In the Matter of the Complaint Against

HOMEWORKERS MASTER LOG COLUMBIA and
HOMEWORKERS CLEARING HOUSE,
Post Office Box 24413 at
Oakland, California 94623

P.S. Docket No. 3/77

Rudolf Sobernheim Administrative Law Judge

APPEARANCES:
Thomas A. Ziebarth, Esq.
Consumer Protection Office
Law Department U.S. Postal Service
Washington, D.C. 20260 for Complainant

Wayne M. Black Frances M. Black
1633 Kains Avenue Berkeley,
California 94702 for Respondents

INITIAL DECISION

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

Complainant alleges that Respondents are engaged in such a scheme by offering employment in stuffing envelopes at a stated rate of pay by means of advertisements published in numerous newspapers and periodicals (Compl. Ex. 1). Specifically, Complainant alleges that Respondents falsely represent, directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implication:

"(a) That Respondent will furnish employment stuffing envelopes at a rate of $250.00 per thousand to any person remitting one dollar in response to its advertisement;

"(b) That the persons who respond to Respondent's advertisements by remitting one dollar will be furnished with a 'complete starter kit' containing all of the materials necessary to earn money at home at a rate of $250.00 per thousand by stuffing envelopes; and

(c) That Respondent's work-at-home enterprise is backed by an unconditional money-back guarantee."

Respondents in their answer admitted that they were conducting their business by means of the advertisements referred to by Complainant through the mails but deny that the representations made are materially false, as charged by Complainant, and assert that the wording and mode of insertion of their advertisements make it clear that Respondents do not offer wage employment to prospective customers.

After this proceeding was started Complainant sought a preliminary injunction pursuant to 39 U.S.C. 3007 in the United States District Court for the Northern District of California (Civil No. C-74-1890-0JC). A hearing was held on this request on 13 September 1974 at the end of which a preliminary injunction was issued. At this hearing testimony was taken and a copy of the official transcript thereof was made an exhibit in this proceeding as Complainant's Exhibit 4. Material sent out by Respondents Columbia and Homeworkers was admitted in evidence as Complainant's Exhibits 2 and 3 respectively. These exhibits are copies of the exhibits introduced by the defendants in the injunction proceedings at the hearing of 13 September 1974. A hearing was held as promptly as possible and Respondents filed a post-hearing brief.

STATEMENT OF FACTS

1. Wayne M. and Frances M. Black are engaged in the business, described by them as "commission mailing", under the name of Homeworkers Clearing House in Berkeley, California.

2. Wayne M. and Frances M. Black, doing business as Homeworkers Clearing House, advertise in various newspapers, using the name "Homeworkers" (Compl. Ex. 1).

3. All of the Homeworkers ads, according to the testimony proffered by Respondents in court (Compl. Ex. 4, p. 37) appear under the business opportunity sections of the classified advertising columns and none appear in the employment opportunity columns. Complainant's Exhibit 1 shows three ads listed under business or moneymaking opportunities and three ads where the classification is not affirmatively shown except that in one case the ad clearly was not listed under employment information and in another clearly not under moneymaking opportunities.

4. The six Homeworkers ads disclosed by Complainant's Exhibit 1 read as follows (except for code changes):

"$250.00 PER Thousand, Stuffing Envelopes]
Unconditional Money Back Guarantee] Com-
plete starter kit $1.00. HOMEWORKERS, Box
24413-CG, Oakland, CA 94623."

5. Prospective customers, responding to the Homeworkers ad, receive the "Complete starter kit" from the Clearing House, entitled "BEGINNERS KIT FOR MAKING $250 PER THOUSAND STUFFING ENVELOPES". Actually the kit explains in detail how the customer can set up him- or herself in his or her own business as a "commission mailer", i . e . how and where to get self-addressed stamped envelopes in which to mail out circulars as well as the circulars to mail out and how orders received are filled, and how to build up a large mailing list. Attached to the kit are sample circulars for selling the Homeworkers Index, published by the Clearing House, for selling customers on doing addressing work for R. Stewart at Huntington Beach, California, and for becoming a wholesale agent for XCito, a Chicago firm (T 50).

6. The purchasers of the kit receive compensation by splitting the monies received for the Homeworkers Index, for example, with the Clearing House more or less equally or other receipts with those for whom they mail circulars.

