[Federal Register Volume 64, Number 170 (Thursday, September 2, 1999)]
[Rules and Regulations]
[Pages 48092-48094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22822]
=======================================================================
-----------------------------------------------------------------------
POSTAL SERVICE
39 CFR Part 111
Eligibility Requirements for Certain Nonprofit Standard Mail Rate
Matter
AGENCY: Postal Service.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document adopts a proposed rule, which was published in
the Federal Register on March 6, 1998 (63 FR 11199-11200). It amends
the standards for mail matter eligible to be sent at the Nonprofit
Standard Mail rates. Specifically, mail matter that seeks or solicits
membership dues payments may contain ``promotional'' material
concerning membership benefits when certain criteria are met. This
final rule adopts the proposal as it was published with an explanation
below.
EFFECTIVE DATE: September 9, 1999.
FOR FURTHER INFORMATION CONTACT: Jerome M. Lease, 202-268-5188.
SUPPLEMENTARY INFORMATION: Eligibility to mail at Nonprofit Standard
Mail rates (referred to below as ``nonprofit'' rates) is established by
statute. These statutes prescribe which organizations may mail at these
rates along with the limitations on what may be mailed. As it has noted
in numerous rulemakings concerning nonprofit rates (see, for example,
56 FR 46551 (September 13, 1991)), the Postal Service views its role in
this area as that of an administrator, rather than that of a
policymaker. That is, the Postal Service simply seeks to administer the
eligibility provisions on nonprofit mail as set forth by Congress.
On two occasions at the beginning of this decade, Congress enacted
limitations on the inclusion of advertising matter at the nonprofit
rates. The first of these, codified to a large extent as 39 U.S.C.
3626(j)(1)(A-C), limited solicitations for credit cards and other
financial instruments, insurance, and travel. The second, codified as
39 U.S.C. 3626(j)(1)(D), limited solicitations for all other products
and services. There are no exceptions listed to the restrictions on
advertising for financial instruments; the statute does set forth
exceptions to the restrictions on advertising for travel, insurance,
and all other products and services. Unfortunately, there is little
legislative history concerning these provisions.
The statutes contain two additional exceptions that apply to each
of the categories in 39 U.S.C. 3626(j)(1). These exceptions, which are
set forth in 39 U.S.C. 3626(j)(2), allow certain acknowledgments of
sponsors and references to member benefits to be mailed at the
nonprofit rates. The latter exception, which is codified at 39 U.S.C.
3626(j)(2)(B), is the subject of this rulemaking. Again, there is
little legislative history concerning these provisions.
The membership benefit exception states that a mailpiece shall not
be excluded from being mailed at nonprofit rates solely because that
material contains, but is not primarily devoted to, references to and a
response card or other instructions for making inquiries about services
or benefits available from membership in the authorized organization,
if advertising,
[[Page 48093]]
promotional, or application materials for such services or benefits are
not included. Up to now, the Postal Service has applied this rule in a
literal, straightforward manner. That is, nonprofit organizations have
been permitted to list a product or service available to members and a
response card or instructions for inquiring about the product or
service. They have not, however, been permitted to provide additional
information concerning the product, such as a description, brand name,
price or other terms of purchase that would be promotional in nature.
For instance, an organization could state: ``An affinity credit card is
available to members. For information, please call John Doe at xxx-
xxxx,'' assuming the mailpiece did not consist to a primary degree
(i.e., was ``not primarily devoted to'' under the statute) such product
and service references. Contrary to arguments made by mailers, the
Postal Service interpretation of the statute was consistent with the
statute and created an exception to the blanket preclusion of
3626(j)(1), since the example quoted above would be prohibited by 39
U.S.C. 3626(j)(1)(A) if not for the member benefit exception. However,
the Postal Service has not permitted a description of the credit card
as ``low cost'' or as having ``no annual fee'' or a ``five percent
interest rate'' under the exception since these descriptions would
constitute ``advertising, promotional, or application materials''
prohibited under the statute.
Consideration of the proposed policy was prompted by concerns that
the literal reading and Postal Service application of the statute was
hindering the efforts of nonprofit organizations to attract and retain
members. That is, nonprofit organizations claim that their goal in
these mailings is to attract or retain members, rather than to sell
benefits, and that the success of these membership efforts hinges on
their ability to provide a favorable description of the nonprofit's
membership benefits. Although the Postal Service was sympathetic to the
concerns raised by some nonprofit organizations, it was mindful, as
discussed above, that the accommodation sought appeared to go beyond
the literal language of the statute. Moreover, as noted above, there
was little legislative history to support the nonprofit organizations'
view. Nevertheless, in the belief that the statute was not intended to
create an impediment to membership in nonprofit organizations, the
Postal Service determined to propose this rule to alleviate this
effect. Accordingly, as discussed in its proposal, 63 FR 11199, the
Postal Service proposed to follow the principles utilized in an earlier
rule change concerning ``back end premiums'' by looking at the
mailpiece as a single solicitation and considering whether it was
primarily intended to attract or retain members or solicit sales of
other products and services (citing 62 FR 61014-61015 (November 14,
1997)). This was to be accomplished by objective criteria concerning
the relative amount of space devoted in the mailpiece to these
purposes.
