In the Matter of the Complaint Against

U.S. ZIP CODE SERVICE,
1100 17th Street, N.W. at
Washington, D. C. 20036 and

U.S. ZIP CODE SERVICE, and
P. O. Box 2808,
Main Post Office at
Washington, D. C. 20013

P.S. Docket No. 2/171

Rudolf Sobernheim Administrative Law Judge

APPEARANCES:
Daniel S. Greenberg, Esq.
Consumer Protection Office
Law Department
United States Postal Service
Washington, D.C. 20260 for the Complainant

Myles Ambrose, Esq.
Mrs. Imogene Lehman Spear & Hill
1750 New York Avenue,
N.W. Washington, D.C. 20006 for the Respondent

INITIAL DECISION^1/

This is a proceeding by Complainant against Respondent under 39 U.S.C. 3005 which authorizes action against Respondent on evidence satisfactory to the Postal Service that the Respondent "is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations."

Complainant alleges that Respondent is engaged in such a scheme in the sale of its "United States Zip Code Directory." Specifically, Complainant alleges that by the use of advertising material, Respondent, directly or indirectly, in substance and effect represents:

"(a) That the 'United States Zip Code Directory' sold by respondent contains essentially the same information as found in the 'National Zip Code Directory' published by the United States Government;

(b) That, notwithstanding the reference to 'mb ltd':

1. The United States Government urges the purchase of respondent's directory;

2. Respondent is connected in some manner with the United States Government for purposes of promoting the sale of the directory;

3. Respondent's directory is being offered for sale by or on behalf of the United States Government."

Copies of the mailings and advertisements, alleged to have been used by Respondent, are attached to the complaint and an additional form of mailing was placed in evidence by Respondent (Ex. R-4).

Respondent denied the allegations of the complaint but admitted that it was engaged in a business wherein it sought to make a profit by selling its materials and services, and that to do this it had to use the mails.

A hearing was held on 14 January 1974, at which time both parties presented testimonial and documentary evidence. At the end of the hearing both parties agreed that an oral decision should be rendered in accordance with 39 CFR 952.24(c) in view of the fact that a temporary restraining order issued by the United States District Court for the District of Columbia would expire on January 16, 1974. Since Respondent desired to add an exhibit to the record which was not available at the end of the presentation of evidence it was further agreed that such a decision should be rendered at a continued hearing at 3:00 PM on 15 January 1974.

FINDINGS OF FACT

1. Respondent is operated by a Maryland corporation formed in 1968 under the name of M/B, Limited with offices in Montgomery County, Maryland.

2. M/B, Limited prior to the present proceeding had operated National Zip Code Directory Service, the subject of proceedings under 39 U.S.C. 3005 which resulted in the issuance of an order thereunder (P.O.D. Docket No. 3/54). Subsequently, M/B, Limited operated U.S. Zip Code Service which was the subject of a proceeding under 39 U.S.C. 3005 which led to the issuance of a default order (P.S. Docket No. 1/41). However, the determination of the issues raised in these proceedings is not res judicata against Respondent in this proceeding.

3. In April-May 1973 M/B, Limited decided to resume the U. S. Zip Code Service and to distribute a directory which it had acquired from the original publisher in Milwaukee, Wisconsin.

4. In view of the cited Post Office Department and Postal Service orders Respondent's principals sought guidance from the Postal Service as well as the advice of counsel as to how to avoid a repetition of their previous difficulties. The gist of the advice received by them was that no guidance or guidelines were available from the U. S. Postal Service and that for one reason or another counsel could not give a final opinion as to the legality of the proposed operation.

5. The directory published by Respondent is a pamphlet of 64 pages listing the zip codes by state and local post offices within a state in alphabetical order. It does not, however, show the street addresses covered by each zip code within a city. Respondent's directory lists on the cover page a toll free "800" number which the purchaser may use to obtain more detailed zip code information from Respondent. Respondent has two telephone operators who will answer questions during regular working hours. About 40 inquiries are received daily.

6. The usefulness of Respondent's directory is severely limited since, as the directory itself shows, larger municipalities have numerous zip codes and the user of Respondent's directory cannot ascertain therefrom which zip code to place on mail to any particular city address. The testimony of a Postal Service employee, offered by Respondent, shows that mail will be delayed in delivery if the sender, not knowing the correct zip code, uses the postmaster's zip code for the particular municipality.

7. On the other hand, the 1973 National Zip Code Directory, published by the Postal Service, lists every street and house number which is covered by any of the zip codes in a volume of 1807 pages.

8. The official zip code directory sells for $10.00 each while Respondent offers its directory for $3.50 for one copy, with reduced prices for multiple orders down to $1.75 each if ten (10) or more copies are ordered.

