Permanent Subcommittee On Investigations
Committee On Governmental Affairs
United States Senate
With Respect To S.
335
Deceptive Mail Prevention and Enforcement
Act
Comments of
Free Speech Coalition, Inc.
8180 Greensboro Drive, Suite 1070
McLean, Virginia 22102-3860
Phone: (703) 356-6912
Fax: (703) 356-6913
May 19, 1999
INTRODUCTION
The Free Speech Coalition, Inc. respectfully submits
these comments with respect to S.335, the Deceptive Mail
Prevention and Enforcement Act.
The Free Speech Coalition, Inc. (FSC),
founded in 1993, is a nonpartisan group of ideologically
diverse nonprofit organizations and the for-profit
organizations which help them raise funds and implement
programs. Our purpose is to protect First Amendment rights
and reduce or eliminate excessive regulatory burdens. Most
of FSCs members rely upon direct mail fundraising,
some of which includes sweepstakes, as a principal method of
generating funds and carrying out their programs. FSCs
members, therefore, are subject to the United States Postal
Services (Postal Service) authority, and
are very concerned about certain provisions in S.335,
particularly its proposal to dramatically increase the
Postal Services enforcement power.
SUMMARY
FSC fully supports law enforcement efforts to stop
fraudulent and deceptive mailing practices. We appreciate
the good intentions underlying S.335, but are concerned
that, in trying to stop fraud, the bill tramples upon the
Constitutional rights to free speech and due process, and
unnecessarily federalizes a matter -- sweepstakes mailings
-- that is already subject to comprehensive state and local
regulation.
FSC appreciates and commends the Postal Service for the
manner in which it provides its core services. We are
concerned, however, with the bills proposal to grant
the Postal Service even greater enforcement authority than
it currently possesses, including the ability to levy
punitive fines of up to $2 million, and to stop mail
deliveries to targeted recipients. The Postal Services
enforcement track record in civil fraud cases under 39
U.S.C. 3005, and in other matters, raises questions whether
those subject to its proposed new authority will necessarily
be treated as Congress apparently intends.
Pursuant to Section 3 of S.335, the Postal Service would
have virtually unfettered discretion to decide what matter
is mailable and to stop an organization from mailing before
making a final determination that the organization has
violated the statute. For small organizations that depend
upon the mail for the funds they need to operate,
after-the-fact exoneration from wrongdoing would be of
little value because of the economic ruin caused by the
Postal Services preemptive stop mail power.
FSC urges the Subcommittee to consider alternatives to
proposing new legislation. If, however, it deems new federal
legislation appropriate, then the bill should thoroughly
define what materials cannot be mailed, and enforcement
authority should be given to a government agency other than
the Postal Service. The Department of Justice or the Federal
Trade Commission, for example, would be better suited for
such a role.
COMMENTS
I. Constitutional Issues
A. The Proposed Delegation of Governmental Power to the
Postal Service is Improper, Particularly with Regard to
Allowing It Unfettered Rulemaking Authority to Expand the
Statutory Provisions.
As a threshold matter, we believe that the Congress
must consider carefully whether the Postal Services
legal status permits Congress to constitutionally authorize
the Postal Service to exercise governmental powers.1
In effect, the Postal Service is more a business
than a government agency. Indeed, the Postal Service is not
included in the list of executive departments or government
corporations set forth in 5 U.S.C. 101 and 103. This is
because pursuant to the Postal Reorganization Act of 1970
(P.L. 91-375, 84 Stat. 720 (Aug. 12, 1970)), the Post Office
Department of the executive branch was transformed into the
United States Postal Service, an independent
establishment of the executive branch of the
[Federal] Government. See 39 U.S.C. 201.
Like a business, the Postal Service is governed by an
11-member Board (of Governors). See 39 U.S.C. 202(a). The
Board of Governors has the power to appoint and remove the
Postmaster General, as well as determine postal rates and
fees. See 9 U.S.C. 202(b) and 3621. Hence, like a business,
the Postal Service is not burdened by direct public and
political accountability as are true executive agencies.
