Reporter’s Shield Legislation Passes in the House

Following on its strong passage in the 110th Congress (398 – 21), H.R. 985, the Free Flow of Information Act, has again passed in the House of Representatives in the 111th Congress, this time on a voice vote.

With House Judiciary Committee Chairman John Conyers’ (D-MI) commitment to move the bill this year, the Committee held a markup of the bill on March 25th.  MPA, in conjunction with a small group of influential associations, worked diligently to ensure that the legislation would pass in Committee.  The only objection came from Ranking Member Lamar Smith (R-TX), and the legislation, which would protect journalists from being compelled to reveal their confidential sources, passed out of Committee overwhelmingly.  Just a few days later, the full House of Representatives passed the measure. 

As in the previous Congress, the fight now moves to the Senate, where similar legislation (S. 448) has been introduced by Senator Arlen Specter (R-PA). While likely to be marked up by the Committee in the next several weeks, the bill continues to face Republican objections that have stalled the bill before.  Despite this, Democrats’ larger majority in the Senate, the support of President Obama, and the anticipated support of Attorney General Eric Holder (who expressed support for a bill in his Senate confirmation) increases the likelihood of passage for this important First Amendment protection. 

Postal Regulatory Commission Approves Postal Service 2009 Rate Increases
and Completes Annual Compliance Review

On March 16th, the Postal Regulatory Commission issued the results of its review of the Postal Service’s May 11, 2009 price adjustments for market dominant products, including Periodicals. Chairman Dan Blair announced the Commissioners’ decision that the increases for market dominant products were, on average, within the applicable 3.8 percent price cap for each class of mail.

With regard to Periodicals rates, the Commission noted that using all available pricing authority under the CPI cap still leaves the cost coverage for periodicals at approximately 84%, and called this situation a “serious concern”.  Citing the “sweeping nature of the problem and a short period for review”, however, the PRC deferred the cost coverage issue to its then-pending annual compliance review.  While approving the rates for periodicals, the PRC did question the rate structure, saying “the Postal Service’s stated pricing objective of keeping increases “around the average” may impede progress toward full cost coverage, as it fails to more fully implement the recently-adopted Periodicals rate structure.” 

Two weeks later, on March 30, the Commission issued its Annual Compliance Determination for 2008, concluding in broad terms, “the Commission deems the Service to be in compliance with the PAEA.”  Discussing Periodicals class, the PRC noted the need for improvement in the class’ cost coverage, and recommended both “cost control” and “improved pricing signals”.  While deferring some studies to the joint USPS-PRC task force looking at periodicals costs, the Commission laid out some specific recommendations to bring Periodicals revenues into closer alignment with attributable costs, including reducing the extent to which periodicals are exposed to manual sorting operations, controlling other costs, improving cost modeling, aligning the pricing structure more closely with cost incurrence, and employing pricing objectives that send clear signals to mailers.

No Improvement in Postal Service Finances;
Industry Mobilizes In Support of Congressional Relief for USPS

The bad financial news continued for the Postal Service in February and March.  In February, the most recent month for which published financial results are available, volume declined by 17% and the Postal Service lost $658 million.  Year-to-date through February, the Service has lost $1.8 billion.  In testimony before the House subcommittee on Federal Workforce, Postal Service, and the District of Columbia on March 25^th, Postmaster General Potter said that the Postal Service’s situation is “critical” and that even after $5.9 billion in planned cost reductions, the Service is still projecting a loss of $6 billion in 2010.   Potter asked Congress for legislative help in two areas – relief on payments for retiree health benefits and flexibility to adjust days of delivery.

The PMG endorsed H.R. 22, legislation introduced by Reps. McHugh and Davis with over 200 co-sponsors that would allow the Postal Service to pay health benefit premiums for current retirees out of the Health Benefit Fund established by 2006’s Postal Accountability and Enhancement Act.  The bill would provide the Postal Service with $28 billion in financial relief over the next 8 years and Potter stated that without this relief, the retiree health benefit funding obligations mandated by the PAEA will exhaust the Postal Service’s cash resources.

To help the Postal Service achieve legislative relief, the mailing industry is planning to re-form the broad-based coalition that successfully fought for enactment of the PAEA in 2006.  MPA is helping to lead the effort to secure additional support and momentum for H.R. 22 and is working tirelessly to get a similar measure introduced in the Senate.

Florida Considers Eliminating Tax Exemption for Magazine Subscriptions

Facing a potential six billion dollar shortfall in their 2010 budget, Florida lawmakers are considering eliminating a small handful of tax exemptions, including the exemption for newspaper and magazine subscriptions.  While this is not the first time publishers have faced this challenge, the combination of the current economy and the looming deficit have added momentum to the repeal effort this year.

