[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]


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POSTAL SERVICE

39 CFR Part 111


Eligibility Requirements for Certain Nonprofit Standard Mail Rate 
Matter

AGENCY: Postal Service.

ACTION: Final rule.

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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