When interrogated on this point on the day following the statement by the company opposing us, Mr. Nelson B. Wentzel, Deputy Third Assistant Postmaster General, stated during the April 4 hearing of the House committee and I quote:

* According to the definition of the publications in this proposed bill,

it would not apply to so-called shopping news

# Because most of these publications carry no reading matter. Or if

they do, it is a very small percentage.

"(Because) this bill requires-and the present law for these publications does require them to have at least 25 percent of textual matter.

*

*

"(Because) the shopping news is delivered without any address at all-whereas, under this bill, a controlled circulation publication must be addressed.

"For those reasons, it (the bill) would hardly take in the shopping news." Allegation No. 4.-I quote: "The Postmaster General is saddled with the responsibility for determining whether or not the publications of controlled circulation and ones of paid circulation are comparable.”

The fact is that the Postmaster General's function has nothing whatsoever to do with determining the relative values of periodicals. Since the creation of second class 70 years ago, the Post Office Department has always determined what is "legitimate reading matter," and what is not "legitimate reading matter." This has been necessary in order to check the different rates paid on editorial content and advertising matter.

Since the creation of the controlled circulation classification 15 years ago, the Post Office Department has also successfully determined what is "legitimate reading matter" and what is not "legitimate reading matter" in periodicals enjoying that classification. Moreover, in determining "legitimate reading matter" for the controlled circulation group, the Post Office Department uses more rigid regulations than those applied to publications enjoying second class rates * so much more rigid, in fact, that many of the periodicals published by the company opposing us, all of which are enjoying the second class privilege, could not qualify for admission to the controlled circulation classification.

*

Allegation No. 5.-I quote: "The advertiser can claim the right to bring strong pressure to bear in matters of editorial policies of controlled circulation periodicals."

To the contrary, it is an accepted and proven fact, as I have stated before, that both controlled and paid circulation trade and technical periodicals are dependent upon the advertiser for their economic existence. Therefore, it could be charged by the misinformed that both may be subjected to the same pressure from advertisers in regard to editorial policy. However, advertisers have learned that it is to their advantage to patronize only publications with highest editorial standards and publishers have learned over the years that it is to their advantage to maintain that confidence and give the greatest possible reader service. Consequently, instances of advertiser pressure on editorial policies are extremely rare. Technical periodicals yielding to such pressure do not survive long.

Allegation No. 6.-I quote: "Paid circulation has a contractual agreement with the subscriber. If sledding gets tough--advertising falls off-he cannot suddenly find that he can do without 10 percent or 15 percent of his circulation in order to redress his income and his costs-he has not the control of his circulation in bad times as well as good."

Actually, Mr. Chairman, the average subscription renewal percentage of the many technical publications produced by the opposing company is between 50 percent and 55 percent. Therefore, simply by calling in their subscription canvassers and stopping subscription promotion, these publications can reduce their subscription lists, not 10 percent or 15 percent at any time they desire, but by 25 percent in 6 months, and by 50 percent within but 12 months.

In conclusion, I would like to emphasize that the requirements for admission into the controlled circulation classification as written in H. R. 3195 are so strict that they would automatically exclude many periodicals now enjoying the second-class privilege, including many of those published by the opposition. As a matter of fact, many periodicals now employing the controlled circulation technique of disseminating technical information will be forced to make major changes in order to qualify. Consequently, Mr. Chairman, by acting favorably upon this proposed legislation, the committee will not only be correcting a longstanding injustice in postal rates, but it will also be helping to raise the standards of the vital editorial services rendered by all technical periodicals, both paid and controlled, with great benefits to the health, standard of living, and military security of our country.

STATEMENT BY DON M. TURNBULL, EXECUTIVE SECRETARY, INTERNATIONAL BABY CHICK ASSOCIATION, KANSAS CITY, Mo.

Mr. Chairman and members of the committee, this association, with a paid-up membership in excess of 5,000 hatcherymen and poultry breeders, maintains of fices in Kansas City, Mo. I am its paid secretary. All officers are men engaged in the business of breeding, hatching, and selling day-old chicks and turkey poults, In behalf of the membership, I am instructed to file the following statement with respect to revisions in postal charges as proposed by the Postmaster General on February 23, 1949.