Yet, unlike other businesses, the Postal Service already
possesses vast governmental powers, including rulemaking,
adjudicative and subpoena power. The Supreme Court has long
been concerned with congressional attempts to delegate
legislative power. See generally .L.A. Schecter Poultry
Corp. v. United States, 295 U.S. 495, 529,
541-542 (1935).
S.335 would delegate even greater power to the Postal
Service via a broad and essentially undefined grant of
authority. For example, the bill allows the Postal Service
to refuse to mail a letter if it relates to a
sweepstakes and indicates that persons who
fail to purchase a product may not receive future mailings,
or suggests that making a purchase will increase
the odds of winning, or suggests that making a
purchase will result in special treatment. See S.335,
Section 3 (emphasis added). Terms such as
relates, indicates and
suggests are so extraordinarily vague and
subject to reasonably different interpretations that mailers
would be placed in the untenable position of having to guess
the meaning of such terms and hoping that their guess
accords with the Postal Services view. See
American Trucking Associations, Inc. v.
Environmental Protection Agency, No. 97-1440 (D.C.
Cir. 1999) (unconstitutional delegation of powers where no
intelligible principle to channel application of factors
apparent in statute).
Even more troubling than these vague terms is the carte
blanche that would be given the Postal Service to refuse to
deliver any letter that does not meet any other
requirement the Postal Service shall prescribe by
regulation. Id. (emphasis added). This provision would
grant the Postal Service the unfettered authority to expand
the statutory standards in any way it sees fit. It is not
proper for the Congress to delegate such open-ended
rulemaking authority, particularly when that authority would
be exercised by an independent establishment in
such a way that could impinge on First Amendment rights by
denying an organization the right to mail. See A.L.A.
Schecter Poultry Corp., supra 295 U.S. at 541-542
(concluding that code-making authority delegated to the
President was unconstitutional and noting that because
of the few restrictions that are imposed, the
discretion of the President in approving or prescribing
codes, and thus enacting laws for the government of trade
and industry throughout the country, is virtually
unfettered.).
Allowing the Postal Service free rein to effectively
amend the statutory standards by adding whatever other
prohibitions it deems fit through the simple means of
promulgating a regulation would also create tremendous
uncertainty on the part of mailers, thus imposing an
improper chilling effect. If the goal of S. 335 is to
provide clear and understandable rules, then it should use
precise terms and specify in the bill everything that is
required.2 (In doing this, however, Congress should
avoid trying to prescribe the exact words mailers must use.
Mandating speech is not the appropriate course of action.)
B. The Bill Fosters Unconstitutional
Prior Restraint of Speech
Sweepstakes solicitations are typically used by
nonprofit organizations alongside public education
information and a call to action about their cause -- be it
political, religious, or health-related. Thus, these
mailings comprise more than pure commercial speech.
Nevertheless commercial speech, even that "which 'does no
more than propose a commercial transaction,'" enjoys
significant First Amendment protection. Virginia State
Board of Pharmacy v. Virginia Citizens Consumer
Council, Inc., 425 U.S. 748, 762 (1976) (holding that
state law barring certain advertising violated the First
Amendment) (citations omitted). Although "untruthful speech,
commercial or otherwise, has never been protected for its
own sake," id. at 771, due process requires safeguards such
as prompt judicial review in an adversary proceeding to
insure that reasonable time, place and manner restrictions
have been imposed.
The Supreme Court has declared that "any system of prior
restraints of expression
bear[s] a heavy
presumption against its constitutional validity." New
York Times Co. v. United States, 403 U.S. 713,
714 (1971) (citation omitted). S. 335 invites the "heavy
presumption against its constitutional validity" by
proposing an administrative enforcement mechanism that fails
to provide the appropriate due process safeguards.
Section 4 of S. 335 would amend 39 U.S.C. 3005 by
increasing the Postal Service's authority to issue orders to
stop an organization from receiving mail and to cease and
desist from certain activities. The enforcement scheme under
39 U.S.C. 3005, both currently and as proposed under S. 335,
is problematic for several reasons.
First, the Postal Service acts as both prosecutor and
judge in proceedings it initiates pursuant to 39 U.S.C.
3005, and is under no time constraint in concluding such
proceedings. Delay in these matters can equal a death
sentence for organizations that depend upon the mail.