The application of the new standards is prospective. The former
standards were clear, rational, and, as discussed above, consistent
with the statute. Therefore, the new standard will not be applied
retroactively to any previously assessed revenue deficiencies.
The proposed rule offered standards under which a membership
solicitation could be entered at the nonprofit rates, notwithstanding
the inclusion of promotional material for products and services. For
purposes of this exception, ``minor'' is defined as less than half.
Measurement of contents would be performed in accordance with the same
standards for measuring advertising and nonadvertising in a Periodicals
publication as described in Domestic Mail Manual (DMM) P200.1.7. Except
as allowed below, only the solicitation letter is eligible to contain
information about membership benefits under this standard. It does not
apply to any brochures, circulars, flyers, or other separate, distinct,
or independent documents. Any advertising, promotional, or benefit
application materials in these latter documents will cause the entire
mailpiece to be ineligible for the nonprofit rates unless other
provisions allow it to be entered at those rates. The proposed rule did
establish a limited exception for an organization that prepares a
standard, preprinted document, consisting of a single sheet, that lists
and describes its membership benefits. This document may be enclosed
with and considered part of the solicitation letter for purposes of
applying the proposed test, provided that the membership letter does
not itself list or describe the member benefits. The membership letter
may, however, refer the addressee to the separate list of benefits.
(For example, the letter may state ``For a description of benefits
available to members, please see the attached sheet,'' as long as no
promotional material concerning the benefits is included in the
letter.)
The Postal Service received a total of 29 comments on the proposed
rule. A majority of commenters supported the rule, but in some cases
with reservations that the proposal does not go far enough to allow
nonprofit organizations to describe membership benefits in the mails.
There were two commenters who expressed disagreement with the proposed
rule or any change that would make it easier to describe such benefits.
Evaluation of Comments Received
Written comments were received from 26 organizations and
associations representing nonprofit organizations, one individual, and
two organizations representing the travel industry. Of primary concern
to 23 of the commenters is the Postal Service's proposed limitation of
mailpieces eligible to contain descriptive material about membership
benefits to mailpieces that are a solicitation for membership, renewal
of membership, or requests to become a contributing member. These
commenters, many of which operate on a monthly dues cycle, do not
communicate with members by solicitation or renewal letter, but by
newsletter. This group of commenters wants the proposal to extend to
nonprofit organizations the ability to describe with favorable terms
membership benefits in newsletters. One individual simply requested a
copy of the proposed rule, which has been provided. One commenter
believes the proposed rule does not make clear that among membership
benefits that may be described under the proposal are credit cards,
travel arrangements, and insurance. These services, advertising for
which has been restricted since 1991 under 39 U.S.C. 3626(j)(1)(A-C),
are subject to restrictions whether they are described in a stand-alone
mailpiece or a newsletter. This same commenter also was concerned about
the limitations of the proposal to membership solicitations. Two
additional commenters expressed concern that the proposed rule would
create an overly narrow definition of a membership solicitation or
renewal mailpiece. Like the previous commenters, they suggested that
the proposal be extended to include all membership mailings, not just
membership solicitations or renewals. They also stated that the Postal
Service should exclude membership benefits that are substantially
related to a nonprofit organization's purposes when determining whether
a mailpiece contains a ``minor'' description of benefits under the
rule.
The two commenters representing the travel industry strongly
opposed the proposed rule change. These commenters requested that the
Postal Service withdraw the proposed
[[Page 48094]]
modification to standards on the bases that the proposed rule's literal
language contravenes the statute on which it is based; the rule
conflicts with federal policy pronouncements on competition between
small firms and nonprofit organizations; the rule constitutes a faulty
interpretation of the statute; and the rule reflects unsound postal
policy.