Over the past decade, this issue has surfaced several times.  In 2002, lawmakers put a proposed state constitutional amendment on the ballot that would have let a committee of 12 lawmakers review exemptions. The Florida Supreme Court stopped the ballot initiative, ruling the proposal was an excessive delegation of the Legislature’s power.  A similar series of events took place just last year, when the Taxation and Budget Reform Commission put another amendment on the ballot that would have swapped a property tax cut for other new revenues, potentially including exemption repeals. The Supreme Court also removed that proposal, citing a misleading ballot summary.

The current repeal effort began gathering steam in February when the Finance & Tax Council in the Florida House began holding hearings and gathering testimony on a list of roughly 100 exemptions being considered for elimination.  On March 11th, the Council considered the exemption for magazines.  MPA, in conjunction with the Florida Magazine Association, testified against the repeal of the magazine exemption.

While the House continued its analysis, the Senate concluded that they would not take action on exemptions this year.  This did not however, dissuade Republican Representative Bogdanoff of Ft. Lauderdale from further action.  In mid April, the House Finance & Tax Council met to consider her bill to eliminate six exemptions, including the exemption for magazine subscriptions.  While MPA was successful in having an amendment introduced to strip the magazine exemption elimination language, the amendment did not pass, and the bill, with the exemption repeal included, passed out of the Council on a party line vote. 

With only a few days left in the legislative session, and the House and Senate versions of the budget roughly $500 million apart and headed for a joint conference, the passage of this bill out of committee means that the issue of exemption eliminations could become part of the conference debate.  At this juncture, support for continuing the exemption remains high in the Senate, but there are signs that the need to find solutions to the looming budget battle could compromise this support.  MPA is working tirelessly to remind legislators on both sides of the aisle and in both Houses of the burden this would place on all publishers, particularly Florida based publishers, the number of jobs that could be lost, and the First Amendment and literary value of magazines. 

Bills Prohibiting “Libel Tourism” Continue to Proliferate

Following the House Judiciary subcommittee on Commercial and Administrative Law hearing on “libel tourism” in February, Representative Peter King (R-NY) has introduced legislation (H.R. 1304) that would create a federal cause of action to determine whether defamation exists under United Sates law in cases in which defamation actions have been brought in foreign courts against American citizens.  Senator Arlen Specter (R-PA), in conjunction with Senators Lieberman (I-CT) and Schumer (D-NY) have cosponsored identical legislation in the Senate (S. 449). 

“Libel tourism” – the practice of bringing libel suits against U.S.-based defendants in foreign countries that have weaker protections for the press than does the United States – continues to be an issue of concern for publishers.  The legislation would help address the problem by providing relief (such as an order to bar enforcement) and remedies (including treble damages against the entity bringing the foreign lawsuit) to protect US citizens facing libel decisions against them in foreign courts if the “speech at issue in the foreign lawsuit does not constitute defamation under United States law.”

Concern over libel tourism is being addressed at the state level as well. Last year, the states of New York and Illinois passed legislation to protect state residents against defamation judgments and this year, California, Hawaii, and Florida are all considering legislation to address the issue.   

Automatic Renewal Bills Introduced in Several States

Several states, including North Carolina, Oregon, Texas, and California have introduced bills to regulate automatic renewals.

Legislation introduced in North Carolina (HB 1219), on April 8th, would prohibit automatic renewals entirely.  The bill was recently heard during a hearing in the House Committee on Commerce, Small Business, and Entrepreneurship.  MPA is working to oppose the North Carolina bill and monitoring another bill in Oregon (HB 2631) that would also effectively ban auto renewals. That bill has not moved since introduction. 

A bill that would mandate certain disclosures and procedures for automatic renewals, HB 2672, is pending before the Texas House Committee on Business & Industry.  We believe that magazine publishers would be exempt from the bill’s requirements, since the legislation contains an exemption for agreements in which the consumer may cancel after the initial term without penalty and can receive a refund for goods not yet sent – although the language, which is directed at services, leaves some uncertainty as to refund requirements during the month in which cancellation occurs.  During a hearing on the bill, many objections were raised, increasing the likelihood of amendments.  MPA is preparing suggestions to the sponsor to clarify the refund requirements for the exemption, as well as to remove type-size and color requirements and to add cancellation options (as written the bill only mentions cancellation by facsimile transmission). 

California also has proposed legislation dealing with automatic renewals.  The initial version of SB340, introduced in February, contained provisions closely modeled on an auto renewal multi-state agreement reached several years ago.  Modifications to the bill in April eliminated the requirement for a toll-free telephone number for cancellations and a requirement that full offer terms be on the front of the offer materials.  The amended legislation recently passed in the Senate, and now heads to the House for consideration. 

