The CHAIRMAN. Are there any questions? Mr. PORTER. Mr. Chairman, I would like to ask the gentleman if he has any idea how many of his colleagues are in the same boat; in other words, how general is the situation he describes here? Mr. JEPSON. As far as I know, my competitors' mailings have dropped materially. I don't know to what extent. Mr. PORTER. Why do you suppose third-class mail-you must be conscious of that because of your work-has such a bad reputation among some members of the public? Mr. JEPSON. I do not think that actually exists to the extent that it is claimed. We get mail back occasionally which indicates, "Take me off your mailing list." But the percentage is so small that you don't notice it. Mr. PORTER. As far as the people receiving it are concerned, you do not get much evidence of resentment; is that your position, relating to your returns? You only get a few back from people saying, "Take me off your mailing list"? Mr. JEPSON. Well, I get 2 percent returns on orders. Mr. PORTER. Yes. Do people talk to you, though, or are you aware of the fact that there is a certain amount of resistance to third-class mail? Mr. Maginnis testified how we almost abolished it here on the floor of the House because of the feeling against it. I was wondering whether from your experience you had any idea why third-class mail had such resentment against it, if it does. Mr. JEPSON. It would have to be an opinion. If I understand your question, it is why it has a bad reputation. Mr. PORTER. Yes. I mean it must have, if we almost threw it out here. And I get letters from time to time from people saying, "Do away with the trash mail." Mr. JEPSON. Where did it start? Where did the word start? Mr. JEPSON. I think so, too. Mr. PORTER. I was just wondering what your personal experience had been. Mr. JEPSON. I think it started with the newspapers, and I think that if third-class mail was eliminated, the newspapers might benefit. However, I cannot use it. I have tried it. The CHAIRMAN. All right, thank you very much. Are there any other witnesses here now, Mr. Maginnis? Mr. MAGINNIS. I just wanted to say, Mr. Chairman, I was available for questions if there were any more, when I introduced Mr. Thomas. The CHAIRMAN. I think since some witnesses are from out of town, they ought to get through and not have to come back here. Mr. MAGINNIS. Mr. Fixler of Long Island has a 12 minute statement. I think would fit in well. STATEMENT OF BERNARD FIXLER, PRESIDENT, CREATIVE MAILING SERVICE, INC., FREEPORT, LONG ISLAND, N.Y. The CHAIRMAN. You have been before the committee before, have you not, Mr. Fixler? Mr. FIXLER. No, never, sir, this is my first time. The CHAIRMAN. Oh, I thought it was Mr. Tillotson. It is Mr. Fixler. All right. Mr. FIXLER. That is right. My purpose in appearing before you today is to supply you with information about a direct-mail survey that we have recently conducted among firms in Nassau and Suffolk Counties in New York State. I believe you all have a copy of this survey before you. On April 7 of this year, a group of local businessmen met to discuss the effect of legislation that is now awaiting the action of Congress that would further increase postal rates. We were deeply concerned because our businesses depend on the postal service and we have not yet had the opportunity to adapt to postal increases already authorized to become effective on July 1, 1960. We decided to do a survey of local firms believed to be engaged in direct mail. A list of some 200 firms, including mailing services, lettershops, mail-order companies, publishers, and some miscellaneous categories was assembled. On April 15, just 1 month ago, a survey form was mailed to these firms requesting specific information about their businesses. By May 11 we had received back 57 responses to our questionnaire, and the information obtained was prepared in report form and has been submitted to this committee. The three most significant figures revealed were that the number of employees in the firms responding totaled 5,199, the yearly payroll was in excess of $14,166,000, and the annual postage paid exceeded $13,417,000. Now, why were these statistics so significant? Nassau and Suffolk Counties on Long Island are completely representative of that new look in our country-Suburbia. And like most other suburban areas surrounding large metropolitan centers we have far too little industry paying taxes to support our local requirements and to give local job opportunities to our people. Those of us on the committee were startled by the result. We ourselves had not fully recognized the importance of the direct mail business to the local economy. And remember that we had only 57 replies from which to obtain these statistics. In addition to the employment opportunity, we had gathered some revealing information about postal rates and how they relate to payroll. The advocates of ever-spiraling postal rates continue to insist that postage is a minor factor to the overall cost of doing business. Our survey proves that the number of dollars spent for postage is almost the same as the number of dollars