9. After resumption of business Respondent mailed post card solicitations for its directory to a list of homeowners of above-average income (Ex. A and B attached to the Complaint) and letter solicitations to a list of business firms (Ex. C and D attached to the Complaint). After receipt of Complainant's complaint, on or about 10 December 1973, Respondent discontinued the mailing ot homeowners but continued the mailing to business firms. It added at that time the words "PRIVATE NON-GOVERNMENTAL SERVICE" to the postage meter cancellation on its envelopes but did not change the advertisement enclosed inside.

10. (a) The mailing to homeowners is a 4" x 6" post card which on the upper left front side shows in capital letters the words:

"U.S. ZIP CODE SERVICE", and in less large capital letters the words "MAIN POST OFFICE", the number of its post office box and the postal address: "WASHINGTON, D. C. 20013". In between the lines "U.S. ZIP CODE SERVICE" and "MAIN POST OFFICE" the following is inserted in very small type: "(Division of mb ltd)". At the lower left there appear the words: "UNITED STATES" and "SERVICE" above and below an outline map of the United States with a circle in which the words "ZIP CODE" are placed.

(b) A statement on the back of the card, printed in capital letters, advises the recipient that "IT IS NOW REQUESTED THAT ALL MAIL ... CARRY ZIP CODE NUMBERS" and that "A NEW MULTI-CODED UNITED STATES ZIP CODE DIRECTORY AND SERVICE HAS BEEN DESIGNED AND IS AVAILABLE FOR THE HOME". The directory is said to have been "DESIGNED AS A QUICK REFERENCE GUIDE" for the purchaser's "CONVENIENCE, IN ORDER TO GIVE ALL" his or her "MAIL A HEAD START". To the left, under this statement and at the side of the space provided for the addressee's name and address, there is a direction that the cards should be mail to:

"U. S. ZIP CODE SERVICE MAIN POST OFFICE P. O. BOX 2808 WASHINGTON, D. C. 20013"

Beneath is found the further language, the second and third lines printed in small size letters:

"U. S. ZIP CODE SERVICE (Division of mb ltd) Not GPO Publication" (See Ex. A and B to Complaint)

11. (a) The mailing to business firms consists of an enveloped which carries in the upper left the following address with the second line printed in very small letters:

"U .S. ZIP CODE SERVICE
(Division of mb ltd.)
1100 17th Street, N.W.
Room 1000
Washington, D. C. 20036"

and at the lower right the words "Office Form #00001".

(b) Enclosed in this envelope is a sheet, the upper half of which contains the address of U. S. Zip Code Service and a place for a postage stamp. Its lower half contains a notice, substantially similar to the notice sent to homeowners, and the added sentence:

"THIS INCLUDES A COMPLETE AND FULL ZIP CODE SERVICE". Beneath this is a space for the name and address of the addressee; and to the left thereof, the instruction to mail the order to:

"U. S. ZIP CODE SERVICE
(Division of mb ltd)
Not GPO Publication"

with the last two lines in tiny letters (See Ex. C and D to the Complaint). (c) The return address employed for the business mailing is the office of a "mail drop" service used by Respondent for the receipt of this part of its mail.

12. The record indicates that Respondent mailed a very substantial number of the foregoing advertisements and obtained approximately 90,000 subscribers, who purchased approximately 170,000 copies of the directory. Respondent admits that it received about 185 complaints about the content or usefulness of its directory and that of these about 20% indicated that the recipient felt himself deceived in that he thought he was buying a Government document when he was buying a private compilation. It also appears that a number of Government installations purchased Respondent's zip code directory and, in at least one instance, the order included the words: "Not GPO Publication" (Ex. R-3).

13. On the basis of the foregoing findings and the record as a whole I find:

a. The advertisements used by Respondent in the mail order sale of its U.S. Zip Code Directory falsely represent that the U.S. Zip Code Directory sold by it contains substantially the information that is found in the "National Zip Code Directory" sold by the U. S. Government Printing Office.

It is apparent from a comparison of the National Zip Code Directory, of the contents of which I take judicial notice, and the U. S. Zip Code Directory published by Respondent that the latter does not by any means contain all the information furnished by the former. In consequence, Respondent's statement to its customers that its product "includes a complete and full zip code service" is false. Whatever the usefulness of Respondent's abridged directory, together with its telephone answering service, this product is by no stretch of the imagination the equivalent of the Government- published National Zip Code Directory. Respondent's description of its product to its business customers as a complete and full zip code service is, therefore, highly misleading and in effect falsely represents the product offered by Respondent. Respondent in all its advertisements gives to the reader whom it addresses the appearance of offering a complete, self-contained directory when in fact it only offers an abridgement of limited usefulness, supplemented (as the advertisements do not state) by a telephone answering service.

b. Respondent represents that the U. S. Government urges the purchase of Respondent's directory; that Respondent is in some manner connected with the U. S. Government in the promotion of the directory; and that such directory is being offered for sale by or on behalf of the United States Government. (i) While Respondent states on the outside of its post case (Ex. A to the Complaint) or the envelope (Ex. C to the Complaint) as part of the address that U. S. Zip Code Service is a "(Division of mb ltd)", the notation is in very small print compared to the rest of the address and uncertain in its meaning. The company which organized Respondent is called "M/B, Limited" and the printing of its name in the manner set out as part of the sender's address on its mailings may well be treated by an unwary reader as Government mumbo-jumbo to which no significance attaches. The dominant impression is created by the sender's name "U. S. ZIP CODE SERVICE" which can easily be mistaken for a Government or Postal Service activity.