California State Board of Equalization Issues Troubling Tax Decision

In a decision potentially affecting nexus determinations for magazine publishers, on March 16th, the California State Board of Equalization denied a publisher’s appeal of a Franchise Tax Board decision.  The Franchise Tax Board had denied the publisher a refund of California corporate franchise tax and the appeal was based on the publisher’s claim that its activities in California lacked substantial nexus and were not subject to taxation under federal Public Law 86-272.  The Board of Equalization’s denial potentially sets a troubling precedent regarding the interpretation of P.L. 86-272 in other states.

The publisher involved, Personal Selling Power, solicited advertising from California companies for its magazine Selling Power.  P.L. 86-272, which was passed by Congress in the 1950’s, seeks to protect businesses from state corporate income taxes if their only activity in a state is the solicitation of sales of tangible personal property via visiting sales representatives.  Since P.L. 86-872 was passed, an unanswered question for the publishing industry has been whether advertising is considered part of a tangible product (i.e, the magazine), or a separate service. The U.S. Supreme Court has only interpreted P.L. 86-272 once and did not touch upon the advertising issue. 

In past years, only two states, California and New York, have considered the issue, with opposite conclusions drawn.  Following the state decisions, Congress passed a production exemption now found at Section 199 of the Internal Revenue Code.  It treats publishers as manufacturers of tangible personal property and there is favorable language concerning advertising in the legislative history, which MPA lobbied for at the time.  In its decision, the CA Board of Equalization ignored this important factor, concluding that the publisher’s solicitation of print advertising constituted solicitation for sales of a service rather than sales of tangible personal property.   

The Board of Equalization is the highest administrative tax body in the state and PSP must now pursue an appeal of the Board’s decision at the California Superior Court. MPA will continue to monitor the developments in this case, and will also continue to support H.R. 1083, the Business Activity Tax Simplification Act “BATSA” reform legislation, which if passed, would make this issue moot by expanding P.L. 86-272 to protect all solicitation activities.

House Introduces Cap and Trade “Discussion Draft” Legislation

House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Energy and Environment subcommittee Chairman Ed Markey (D-MA) recently introduced a discussion draft of “The American Clean Energy and Security Act of 2009,” comprehensive energy legislation intended to cut global warming and create a nationwide cap and trade system for limiting emissions of greenhouse gases. 

The discussion draft outlines several specific goals, including a 20 percent reduction in greenhouse gas emissions by 2020 and an 80 percent reduction from 2005 levels by 2050, consistent with what President Obama has called for.  It also calls for a requirement that 25% of U.S. electricity supplies come from renewable resources by 2025. 

Still up for discussion before a hoped-for May completion date for Committee and House action, are the specifics of the cap and trade system.  Cap and trade systems seek to reduce emissions by setting limits on the total amount of emissions an economy can produce (the cap), and having emitters buy or trade permits for the right to produce emissions (the trade).  “Covered entities,” which would include industries like electric utilities, oil companies, and large industrial sources, would need federal permits, called “allowances” for each ton of pollution they emit.  The key piece of the cap and trade system which is yet to be specified is how the allowances would be initially distributed to covered entities, i.e., by allocation, by auction, or a combination thereof. 

While Waxman and Markey intend to seek quick action in the House, the Senate as of now has taken a “wait and see” approach to climate change legislation.

Climate change legislation could have a “trickle down” impact on publishers, and MPA is reviewing the discussion draft to evaluate potential impacts.  The MPA Washington office is also coordinating with other like-minded associations to ensure that the interests of paper users are protected.

New York Expiration Date Notification Legislation Modified

A bill introduced in New York (A. 2642) which would extend subscription expiration date notice requirements currently imposed on magazines to newspapers and change the requirements for how expiration dates must be disclosed on subscription renewal materials for both magazines and newspapers, has been modified in response to objections raised by MPA and others.

The bill, which was originally introduced in January, had been scheduled for a hearing in the Assembly’s Consumer Affairs and Protection Committee in mid February.  At the urging of MPA and the newspaper association, the bill was withdrawn from the agenda to provide time for the involved parties, MPA principal among them, to provide input.  In a meeting with Committee Chairwoman and bill sponsor Audrey Pheffer, MPA expressed concerns about the bill, and offered several revisions.

Following the meeting, an amended bill (A. 2642-A) was introduced.  While the amended bill resolves some of the issues, there remain a number of troubling provisions.  They include type-size requirements for both the mailing label and renewal materials and the lack of a safe harbor for honest errors when appropriate systems are in place.  MPA has communicated our ongoing concerns about the bill to the sponsor, and will continue to seek workable notification provisions.