spent for payroll. In addition to the number of employees, the annual payroll, and expenditures for postage, we also asked other pertinent questions, with the following results: Twenty-two of the firms responding reported total other expenditures of over $8,897,241. Twenty-six of the firms gave information on total investment in plant and equipment of $3,347,145. Thirty-five of the firms answered the question on the number of square feet of space used for a total of 631,650 square feet. Twenty of the firms supplied figures on rentals of plant and equipment that showed $1,642,048 spent annually for this purpose. It was not my intention in coming here to bore you with statistics. As Congressmen, you get enough of this. But these figures I have just quoted to you from our survey are more than just numbers. They represent people employed constructively in our economy; they represent salaries on the barrelhead every Friday; purchasing power that multiplies over and over again into more jobs and more salaries and more purchasing power. In evaluating the total impact of our industry in our local area, we cannot overlook the taxes that are paid to the local, State, and Federal Governments. Federal withholding taxes alone averaged at only 10 percent account for at least $12 million a year in payroll deductions from the 57 firms that responded. Another phase of our industry that could not be covered adequately by our survey was the millions upon millions of dollars worth of paper, envelopes, and printing that were not produced locally but came into our area for processing and mailing. These, too, should be viewed in their proper perspective of providing jobs and wages. Those of us who are in the mailing service business recognize the range of impact that increased rates will have. We know that all business uses and depends on the postal service, even though there is a wide variation in the effect of higher postal rates. Some business firms will take any increase in stride because their use of direct mail for advertising purposes is negligible. Other business firms will reduce the use of direct mail as it becomes economically unsound to use this medium of advertising. And some businesses will be priced out of existence because they are completely reliant on fair and reasonable postal rates in order to continue operations. There is a basic economics to direct mail that determines its use. Advertising and promotional material distributed through the mails sells goods and services directly to the consumer, and we call this mail order. When it distributes information and requests inquiries, we call it industrial direct mail. When it announces sales, describes new merchandise, and opens charge accounts for the retailer, we call this direct mail advertising. But whatever way it is used direct mail must be worth its cost, or it will not be used. Postage rates at the present time are the major item of expense of all the components that make up a direct mail package. As the representative of our committee, and as the owner of a small business, I ask the House Post Office Committee to think of direct mail for what it really is one of the most potent selling forces in our country. This is certainly not the time to reduce our selling efforts. They must be expanded and improved. I look upon my job as having two main purposes. One of them is to help American industry to sell the goods and services that it has such an overwhelming capacity to produce. The other is to provide job opportunities, good working conditions, and high salaries to as many people in my community as I can employ. I take both of these jobs very seriously. The Postmaster General has requested higher rates on all classes of mail. I cannot believe that he understands the detrimental effect this will have on direct mail activity, with the consequent loss of jobs and selling power. The Post Office Department has called attention to the fact that third-class mail has increased more than fourfold since 1928. In con sidering this increase, we should also consider that the gross national product of the United States has increased from $100 billion to almost $450 billion, or well over fourfold since 1940. The Post Office refers to bulk third class as "preferred rate" matter. This is not an accurate description. It should be referred to as "deferred handling" matter, because it enjoys no priority, and, as mailers well know, it waits its turn before it is handled, transported, or delivered. In the "Survey of Postal Rates" reference was made to a study conducted by McKinsey & Co. of the proposed third-class increases. One of the objectives of this study was to analyze "To what extent are third-class postal rates a major factor in the success or failure of direct mail businesses?" They then go on to talk about the decision of an advertiser to use or not to use direct mail. They cannot, surely, be referring to direct mail or mail-order businesses, because these are committed to the use of direct mail; they use the mails exclusively in dealing with their customers. The language of their report indicates that whatever