As the data presented below show, in the past 10 years,
when the Postal Service institutes proceedings under 39
U.S.C. 3005, it is almost certain to win the case. From 1989
through 1998, of 143 Postal Service proceedings brought
pursuant to 39 U.S.C. 3005, the Postal Service prevailed
over 85 percent of the time. These 143 cases are broken down
as follows:
Postal Service Won/Loss Record Under 39 U.S.C. 3005
Year
|
Total Cases
|
Postal Service Won
|
Postal Service Lost
|
1989
|
21
|
17
|
4
|
1990
|
22
|
16
|
6
|
1991
|
37
|
33
|
4
|
1992
|
22
|
19
|
3
|
1993
|
8
|
7
|
1
|
1994
|
15
|
14
|
1
|
1995
|
6
|
6
|
0
|
1996
|
4
|
4
|
0
|
1997
|
6
|
4
|
2
|
1998
|
2
|
2
|
0
|
Given the Postal Services win rate of over 85 percent,
the steady decline in the number of proceedings over the
years reflects the widespread perception that it is
pointless to seek justice from the Postal Service. As the
data show, an accusation of wrongdoing by the Postal Service
is tantamount to conviction by the Postal Service.
Regrettably, meaningful judicial review of the Postal
Services administrative ruling is not available.
Absent extraordinarily flagrant abuse, courts defer to the
Postal Service's action. As one court observed when it
reviewed a decision by the Postal Service that found an
organization had violated 39 U.S.C. 3005, the court
might well take a slightly different or even contrary view
if it were its responsibility to make the initial findings
of fact and conclusions of law [regarding whether a
violation of Sec. 3005 occurred], but the court is
not permitted to do so. Directory Publishing Services,
Inc. v. Runyon, 851 F. Supp. 484, 489 (D.D.C.
1994). An appeal to an Article III court, therefore, does
not bring a fresh set of eyes to the
proceedings.
This is borne out by the data on appeals from Postal
Service decisions under Sec. 3005. A computerized search on
Lexis of all federal cases in the past 10 years encompassing
appeals of cases involving Sec. 3005 yielded only 24 cases,
of which 8 involved judicial review of a Postal Service
ruling. As testament to the great deference given the Postal
Services rulings, all eight affirmed the Postal
Service's prior rulings.
A similar scenario arises with respect to the Postal
Services initiation of injunctive proceedings pursuant
to 39 U.S.C. 3007. This statute permits the Postal Service
to petition a court to enter an injunction allowing the
Postal Service to detain all of an organization's incoming
mail until the Postal Service has time to conclude its
proceedings under 39 U.S.C. 3005.
Augmenting the Postal Services already sweeping
authority under 39 U.S.C. 3005 without providing any of the
constitutional protections against prior restraint risks
further abuses. For this and the other reasons discussed
herein, the Postal Service is not the proper repository of
the authority to be delegated by S.335.
C. The Bill Denies Due Process by
Allowing the Postal Service to Levy Punitive Fines and Place
the Collections in Its Coffers.
The Constitutions guarantee of due process
requires a fair hearing before an impartial judge who does
not have a pecuniary interest in the outcome. See
Tumey v. Ohio, 273 U.S. 510 (1927) (holding
that a statute which allowed a judge to be paid upon
convicting a defendant violated due process). Section 6 of
S. 335 would deny due process by allowing the Postal Service
-- which operates as a business -- to levy punitive fines
and then deposit the funds it collects into its own
treasury. The Postal Service, like any business, is under
pressure to make a profit. Indeed, the Postal Service makes
much of the fact that it has worked to create a surplus and
that it strives for ways to increase its bottom line:
Chief Financial Officer M. Richard Porras announced
a net income at the close of Quarter II of $761 million. He
indicated today that the U.S. Postal Service is taking
aggressive action to ensure it ends its fiscal year in
September with a surplus of at least $200 million,
consistent with its operating plan.3
The bill wrongly creates tremendous incentive for the
Postal Service to increase its business profits on the backs
of mailers by imposing fines (up to $2 million) which,
despite being labeled as Civil Penalties, can in
fact be punitive. Indeed, a nonprofit newsletter reported
that postal inspectors are assigned revenue
targets.