Congressional Focus on Behavioral Advertising Continues

Following the Federal Trade Commission’s release of their report on behavioral advertising, and their endorsement of industry self regulation, several legislators have begun to call for Congress to take a tougher stance in regulating online advertising.

Led by Congressman Rick Boucher (D-VA), the Energy and Commerce House subcommittee on Communications, Technology, and the Internet recently held a hearing that begins to set the stage for potential consideration of broad online privacy legislation by the subcommittee, possibly to be introduced later this summer. Boucher said “It’s my intention for the Subcommittee this year to develop legislation extending to Internet users that assurance that their online experience is more secure.”

Like last year’s hearings in the House and Senate, the main focus of the hearing was on the practices of internet service providers and cable companies, and specifically the practice of deep packet inspection (DPI) – a process that allows companies to look at any piece of data transmitted over the internet.  However, the Committee is expected to look at more than just this group – this summer, Boucher's subcommittee will hold a joint hearing with the Subcommittee on Commerce, Trade and Consumer Protection to further examine online privacy, with companies such as Google likely to testify.  The Senate Commerce Committee may consider holding hearings on the topic of online privacy as well. 

Four years ago Congressman Boucher, along with the ranking Republican on the subcommittee Cliff Stearns (R-FL), introduced legislation that defined the sort of notice and permission companies should seek for various types of data collection.  Any legislation introduced this year could focus more on consumer’s online rights than rather than focusing on a particular technology or segment of the online ecosphere. 

MPA, as part of several coalitions of companies and associations interested or engaged in behavioral advertising, is working to improve existing self regulatory models to address concerns of the Federal Trade Commission and Members of Congress, while at the same time recognizing the important role advertising plays in the online publishing model. 

CPSC Continues to Evaluate CPSIA Compliance Issues

Since last year, the Consumer Product Safety Commission (CPSC) has been working to implement the Consumer Product Safety Improvement Act (CPSIA) – legislation passed in August 2008 to address the issue of lead in children’s toys, particularly toys from China.  CPSIA creates limits on the amount of lead a children’s product may contain and requires testing of lead levels by a CPSC-certified third party laboratory.  An ongoing issue has been the need for third party testing and certification for products that clearly do not contain lead at levels near the CPSIA limit – which includes children’s books and other printed matter.  The Printing Industries of America (PIA) has submitted a request to CPSC, asking the agency for a determination that books and other printed matter do not need to undergo the expensive and time-consuming third party testing.  If approved, the determination would exclude books and other printed matter from the lead testing and certification requirements only, not the lead limits themselves.

CPSC has indicated that they anticipate issuing a determination in May for several categories of products, including books and other printed matter, that have been found not to contain lead at or near the limits set out in CPSIA.  However, they also indicated that they need additional information about “other printed materials,” which could include magazines.   MPA is working with members that publish children’s magazines to provide available data on magazine lead levels to PIA for inclusion in the Association’s supplemental submission.

It is also worth noting efforts in Congress to aid the printing industry, with Congressman Jeff Fortenberry (R-NE) introducing H.R.1692, a bill to amend CPSIA to exempt “ordinary books” from the lead limit requirements of the Act.  

Senate Finance Committee Considers Repeal of Alternative Fuel Mixture Credit for Paper Producers

Confirming rumors heard at the beginning of the month, during a Senate Finance Committee hearing on April 23rd, Chairman Max Baucus (D-MT) suggested that the Committee may consider disallowing the alternative fuel mixture credit for paper producers.  The credit provides a production incentive for biomass based fuels that are combined with diesel.

During the kraft paper making process, which is used by many mills when producing magazine grade papers, pulp is broken down into cellulose and lignin.  The cellulose is dried and turned into paper while the carbon rich lignin – also known as “black liquor” – is burned for power to fuel the mills.  By combining the black liquor with a small amount of diesel fuels, paper producers are eligible for the alternative fuel mixture credit.

During the hearing, Senator Baucus discussed the possibility of revoking the credit – perhaps even retroactively – for paper producers, or letting it lapse with the addition of “sweeteners” to minimize the impact on the paper industry.   Paper producers and users are very concerned about the possible early repeal of the credit, which expires at the end of the year and has been beneficial for an industry that has been hit hard by the current economy and seen decreased demand for paper and lower prices for pulp.  Chairman Baucus’ suggestions were met with opposition by several members of the Committee, including Senators Wyden (D-OR), Snowe (R-ME), and Stabenow (D-MI).  As of now, the House Ways and Means Committee, has yet to take any action on the credit. 

Also of Note…

 After being introduced several times over the last couple of years, Wisconsin has passed a law regulating the actions of traveling sales crews…The House of Representatives passed comprehensive tobacco legislation giving oversight of tobacco products to the FDA.  The measure now moves to the Senate...