It is the hope of the association that the bulk rate on third-class mail will not be eliminated. Most of the members of this industry place considerable reliance on this particular postal service in carrying their sales messages to the Nation's 51⁄2 million farmers.

While it is recognized that certain rate adjustments probably should be made to offset, in part, the growing postal deficit, elimination of bulk mailing privileges would call for a complete revision in the sales programs of hundreds of hatcherymen. This is particularly true of any industry where its customers are located on R. F. D. routes.

Our second concern in the proposed increases is found in fourth-class mail. Day-old chicks and poults regularly move from hatchery to customer via the postal service as fourth-class mail. Because boxes of chicks cannot be carried in sacks, it is required that a special handling fee be paid on each bundle.

The increases proposed by the Postmaster General do not appear to be exorbitant. In all probability, hatcheries will generally adopt a policy of pricing chicks f. o. b. the hatchery, passing the increase along to the customer where competition permits.

However, certain inconsistencies prevail which we feel should be cleared up. It is possible our industry should make another attempt to solve this problem direct with the Post Office Department.

Since the end of the war the Post Office Department, we are told, has been able to materially increase its working staff. Mail loads are not as heavy as when the press of wartime activities jammed post offices and postal facilities.

Be that as it may, our industry has experienced a steady downward trend in postal efficiency. More post offices are operating on what is apparently a fiveday week, making it difficult for our members to ship or receive except from Monday through Friday.

Elimination of daily rail service to many points has greatly curtailed the postal facilities available to industries shipping a perishable product.

It is our understanding that communities formerly served by rail are to be served by star-route systems. Star-route contracts are let to the bidder with the lowest bid, with little apparent consideration being given to his ability to satisfactorily perform his duties. This generally means that the bidder with the poorest equipment gets the contract. Mail is carried in open trucks, exposed to the elements. Star-route holders seldom accept responsibility for damages to parcels.

Lately there has been a pronounced downward trend in the percentage of chicks purchased by farmers where delivery is dependent upon the postal service. Those living in remote areas are no longer raising many chickens, except a few for family needs.

At least in our industry, the poorer postal service is resulting in less patronage. It seems inconsistent to our membership that the service should decline, even though more postal employees are available to carry on the work.

Frequently during the current hatching season, members reported instances where it took as long as 60 hours for chicks to reach destinations which ordinarily could be reached in 36 to 48 hours. Baby chicks can safely be transported for periods up to and beyond 72 hours from the time of hatching, according to experiments conducted by the United States Department of Agriculture. The chicks live on the unabsorbed yolk which is drawn into the body at hatching time.

The afore-mentioned delays are true not only in the case of perishable items like chicks, but also in forwarding of third-class mail. Despite the increase in number of employees available to handle the work, we find that it takes from 1 to 3 weeks for third-class matter to travel from a central location such as Kansas City, Mo., to either coast.

The foregoing concludes our statement.

STATEMENT OF PAUL B. WEST, PRESIDENT OF THE ASSOCIATION OF NATIONAL ADVERTISERS, INC., NEW YORK CITY

Mr. Chairman and members of the committee, this statement is submitted on behalf of the Association of National Advertisers, Inc., 285 Madison Avenue, New York, a nonprofit corporation with approximately 500 manufacturing concerns as its members representing a cross section of American industry whose common interest is in the promotion through advertising of manufactured goods.

The Association of National Advertisers respectfully submits that the effects of the proposed increases would be as follows:

1. Important channels of consumer education by which we have raised our standards of living would be impeded.

2. There would be severe consequences to the national economy.

3. The public would suffer from a decrease in much of the informative literature now available to it.

4. Periodical publishers would be forced into alternative methods of distribution which would profit no one.

5. Varying rates based on advertising content would especially injure small business.

6. Elimination of bulk rates for third-class mail would hamper the distribution, and hence the production, of goods.

7. The proposed increases affect the several classes of mail unequally.

1. IMPORTANT CHANNELS OF CONSUMER EDUCATION BY WHICH WE HAVE RAISED OUR STANDARDS OF LIVING WOULD BE IMPEDED

The proposed postal-rate increases would impede the channels of communication with the public. Since 1879 Congress has recognized a very broad principle in the application of second-class postal rates, namely that low second-class rates should be granted as a means of spreading useful information and education and promoting unity among the people of the United States. If that was an important principle in 1879, it is 100 times more important today with America standing at the crossroads in the battle to preserve civilization itself. The appeal everywhere is for a united Nation with a clear understanding of our global responsibilities.

