In the Matter of the Complaint Against

AGE-LESS COSMETIC CO., INC.,
and
AGE-LESS COSMETICS, INC.

at San Francisco, California

H.E. Docket No. 5/69;

06/09/58

Ablard, Charles D.

POST OFFICE DEPARTMENT WASHINGTON, D. C.

DEPARTMENTAL DECISION

A hearing having been held on the above matter in San Francisco on October 1, 1957, the Hearing Examiner rendered an Initial Decision on February 3, 1958, finding that the respondent was violating 39 U.S.C. 259 by conducting a scheme for obtaining money through the mails by false and fraudulent pretenses. The Respondent has filed exceptions to the Initial Decision of the Hearing Examiner.

The first of these exceptions is to the statements in the pamphlets distributed by the respondent with the trial size of Bye-line and Defy-line, the products of the respondent. These products were marketed as a wrinkle-reducing cream which would "make you look two to ten years younger in ten days, or your money back." The respondent contends that since these pamphlets were sent out with the trial size and not with the original inducement to buy which was printed in magazines and newspapers that they were immaterial to the case. This exception is without merit because the circulars were calculated to induce the purchaser to buy the large size Bye-line and Defy-line.

The money-back guarantee of the respondent in this case offers an interesting situation. It is prominently displayed in the advertisements circulated by the respondent (Government's Exhibits A1, A2 and A3.) It is also prominently displayed in the circular that accompanies the trial sizes of Bye-line and Defy-line. However, the pamphlet gives such a glowing view of the efficacy of the product and the results that may be obtained by use of the product continuously, i.e. the large size, that the money-back guarantee for the trial size is rendered nugatory. The statement in the Bye-line direction that "it takes persistent treatment to vanquish lines under and around the eyes but the reward is very great when it does come after two or three months of regular treatment," is an example. There is no indication that the money-back guarantee is given with the large sizes. The great desire of American women to stop the aging process in spite of the years would tend to make the female purchaser have high hopes that something could be done and part with more money for the larger size. With only a dollar invested it is doubtful that anyone, and this is borne out by the testimony of the respondent that very few money-back requests were made, would demand their money when the promises of the respondent indicate that for only four more dollars you can really do wonders] As the court said in Charles of the Ritz vs. F.T.C., 143 Fed. 676, 680 (2nd Cir.) (1944),

"And, while the wise and the worldly may well realize the falsity of any representations that the present product can roll back the years, there remains 'that vast multitude' of others who, like Ponce de Leon, still seek a perpetual fountain of youth."

The language of the Court of Appeals in the 8th Circuit in Harris vs. Rosenberger, 145 Fed. 449 is applicable:

"...the promise to refund the purchase price, if the goods were not satisfactory and were returned was cleverly devised to give apparent color and support to the representations."

A somewhat comparable problem was discussed in U.S. v. Vibra-Brush, 152 F.Supp. 461, where the money-back guarantee period expired before the test period. Also, there is no express disclaimer of efficacy for all users. Therefore, the doctrine of Jarvis vs. Shackleton, 136 Fed. 116, (6th Cir.) (1943) would not be applicable to this case.

The second exception is to the language of the representations. The respondent contends that the examiner misconstrued the representation and that they were not fraudulent. A careful reading of the advertising of the respondent indicates that the examiner did not err in his interpretation. The exception is disallowed.

The third exception of the respondent is to the finding of fraudulent intent on the part of the respondent by the examiner. The complainant in this case produced two qualified medical witnesses who testified as to the current scientific belief concerning the efficacy of the product. They were unanimous in their view that the product will not do for a user what the advertising represents that it will do. The Supreme Court in Reilly v. Pinkus, 338 U.S. 269, said "an intent to deceive might be inferred from the universality of scientific belief that advertising representations are wholly unsupportable." The courts have held that it is not necessary that experimentation be indulged in by the Government's witnesses but that qualified opinion testimony is satisfactory. U.S. v. One Device, 160 Fed 194, 197, (10th Cir.) (1947). There was testimony in the record of Dr. Weilerstein to the effect that he had advised Mrs. Frank, the respondent, that to ship her drugs in interstate commerce would be a violation of the Food and Drug Act. Although Mrs. Frank denied this, the Hearing Examiner who had opportunity to view the witnesses and weigh the credibility of each believed the doctor and not the respondent. Upon a reading of the testimony, there is no basis for saying that the examiner erred in his finding and it is affirmed. The analysis by the Hearing Examiner in his Initial Decision, pages 22 - 28, is well reasoned and I believe it is the proper interpretation. The inference of intent having been raised the respondent failed to rebut it.

The respondent would make much of the fact that Dr. Weilerstein advised Mrs. Frank that this would be a violation of Food and Drug Act and therefore that agency should have taken jurisdiction of this case. While Food and Drug might have statutory jurisdiction over this proceeding, 21 U.S.C. 352 (a), (f) 2 and (J), assuming the testimony of Dr. Weilerstein and Dr. Barnes to be correct, the action of Food and Drug would lie only in a libel proceeding in the District Court of any product transported in interstate commerce. Thus, the action of Food and Drug is against the product and not against the enterprise. Most of respondent's activities are apparently intra-state. The fact that the Congress gave Food and Drug jurisdiction over cosmetics (21 U.S.C. 361, 362) is not to say that they have exclusive jurisdiction although as a matter of policy these cases should be handled by that agency when possible. The Postal fraud statute has been law for a great number of years and it has been interpreted as applying not only to "schemes" but also to what might otherwise be legitimate enterprises which are involved in the perpetration of a fraud. Harris v. Rosenberger, supra.

Since this case became ready for Departmental Decision, a reorganization in the Post Office Department established an independent Judicial Officer responsible directly to Postmaster General, who makes the final departmental decision in administrative proceedings. New Rules of Practice were published effective April 26, 1958, and were served upon the respondent. Those rules were made applicable to this and other pending cases.

On May 13, 1958, the Court of Appeals for the Second Circuit decided Vibra-Brush Corporation vs. Schaffer and Columbia Research vs. Schaffer holding that a fraud order issued by the Post Office Department was invalid for failure to comply with Section 3(a) of the Administrative Procedure Act which requires that "no person shall in any manner be required to resort to organization or procedure not so published." The Court said this section applied not only to affirmative resort but also to any "subjection to unpublished procedure," and that the proceeding was invalid for failure to describe the relation between prosecutor and adjudicator. The Court went on to say, "we hold the order at bar invalid for this reason, regardless whether the chain of subordination to the agency of both prosecutor and judge was in fact not sufficiently separated."

Until this recent reorganization, the respondent was not subject to any action by the Judicial Officer. The procedures and delegations of authority governing the action of the Judicial Officer were not only published but were served upon the respondent. Therefore, it appears that the reason for holding the orders in Vibra-Brush and Columbia Research invalid are not applicable to this case. Also, since this order will probably be tested in the 9th Circuit, the language of Foreman and Clark, Inc. vs. National Labor Relations Board, 215 F.2d, 396 (9th circuit) is persuasive. The Court of Appeals there said:

"the clear purpose of Section 3(a), supra, is to provide a shield for a petitioner before the Board, or other agency, to protect him from being penalized for failing to resort to unpublished methods of procedure. It is not a sword by which a petitioner can strike down the agency's order, on the ground that the agency has not authorized itself to issue that type of order, by publishing a statement in the Federal Register]" (Emphasis not supplied)

The decision of the Hearing Examiner is affirmed. An order will be issued.