The Postal Service considered the comments, and has determined to
adopt the rule as proposed. The requests to extend the policy beyond
membership solicitation letters but to newsletters sent to all members
are beyond the scope of the proposal. The standards adopted here were
undertaken to ensure that the advertising restrictions did not have a
detrimental effect on the ability of nonprofit organizations to attract
and retain members. They are intended to apply where the mailpiece is
intended only to attract or retain members, rather than to sell the
products or services described in them, and the proposal was limited to
membership solicitation letters for that reason. Moreover, this
decision does not prohibit organizations from mentioning their benefits
in member newsletters. Indeed, unless the benefit concerns travel,
insurance, or financial instruments (the so-called TIF advertisements),
the organization likely is already free to describe them in newsletters
under 39 U.S.C. 3626(j)(1)(D)(III) and DMM E670.5.4(d)(2). Further,
even if a ``TIF'' benefit is involved and it is not within the
statutory exceptions in 39 U.S.C. 3626(j)(1), the newsletter can, as
described above, include an announcement such as: ``(Product) is
available to members. For further information, contact . . .''
The request that the calculation of the percentage of membership
benefits not include ``substantially related'' advertisements appears
to the Postal Service to be inconsistent with the language of the
statute. That is, nothing indicates that all relevant references to
benefits should not be included in determining whether the mailpiece is
``primarily devoted'' to member benefit references. If the Postal
Service were to adopt this proposal, it would permit, at the nonprofit
rate, letters consisting entirely, or nearly entirely, of descriptions
of membership benefits. This would seem to be inconsistent with the
underlying reason for this policy change (i.e., that the letters are
primarily intended to attract or retain members rather than to sell
products or services).
The Postal Service agrees that the policy adopted here applies to
all member benefits, including travel, insurance, and financial
instruments, but does not believe that the proposed rule is misleading
or requires revision concerning this issue.
The Postal Service disagrees with the commenters who oppose the
proposal. As discussed above, although the Postal Service does not
believe that the proposed policy represents the most literal reading of
the underlying statute, it disputes the assertion that it is contrary
to the language of the statute or beyond the authority of the Postal
Service to adopt. The Postal Service acknowledges the keen financial
interest that these commenters have in this policy, and commenters'
concern that the use of nonprofit rates will put them or their members
at a competitive disadvantage. The Postal Service does not believe that
it can establish a special policy for membership benefits concerning
travel arrangements; the language of 39 U.S.C. 3626(j)(2)(B) provides
no basis for distinguishing travel from other products and services.
Nevertheless, the Postal Service believes that the limited scope of the
policy change will minimize any adverse effect on for-profit
businesses. The rules are intended to help nonprofit organizations
attract and maintain members, rather than to compete in the sale of
products and services. Thus, mailings should be made to prospective
members only and existing members only at the time when renewals are
due, rather than to the membership or public at large. Should
circumstances require, the Postal Service will consider revisiting this
policy.
After full consideration of the comments received and for the
reasons discussed above, the Postal Service believes it appropriate to
adopt, without revisions, the proposed changes in eligibility
requirements.
List of Subjects in 39 CFR Part 111
Postal Service.
For the reasons discussed above, the Postal Service hereby adopts
the following amendments to the Domestic Mail Manual, which is
incorporated by reference in the Code of Federal Regulations (see 39
CFR part 111).
PART 111--[AMENDED]
1. The authority citation for 39 CFR part 111 continues to read as
follows:
Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 3001-
3011, 3201-3219, 3403-3406, 3621, 3626, 5001.
2. Amend Domestic Mail Manual E670.5.7, by revising b. to read as
follows:
Domestic Mail Manual (DMM)
* * * * *
E Eligibility
* * * * *
E670 Nonprofit Standard Mail
* * * * *
5.0 Eligible and Ineligible Matter
* * * * *
5.7 Other Matter
An authorized nonprofit organization's material is not disqualified
from being mailed at the Nonprofit Standard Mail rates solely because
that material contains, but is not primarily devoted to:
* * * * *
b. References to and a response card or other instructions for
making inquiries about services or benefits available from membership
in the authorized organization, if advertising, promotional, or
application materials for such services or benefits are not included.
For purposes of this section, descriptions of membership benefits
available as a part of membership, including the use of adjectives,
terms, conditions, and brand names, are permissible when they are a
minor part of a solicitation or renewal request for membership
payments. For purposes of this provision, ``minor'' is defined as
``less than half.'' Measurement is made in accordance with P200. The
solicitation or renewal request in which, to a minor degree, membership
benefits may be promoted is considered to include only a printed letter
to prospective members or current members whose membership is about to
expire, and not to any separate, distinct, or independent brochure,
circular, flyer, or other documents. Such separate documents will be
considered advertising if they contain any advertising, promotional, or
application materials. Exception: A separate document prepared by the
qualifying organization, consisting of one sheet, will be considered to
be part of the solicitation letter if it describes the organization's
membership benefits and the solicitation letter does not describe the
organization's benefits but instead refers the reader to the separate
document.
* * * * *
Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 99-22822 Filed 9-1-99; 8:45 am]
BILLING CODE 7710-12-P