While it may properly be said that our people are the best informed in the world on domestic questions the urgent need today is for a similar understanding of world issues. Any short-sighted fiscal policy which would impede the dissemination of vital information to American citizens as to our foreign relations would be a step backward and at war with our efforts to inform the rest of the world at Government expense of what America is and stands for.

This principle was well demonstrated during the war through the establishment and operation of the War Advertising Council when the resources of the advertising, periodical, and newspaper publishing industries were placed at the disposal of the Government for disseminating to the American people vital information about what had to be done to win the war. The Government has recognized fully this outstanding service rendered to the Nation at a saving in cost to the taxpayers of millions of dollars.

2. THE ECONOMIC CONSEQUENCES

So far as magazines and newspapers are concerned the proposed increase in second-class postal rates is expected to produce revenue far greater than the total net profit of the publications expected to pay those rates. The immediate effects upon publishers with long-term subscription contracts could be disastrous. Few publishers look to their readers, the general public, for the major portion of their revenues. Low postal rates and advertising revenues have enabled them to develop magazines, newspapers, farm journads, trade and scientific, and religious publications which are the envy of the entire world and at the same time they have paid their taxes often at very high rates, just as any other business on the profits left to them. These publications, with rare exceptions, could not exist without advertising nor could they possibly deliver the same high editorial content to the public without a very substantial advertising revenue.

Because the price to the public and the costs of distribution of publications have remained low we have in this country a far broader penetration of periodical literature than exists anywhere in the world. Large circulations have made our periodicals attractive to manufacturers and sellers of services as vehicles to convey their sales and public-service messages to the people efficiently.

The trend of magazine-manufacturing costs in the past few years has been sharply upward. Most publishers have attempted to apportion the burden of these increased costs on an equitable basis between their two groups of customers, the public and the advertisers. We are reliably informed that the increased rates, if borne solely by the consumers, would cost him from $2 to $4 per year or even more for some of our leading publications. There has been evidence that resistance on the part of readers and advertisers to further increases is developing. The year 1948 saw some decline in circulation and in nearly all cases the rate of acceleration was definitely retarded.

Having represented manufacturers who use advertising as a selling tool since 1910, the Association of National Advertisers can truly reflect the present attitude toward further increases in advertising rates at the present time. Manufacturers generally are faced with much higher labor and material costs. These costs are inflexible. There is evidence that sales are declining and inventories increasing. These are customary forerunners of depression. The only places where industry can cut its costs substantially are, in general, selling and administrative expenses. Of these, general and administrative expenses are relatively unimportant. If we are to keep our economy on a sound basis, sales and other promotional efforts must be increased but at the highest efficiency and lowest possible cost. Advertising is the most efficient and economical selling tool and has made possible mass distribution of goods which in turn is responsible for mass production and high volume. Curtailment of advertising at this time could have most serious economic and social effects.

3. THE PUBLIC WOULD SUFFER FROM A DECREASE IN MUCH OF THE INFORMATIVE LITERATURE NOW AVAILABLE TO IT

It has been suggested by the Postmaster General that low second-class rates are in effect a subsidy for publishers. "Subsidy" is an ugly word and an especially intriguing political term when applied to benefits to business, but the statement of the Postmaster General bypasses the real issue before Congress. Since 1879 Congress has recognized and endorsed a much broader principle, namely, that low second-class rates should be granted as a means of spreading useful information and education and promoting unity among the people of the United States as we have indicated above. Therefore, the subsidy suggested by the Postmaster General is not one for publishers; it is an appropriation for the better education of the entire country. It has long been a recognized principle that education should be paid for by the entire community through general taxation of ali property owners. Education by mail should not be treated on a different basis.