7. The testimony of witnesses both in court and at the administrative hearing as to the earning possibilities proffered by Respondent Homeworkers remains highly confused. The only clear fact which emerges is that the witnesses Wayne M. and Frances M. Black claim that they have made $250 in receipts per thousand envelopes stuffed and mailed. Whether this represents a true net is not clear.

8. Persons employed solely to stuff envelopes whether working at home as so-called independent contractors or as full-time or part-time employees cannot earn any amount near $250 per thousand for stuffing envelopes.

9. The fact that Respondent Homeworkers offers a kit is not a sign that Respondent offers a business venture rather than hourly-paid employment as shown by item 3 of the R. Stewart circular (Compl. Ex. 3) seeking persons to address envelopes for $2.00 per hour and charging $1.00 for Directions and Starting Kit.

10. Respondent Homeworkers' claim that other firms advertise their ventures similarly to their own is not wholly correct. A number of other ads in Complainant's Exhibit 1 inform prospective customers that earnings of $250 or $300 weekly are "possible" or refer to these "possible" earnings as "profits", thus giving some hint at least that such earnings are aleatory and not derived from fixed periodic wages. Others, of course do not. Few, however, use the phrase "Homeworkers" in their advertising.

11. While Respondent Homeworkers contends that a careful parsing of their ads and consideration of their location under business or moneymaking opportunities should alert a careful reader that he or she is not offered employment or self-employment at a fixed rate of pay, they concede in their answer (page 2, under 3b) that a correct representation of what they do would require a statement that they furnish a starter kit enabling purchasers to " enter business *** which substantially consists of stuffing envelopes" at home. In fact, Respondent Homeworkers' plan, if followed, involves substantial expenditures and effort for advertising and printing and securing circulars, beyond stuffing envelopes (Compl. Ex. 3).

12. At the outset of the hearing Complainant withdrew its charge against Master Log.

13. By motion to amend the caption of the complaint, filed on 7 November 1974 after the hearing herein, Complainant withdrew its charges against Respondent Columbia.

14. No showing has been made that Respondent Homeworkers Clearing House solicits money through the mails under its name or receives mail addressed to Respondent Homeworkers in response to the latter's advertisements (Compl. Ex. 1).

15. Based on the foregoing detailed Findings of Fact and the record as a whole I find:

a. Respondent Homeworkers by the use of the word "Homeworkers" and the reference to $250 per thousand for stuffing envelopes conveys to the ordinary reader the idea that such sum can be earned by him or her for the stuffing of the envelopes alone without further outlay or other substantial activity on his or her part. Such representation is materially false since Respondent Homeworkers does not furnish such opportunity but furnishes an opportunity to enter a "commission mailing" business which entails risk of serious loss and in no way guarantees the earnings stated by Respondent Homeworkers. These risks and chances are revealed only when the purchaser has bought the kit and reads the introductory statements with which it starts.

b. Respondent Homeworkers represents that they do, but they do not in fact, furnish a complete starter kit, for to start the operation which they outline therein (Compl. Ex. 3) requires the purchaser of the kit to print circulars and engage in advertising before he can engage in stuffing envelopes and realize any earnings. Such representation is materially false since Respondent Homeworkers' advertising fails to indicate the need for these important preliminary activities and plainly holds out the expectation that envelope stuffing can be undertaken and earnings begin to flow upon receipt of the kit.

c. Respondent Homeworkers's money-back guaranty has no material significance nor has it been shown to be false.

d. Accordingly, the charges made in paragraph (3)(a) and

(b) of the complaint are upheld as a matter of fact. The charge made in paragraph (3)(c) of the complaint cannot in fact be sustained.

CONCLUSIONS OF LAW

1. Respondent Homeworkers is engaged in a scheme or device for obtaining money or property through the mails by means of false representations within the meaning of 39 U.S.C. 3005.

2. Respondent Homeworkers' advertisements make the materially false representations charged in paragraph 3(a) and (b) of the complaint and will be so understood by the ordinary reader. See Donaldson v. Read Magazine , 333 U.S. 178, 189 (1948).

3. Complainant has withdrawn its complaint against Master Log and Columbia and as to these Respondents the proceeding has become moot.

4. Complainant has not shown that Homeworkers Clearing House is the addressee of mail related to the scheme for obtaining money or property through the mails carried on by Homeworkers. Therefore, the request for an order under 39 U.S.C. 3005 against Homeworkers Clearing House is denied.

5. Accordingly, an order pursuant to 39 U.S.C. 3005 in the form attached should be issued against Respondent Homeworkers. No order should be issued against any other Respondent.