copies of past editions of their magazines on a CD-ROM? Or must they obtain – and pay for – "CD-ROM" rights to each and every "free-lance" contribution in those past editions?
• In California, several newspaper publishers are suing an Internet company that takes news articles from their Websites and transmits them to wireless telephone users. The lawsuit alleges that the wireless company is infringing the publishers’ copyrights and trademarks, as well as providing false advertising and unfairly competing against them. The case has yet to be heard. If on-line articles can be downloaded or e-mailed by anyone, can they also be gathered, organized and sent out as a "feature" on wireless telephones?
• And, in Boston, the traditional music industry -- as well as some high-profile musicians -- are suing the 20-something inventor of "Napster" – digital technology that allows users to upload, download and "share" music, without paying a penny to anyone. The industry has asked a court to shut Napster down, and its owners are being individually sued for infringing the musicians’ copyrights in their work. Is it a piracy operation – or a 21st century version of Robin Hood?

This year’s American Magazine Conference Government Affairs Breakfast on Tuesday October 24th will feature a panel discussion on these timely – and controversial – subjects. The panel will be moderated by Cynthia Braddon, Washington Vice President of The McGraw-Hill Companies, Inc., and will include two individuals on the front lines of the intensifying legislative and legal battle over copyright: Thomas E. Mooney, Chief of Staff and General Counsel of the United States House of Representatives Committee on the Judiciary (which has primary Congressional jurisdiction over all "intellectual property" matters), and Simon Barsky, Executive Vice President and General Counsel of the Motion Picture Association of America, a leading advocate of publishers’ and producers’ rights in ongoing "digital piracy" controversies.

UPDATE: SWEEPSTAKES	top

Despite the passage last year of comprehensive Federal sweepstakes legislation, sweepstakes mailings continue to raise concerns at both the federal and state levels. During postal oversight hearings in July Sen. Carl Levin (D-MI) – a key sponsor of last year’s sweepstakes bill – presented several sweepstakes mailings to Postmaster General William Henderson, claiming that they were not in compliance with the new federal law and asking the PMG what the Postal Service (which is charged with enforcement of the measure) intended to do to stop violations.

Since then, both Sen. Levin’s staff and that of Sen. Susan Collins (R-ME) (another sponsor of the 1999 measure) have expressed concerns regarding compliance with the law to the major industry associations involved with sweepstakes – including MPA. In conjunction with the Direct Marketing Association and the Promotion Marketing Association, MPA will shortly be notifying the membership about the Senators’ concerns, detailing the Senators’ compliance suggestions.

• If compliance issues are not resolved, the Senators’ staffs have said that they would consider holding additional hearings. Negative publicity from last year’s hearings had a significantly detrimental effect on magazine sales from sweepstakes solicitations.
  

In addition to continued federal concern about sweepstakes promotions, several states – apparently unsatisfied with the federal law -- are also considering sweepstakes legislation. Despite aggressive lobbying by MPA and our allies in opposition, the Colorado legislature, in May, passed a convoluted and far-reaching bill, which mandates new disclosures and restrictions in addition to those already required by federal law.

• The bill took effect on October 1. A detailed summary of the measure is available from the Washington office.
  

Sweepstakes legislation also has been proposed in the Michigan legislature, where MPA is lobbying hard to achieve a more balanced bill than that enacted in Colorado. The Michigan bill is currently on hold, but, should our efforts lead to a balanced bill there or in other states, we will also attempt to persuade the Colorado legislature to reconsider its law.

FTC RELEASES TROUBLING REPORT ON THE MARKETING OF VIOLENCE TO CHILDREN	top

After a year-long study, the Federal Trade Commission issued a report in September detailing its findings on the marketing of violent entertainment products to children by the motion picture, music recording and electronic games industries. The President and Congress requested the study last year -- shortly after the Columbine shootings.

Following its release, the Senate Commerce Committee immediately scheduled hearings to explore the report’s conclusion that many producers of R-rated movies, explicit-content recordings, and mature-rated video games had targeted children under the age of 17 in their marketing and advertising plans. Among the practices that the Commission and Congress found troubling was the placement of advertisements for violent movies, recordings and video games in magazines or on television shows with a majority or "substantial" segment of its audience under the age of 17. The Commission appeared to define a "substantial segment" as at least 35 percent of the audience.

Under intense pressure during the Congressional hearings, a number of industry groups and individual companies announced additional self-regulatory measures, including some new restrictions on ad placements. In general, however, the companies did not restrict advertising as much as some Senators had desired.

In public statements, MPA has encouraged advertisers and marketers to address the concerns raised in the Commission report. We did, however, caution against hasty implementation of advertising bans or restrictions based on judgments about audience composition. As we have stated previously – in response to Congressional proposals regarding tobacco and alcohol advertising – the calculation of "youth" or "teen" readership is historically imprecise. MPA further stated our long-standing record of opposition to laws and regulations that would restrict advertising in ways inconsistent with constitutional free speech protections.