4. ALTERNATIVE METHODS OF DELIVERING MAGAZINES

According to newspaper accounts plans are projected by publishers to estab lish a more economical method of delivering magazines should the projected legislation be enacted. At first glance that might appear to be a good thing which would solve the problems of both the Government and the publishers However, an examination of Post Office costs (United States News and Work Report, December 1948) shows that 38.1 percent of the cost of the Department is for administrative and clerical services whereas only 23.2 percent of the costs is for actual transportation. While transportation costs might be lowered some what by a lowered volume of mail it appears quite obvious that administrative and clerical costs would diminish very little if at all.

It is our suggestion that the reorganization of the Post Office Department should await a full study of the bipartisan Hoover Commission report and that the prob lem of Post Office deficits be treated in an over-all manner rather than in the piecemeal fashion now contemplated by the proposed legislation.

5. VARYING RATES BASED ON ADVERTISING CONTENT

The next proposition to which we wish to address ourselves is one in which the Association of National Advertisers has a very special interest, the proposal to vary postal rates depending on the amount of advertising carried. There are two aspects of this proposal to which we wish to draw special attention.

The advertising carried in business publications is largely of an informative nature and just as important to the people in the affected industries as the editorial matter. The widespread dissemination of this type of information is an essential ingredient in our competitive economy. It should be encouraged. par

ticularly for the benefit of small businesses which do not have other sources of information, and not made unduly burdensome.

7. THIRD-CLASS RATES

Members of this association have used printed literature as an effective means of selling their goods to a wide extent. It appears to us that the elimination of bulk rates for third-class mail will have a very serious effect upon the use of direct-mail advertising, and at the proposed rates, regardless of quantity, the use of this means of advertising will be denied to many manufacturers. It appears to us that this might, in fact, tend to decrease postal revenue for thirdclass mail without substantially reducing costs.

We further argue, as above, that any action which would impair the efficiency of advertising at the present time might have serious consequences economically and socially.

8. UNEQUAL TREATMENT

Superficially considered, the basic argument that the Post Office Department should be self-supporting would appeal to everyone. However, this is not the issue before the Congress at the present time. The suggested new rates will not make the post office self-supporting. Rather, they would seem to discriminate against certain classes of mail which, as we have tried to demonstrate above, are carried at low rates as a service to the general public and the welfare of the Nation. The proposed legislation, for example, does not change the rates on air mail, air-mail postal cards, air-mail parcel post, which are frankly subsidized, or first-class mail. Nor does it alter the method by which congressional and Government mail is to be carried free of charge at an annual cost to the Post Office of $33,000,000 in the fiscal year 1947.

For the reasons above set forth, it is our view that the proposed legislation should not pass.

STATEMENT OF JOSEPH HARRIS, PRESIDENT, JOSEPH HARRIS CO., INC.,

ROCHESTER, N. Y.

THIRD-CLASS MAIL

Mr. Chairman and members of the committee, our business is primarily done by mail through two annual catalogs, both weighing less than 8 ounces and both regularly mailed under the special third-class bulk-mailing rate. Discontinuing this rate would work a great hardship on us. In the fall of 1948 we mailed 100,000 of our larger catalogs, at a cost of about $3,800. Under the proposed hew rate, they would cost us 8 cents each, or a total of $8,000, more than double ast year's cost. For the past fiscal year (ended June 30, 1948) our total catalog postage bill was $4,970. To mail the same number of catalogs under the new rate would cost $10,350. This increase seems to us unwarranted and excessive, especially since under the bulk rate we bundled and tied all catalogs for each post office together and sent them to our local office by States so that a minimum of sorting was necessary here. This must be cheaper than to sort out all 100,000 if we mailed them individually. We urgently request that the proposed 1-centper-ounce rate be lowered and that a special lower bulk rate for catalogs be restored. Note also that second-class matter not only is handled at a very much lower rate than this, but receives far better service. It is not uncommon for catalogs to take 10 days to 3 weeks for delivery within a 500-mile radius.

FOURTH-CLASS MAIL

The proposed increases here would also be a great hardship, especially when it is evident that seed prices are coming down. Costs are not down, and the additional postage would come at a very difficult time for us. We doubt if it is necessary to raise the rate for the first pound on each zone in order to balance the budget for that department.

The Post Office now carries an extra burden because of the comparatively low rates on larger packages which were formerly sent by express or freight. If any increase is necessary, it should come on the bigger shipments (15 to 20 pounds or more), not on the little ones which were never sent by express or freight to any extent before.