study of this medium they made was conducted among companies who use direct mail sparingly. In this type of organization, postal rates are not a critical factor, and some very wrong conclusions can and did result. The McKinsey & Co. study refers to postage rates as a minor cost of direct mail advertising and selling. Tucked away in parentheses is the item that "postage accounts for perhaps one-third of total costs." It is inconceivable to me that McKinsey & Co. were referring to a mail-order business when they state that 33% percent of the total cost "is not the make-or-break factor in this business." For 7 years the Postmaster General has waged a relentless fight to raise postal rates. His philosophy is that the Post Office is a business and should pay its own way. Those of us who work closely with the postal service know that this is not the case. In Nassau and Suffolk Counties there is a total of 165 post offices, with a postmaster in each. If the Post Office is to be run as a business, then the postal service would consolidate these offices into, at most, one-half of this number and operate substations where they are indicated. If these separate post offices are maintained for the convenience of the public, then you cannot regard their operational costs as a "deficit" and expect the business users of the mails to subsidize them. One of the most alarming intentions of the Postmaster General is to restrict the volume of mail advertising by pricing it out of the reach of the users. This can succeed, but it will certainly not alleviate any Post Office deficit, and it will deeply and harmfully influence the economy. My business has already felt the impact of the last increase in third-class bulk mail that was imposed in January 1959. In that year our volume of mailings dropped 16 percent from the year 1958. In conclusion, I urge this committee to weigh very carefully the proposals now before it. We feel that out survey has demonstrated conclusively that we are an important industry that does not deserve to be legislated into a secondary role. On behalf of the firms that I represent, I thank you for the opportunity of appearing at these proceedings. Mr. LESINSKI. Mr. Chairman? Mr. Fixler, I do not know if you are aware of the fact that the mailing business is a $20-billion-a-year business and employs about 5 million people. Due to the time, I would like to request, Mr. Chairman, that Mr. Thomas be able to extend his remarks at this point in the record; in other words, add some supplementary record to what his statement has been. Any further comments I leave to the Chair. The CHAIRMAN. What kind of business is this creative mailing service? Mr. FIXLER. Sir, we are a mailing service that services customers in all lines of activity: mail order firms, firms that sell financial services, retail stores, service establishments. We process mail for them and do all the mailing functions for them. We also are in the business of supplying mailing lists of business firms and executives throughout the United States. The CHAIRMAN. How many firms do you represent in connection. with your mailing service? Mr. FIXLER. This survey was answered by 57 firms, and I am here as a representative of the 57 that responded to the survey. Mr. PORTER. Mr. Chairman? The CHAIRMAN. Mr. Porter. Mr. PORTER. I want to say I think the gentlemen's statement is excellent. I am glad he conducted this survey. I wonder if the gentleman knows anything about the survey of the Secretary of Commerce. Mr. FIXLER. I am aware of the survey that was made, and like most other people in my business, I am astounded at the conclusions that were reached. Like some of the members of this committee, I look forward very hopefully to seeing some of the blank spots in this survey filled in. It is inconceivable to me that they could have come up with the conclusion that they did, knowing as much as I do about this business. Mr. PORTER. In terms of these blank spots, especially with regard to volume of business and number of people employed and impact, you would feel that if all 200 had answered, they would have just given you additional verification of these points? Mr. FIXLER. Exactly. And if I might enlarge on the answer one bit: In our community I referred to this. But if there is one thing we need, it is more business and more industry and more job opportunities. We are literally starved for this, because we are oftentimes referred to as the "bedroom of New York City." Our people sleep through but work in the metropolitan area. Mr. PORTER. I want to say that if they want to expand into Oregon, we would be glad to have them out there. Mr. JOHANSEN. Mr. Chairman, I wonder if I could ask Mr. Maginnis one question. The CHAIRMAN. Mr. Johansen. Mr. JOHANSEN. I am just trying to clear up a contradiction here. that I do not understand. Mr. MAGINNIS. All right, I will try. Mr. JOHANSEN. I do not attribute bad faith to either of the parties in the controversy in the least way. The gentleman referred in his testimony, as I think he has on other occasions, to the 150-percent increase between 1952 and 1960. The |