The Senate Commerce Committee has also considered legislation sponsored by Sen. Hollings (D-SC) that would restrict the times during which "violent" television programming could be broadcast. MPA and its allies in the Freedom to Advertise coalition have expressed opposition to the Hollings legislation on First Amendment grounds. The bill – S. 876 – was voted out of Committee, and MPA is monitoring the situation closely in the event further action on the measure is scheduled.

Last-minute details on industry issues of interest to our readers.

Update: Telemarketing. While Members of Congress are anxious to complete the current session and hit the campaign trail, several bills affecting telemarketing solicitations are still in play. Specifically, S.2029 and H.R.3100 (the "Know Your Caller Act of 2000") -- companion bills sponsored, respectively, by Sen. Bill Frist (R-TN) and Rep. Rodney Frelinghuysen (R-NJ) – would prohibit telemarketers from blocking Caller ID identification if the telephone system they use is capable of displaying the telephone number. The bills would also require telemarketers to provide a telephone number for consumers to get on the company’s do-not-call list, and would prohibit telemarketers from contacting individuals on the list for any marketing purposes and/or from transferring the names of these individuals to any other entity for marketing purposes. MPA does not generally oppose these bills. We are, however, lobbying to limit the prohibition on any marketing directed to people who have opted out of telemarketing – because we believe this broad prohibition goes beyond the consumer’s choice not to receive telemarketing phone calls. A far more troubling telemarketing bill – H.R. 5283: the Telemarketing Victims Protection Act – was introduced late in the session by Rep. Matt Salmon (R-AZ). The bill would place an affirmative obligation on telemarketers to inform all consumers that they have the right to be placed on the company’s do-not-call list. This requirement would not only greatly lengthen telemarketing sales calls, but could be construed to require that this disclosure be made first, in order to ensure that it would be made at all prior to any particular consumer’s decision to hang up. MPA and other associations representing telemarketers or industries that use telemarketing are strongly opposed to this bill, which we believe will damage legitimate business without adding any meaningful protections for consumers. The Federal Trade Commission already has authority to consider whether (and to what extent) any modifications to existing telemarketing disclosure requirements are warranted. The Commission has held an extensive workshop on this very topic, with MPA and other industry and consumer groups participating and working cooperatively with Commission staff on these types of issues. While H.R. 5283 has not been the subject of any hearings or markup, there is a risk that Sen. John McCain (R-AZ) – as a favor to the retiring Rep. Salmon – will attempt to attach the bill to the Frist bill or other measures during the closing days of the session. MPA and its allies are monitoring the situation closely and will continue to lobby against this course of action.

MPA to meet with European Federation of Magazine Publishers. With the explosive growth of cyberspace leading the way, many government affairs issues have become global issues. In light of this – and other concerns that affect magazine publishers across borders, both real and electronic (such as advertising restrictions, privacy issues and environmental concerns), MPA and the European Federation of Magazine Publishers (FAEP) are planning their first-ever joint meeting, to be held at MPA’s New York headquarters on October 18. A delegation of publishers and association staff – representing Great Britain, Germany, France and the European Community – will meet with MPA’s Government Affairs Council, Legal Affairs Committee and MPA staff to discuss a broad range of issues. On the agenda: postal services, copyright, database protection, the environment, privacy, e-commerce, advertising restrictions and self-regulation. In addition to open discussion on these topics and the sharing of approaches and strategies, we hope to establish open channels of communication to facilitate the sharing of information and ideas on these and other topics in the future.

Non-Profit Relief Legislation Passes Congress: Moves to White House. Legislation designed to protect preferred postal rates for nonprofit mailers – a measure sought by the MPA, the Alliance of Nonprofit Mailers, the Direct Marketing Association, the United Postal Service and others – was approved by the United States Senate on October 6 and by the House on October 11, and is now on its way to the White House. The purpose of the bill (S.2686) is to "address serious shortcomings in the current USPS rate case proposal that is now before the Postal Rate Commission." Specifically, the legislation will: (1) set nonprofit Periodical rates at 95 percent of the commercial counterpart rate, (2) set the revenue per piece for nonprofit Standard A mail to reflect a 40 percent discount over the revenue per piece received by commercial Standard A mail, and (3) set library rates at 95 percent of the rates for the Special subclass of Standard B mail. The bill would thereby "lock-in" the rate relationship between nonprofit and commercial Standard A and Periodical rates, thus preventing current and future "rate shock" for nonprofits. President Clinton is expected to sign the bill into law later this month.

MPA PAC. Political contributions are an important tool for showing support to those Members of Congress who have demonstrated an understanding of – and interest in – the views of MPA, and the magazine industry. Authorized by law and regulated by the Federal Election Commission, political action committees (such as MPA-PAC) are a time-tested, effective and ethical way for companies and their trade associations to participate in the political process. With so many critically important issues at stake for our industry, there has never been as great a need for a strong MPA-PAC as there is right now. So far this year, MPA-PAC has received $14,000 in contributions. For additional information on MPA-PAC, its activities and views, or on FEC rules for making contributions, please contact the Washington office.