(ii) It is also correct that the words "Not GPO Publication" appear on the return side or in the insert of its mailings. However, the line "Not GPO Publication" is always printed in very small letters, is kept very inconspicuous, and placed oddly so that the reader may well overlook it. Moreover, since the U. S. Postal Service is now a separate corporation this notation appearing on Respondent's mailings may well mislead the reader into interpretating this notation as meaning merely that the directory is not produced by the Government Printing Office but leaving open the inference that it is produced by the U. S. Postal Service itself.

(iii) Respondent's prominent use in its homeowner mailing of the phrases "U. S. ZIP CODE SERVICE" and "MAIN POST OFFICE" and of the phrase in the business mailings "U. S. ZIP CODE SERVICE" as a place to which orders are to be sent, the use of the map of the United States with the words "UNITED STATES" and "SERVICE" above and below the map in the mailing to homeowners and the reference in the business mailings to an Office Form bearing the number "00001", as if there might be a multiplicity of such form numbers running into five figures, all are highly likely to indicate, at least to the rapid or unwary reader, that Respondent may be an activity either of the U. S. Government or of the U. S. Postal Service. The inference is reinforced by the impersonal reference, imitating the Government writing style, to the request that all mail carry zip code numbers and that the U. S. ZIP CODE DIRECTORY has been designed for quick and accurate reference of the mail user and is available for sale. The language of Respondent's statement carries with it an official tone which reinforces the impression created by the name used by Respondent that the directory offered by Respondent is an official publication, and completely overshadows the minimal emphasis on the fact that Respondent is a private enterprise.

(iv) In the total context of Respondent's mailings the addressees thereof may well feel that Respondent offers an official publication which the Government urges them to acquire and use in order to comply with the official request for zip coding their mail.

(v) The falsity of Respondent's representations is not overcome by Respondent's recent use of the words: "PRIVATE NON- GOVERNMENTAL SERVICE" as part of its mail meter cancellation. Such envelope notation may well not be seen by the addressees because the mail is opened by their secretarial staff and the envelopes thrown away or because the addressees themselves pay no attention to such envelopes and do not seriously scrutinize them. Hence, this minor change in the mailing is insufficient to overcome the overall impression created by Respondent's mailings that it is or serves in some way an official activity.

CONCLUSIONS OF LAW

1. Respondent is engaged in a scheme or device for obtaining money or property through the mails by means of false representa- tions within the meaning of 39 USC 3005, as alleged in paragraph 2(a) and (b) of the complaint.

2. The scope of the protection of 39 USC 3005 is not measured by the perception of the exceptionally acute or sophisticated. It extends to the trusting as well as to the suspicious. Donaldson v. Read Magazine , 333 U.S. 178, 189 (1948). On ordinary minds the referenced portions of Respondent's mailings will most likely produce the impression, in my view created by them, that the purchaser of Respondent's directory will receive a complete zip code directory which furnishes all information which he might properly need to zip code his or her mail and that such directory is either a publication which the United States Government or the U.S. Postal Service urge prospective purchasers to buy or the sale of which they are promoting, or that Respondent's activity is in some way connected with the U.S. Government or the U.S. Postal Service.

3. Even if Respondent be deemed to have acted in good faith and not to have sought to deceive in the sale of its product, the amendment to 39 USC 3005, adopted in 1968 (82 Stat. 1153), eliminates the requirement that fraudulent intent be shown as a condition for action under 39 USC 3005. The 1968 amendment substitutes therefor (for the legislative history see Lynch v. Blount , 330 F. Supp. 689 (S.D.N.Y. 1971) at p. 693 and note 6) the requirement that the representation used in a scheme or device to obtain money or property through the mails be false in fact and that, as the courts have said, be a substantial and material false representation. Lynch v. Blount, Supra , aff'd. w.o. op. 404 U.S. 1007 (1972); United States v. International Term Paper Company , 477 F.2d 1277, 1280 (1st Cir., 1973). These requirements are here met in full.

4. Accordingly, it is recommended that an order in the form attached as provided in 39 USC 3005 be issued.

____________________

1/ The Initial Decision rendered orally on 15 January 1974 has been corrected for numerous errors in spelling and punctuation and textual errors and omissions in the transcript. The impact and result, however, remain unchanged.