S. 335 would give the Postal Service additional means to
meet its revenue targets, using the general subpoena power
set forth in Section 7. Pursuant to this section, the Postal
Service could issue a subpoena for any records
which the Postmaster General finds relevant or material to
the investigation. S. 335, Section 7. This means that
a subpoena for any records could issue even if
the Postmaster General did not have a reasonable belief that
a violation of the statute has occurred.
The bill also fails to provide safeguards against abusive
use of subpoena authority, or specify that such a subpoena
may be challenged in court. Cf. F.R.Civ.P. Rule 45(c)
(setting forth protections afforded to persons subject to
subpoena).
The Postal Services proposed power to issue
subpoenas and levy punitive fines is particularly troubling
given the previously discussed vague language used in
Section 3 of S. 335 regarding what mailings can violate the
statute, and the bill's failure to provide any guidance
whatsoever in the Postal Services application of the
fines. For example, should first time offenders pay the
maximum fine? Should an inadvertent violation trigger a full
fine? Should the amount of funds received from the alleged
improper mailing be considered when determining the amount
of the fine? As S.335 is currently drafted, the Postal
Service would be free to impose the maximum fine for any and
all violations without regard to any of these types of
factors.
A $2 million fine is punitive for for-profit entities,
but even more so for nonprofit organizations. Since the
Postal Service can count on winning at the administrative
and federal court levels nearly all the time, the risk of
attempting to vindicate ones rights is so great it
results in mailers forfeiting their rights by settling the
case. Lacking the economic means to vindicate one's rights,
as a practical matter, can result in forfeiting that right.
FSC recognizes that S.335 is not intended to grant the
Postal Service free rein to issue subpoenas and extort
punitive fines. The reality, however, is that the bill gives
the Postal Service the means to do so -- contrary to due
process. To avoid this, subpoenas should not be permitted
unless there is a reasonable belief that a statutory
violation has occurred, enforcement should proceed only in
accordance with F.R. Civ.P. Rule 45, and aggrieved parties
should have the express right to seek judicial relief in the
form of a motion to quash or modify the subpoena.
II. Other Issues
In addition to the foregoing constitutional
impediments to delegating to the Postal Service the
authority to enforce the provisions of S. 335, other reasons
counsel against such an approach. These reasons include the
manner in which the Postal Service has misapplied Congress'
intent in exercising statutory authority and the need to
avoid the federalization of matters already thoroughly
regulated by state and local governments.
A. The Postal Service is Ill-Suited
to Enforce S.335.
As discussed above, certain critical terms used in
S.335, intended to guide Postal Service action, are much too
vague. However, even when Congress has been precise, the
Postal Service has not always carried out its mandate in
accordance with Congressional intent.
For example, in 1990, the Postal Reorganization Act was
amended to declare that a special reduced rate of postage
available to nonprofit organizations could not be used in
connection with mailings that promoted any of the following
three types of items: (A) any credit, debit, or charge
card, or similar financial instrument or account, provided
by or through an arrangement with any person or organization
not authorized to mail at the [reduced] rates
;
(B) any insurance policy, unless the organization which
promotes the purchase of such policy is authorized to mail
at the [reduced] rates
; or (C) any travel
arrangement, unless the organization which promotes the
arrangement is authorized to mail at the [reduced]
rates
39 U.S.C. 3626(j).
Although the statute is straightforward in describing the
three types of materials that cannot be mailed at the
reduced rate, the Postal Service has interpreted its
authority under this statute in an extraordinarily expansive
manner. Since the statute was enacted by Congress, the
Postal Service has claimed the right not only to disallow
the reduced mailing rate for the three matters identified by
Congress in 39 U.S.C. 3626(j), but also for many other
matters. Cases have been brought under this statute for
contracts between nonprofits and fundraisers which the
Postal Service felt were inappropriate, for instance, where
fundraisers own a list generated for a nonprofit, and for a
mailer retaining a copyright on a package mailed by a
nonprofit. None of the examples concerned travel, or credit
cards or insurance, yet 39 U.S.C. 3626(j) was cited as the
statute that was violated. In lieu of conducting a formal
rulemaking procedure, the Postal Service issued Publication
417A, entitled "Customer Guide to Cooperative Mailings,"
which lists some of the factors it considers in deciding
whether to allow a mailer to use the reduced rate.
Thus, while 39 U.S.C. 3626(j) on its face identified what
was not mailable at the reduced rate, the Postal Service now
makes ad hoc decisions as to what does and does not comply
with the statute. This type of situation would be even more
intolerable under S. 335, because the Postal Service's
authority would extend not just to the rate of postage, but
also to whether the material could be mailed at all, as well
as the imposition of monetary penalties.
Stopping fraudulent and deceptive sweepstakes is an
important matter. It must be done, however, with due regard
to the rights of all concerned parties, including the
accused mailer. Both experience and the Postal
Services unique legal status show that the Postal
Service is not as well-suited as federal agencies to be the
enforcer of S. 335. The Department of Justice or the Federal
Trade Commission would be better choices for this role.
B. Congress Should Resist the
Federalization of Sweepstakes Regulation.
In The 1998 Year-End Report of the Federal
Judiciary, Chief Justice Rehnquist warned against the
increasing trend of federalizing law enforcement matters
that traditionally have been handled by the states. He noted
that this trend not only puts additional strain on the
federal government, but it also threatens to change
entirely the nature of our federal system. The Chief
Justice implored Congress to adopt a threshold test of
demonstrated state failure before trying to
remedy a problem with federal legislation. FSC urges
following this approach here. See also The Federalization of
Criminal Law, American Bar Association, 1998.
Anecdotes about senior citizens being misled by some
sweepstakes are emotionally moving, although the actual
extent to which sweepstakes deceive is debatable.4
What is not debatable, however, is the existence of a
plethora of state and local law regulating sweepstakes. As
recent and well-publicized state lawsuits against some of
the larger for-profit sweepstakes operators show, the states
are not reticent in bringing actions to enforce alleged
violations of their sweepstakes laws. Attorneys General now
operate in concert. They routinely file 20 to 30 separate
lawsuits in so-called multistate actions. This
type of legal assault will bring even the largest and most
determined offenders to their knees. Thus, there is no
demonstrated state failure with regard to
legislation or enforcement in this regard.
These types of state consumer protection actions are the
classic and proper function of the states. Congress has
historically rejected creating a Federal Consumer
Protection Agency. This does not represent a failure
of will or acceptance of fraud on the part of the Congress.
Rather, it marks a respect for the separation of that which
is properly within the federal purview and that which is in
the states.
Though well-intentioned, S. 335 federalizes crimes that,
for good reason, have been left to the states. Certainly,
absent proof that the states have been derelict or unable to
enforce their sweepstakes laws, Congress should refrain from
federalizing sweepstakes.
CONCLUSION
FSC opposes S.335s grant of broad discretionary
power to the Postal Service. S.335 would cause more problems
than it would solve, because of its infringement of First
Amendment and due process rights. We respectfully ask the
Subcommittee to rethink the bill in light of the foregoing
comments. We welcome the opportunity to work with
Subcommittee on this matter.
FOOTNOTES:
1.
|
One appellate court, faced with a particularly
egregious set of facts, rejected the argument that
Congress had unconstitutionally delegated authority
to the Postal Service. See Silver v.
United States Postal Service, 951 F.2d 1033
(9th Cir. 1991). FSC submits that the existence of
this opinion should not be interpreted as relieving
Congress from its duty to independently consider
the constitutionality of delegating additional
enforcement authority to the Postal Service --
particularly where the delegation lacks sufficient
standards.
|
2.
|
Even when statutory language is clear, the
Postal Service can interpret the language in such
an expansive manner that it creates new authority
and rules is not properly derived from the statute.
This can result in organizations being wrongly
accused by the Postal Service of violating the law.
|
3.
|
May 4, 1999 Postal Service News Release #33.
|
4.
|
The comments submitted by the Direct Marketing
Association provided data which showed that 94
percent of the persons who received sweepstakes
knew they were not a winner and 95 percent of those
who entered sweepstakes knew no purchase was
necessary.
|
|