In the Matter of the Complaint Against

GEGE COSMETICS, INC.
One Wolfs Lane at
Pelham, New York 10803

P.S. Docket No. 6/49;

11/17/78

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
Daniel S.Greenberg, Esq.
Office of General Counsel
U.S. Postal Service
Washington, D. C. 20260

APPEARANCE FOR RESPONDENT:
Lee H. Harter, Esq.
2822 Van Ness Avenue
San Francisco, California 94109

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of Administrative Law Judge Quentin E. Grant holding that Respondent is engaged in conducting a scheme or device for obtaining money or property through the mails by means of representations materially false in fact within the meaning of 39 U.S.C. § 3005.

The Initial Decision found that the allegations of the complaint were made by Respondent's advertising and that they were materially false. The complaint alleges that by means of advertisements Respondent represents directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implication, that Respondent's product, "GeGe Lotion," will (a) improve the appearance and/or condition of the uneven, unsightly discolorations of the skin commonly known as stretch marks, (b) cause stretch marks to be so improved that they will no longer be obvious and/or noticeable when the user wears revealing clothing, (c) improve stretch marks by causing them to become lighter and to begin to fade, (d) be more effective "than just an ordinary cream or lotion" and will "actually do the job," and (e) improve stretchoticeable when the user wears revealing clothing, (c) improve stretch marks by causing them to become lighter and to begin to fade, (d) be more effective "than just an ordinary cream or lotion" and will "actually do the job," and (e) improve stretch marks after one application.

Respondent's exceptions to the findings and conclusions of the Initial Decision are stated to be:

"I. There is no factual basis in the initial decision (nor in the evidence) supporting the ALJ's finding that the advertisement makes the 'representations concerning "GeGe Lotion" substantially as characterized in paragraph III of the complaint.'

II. The ALJ erroneously concluded that GeGe Lotion would not improve the appearance of uneven, unsightly discolorations of the skin, commonly known as stretchmarks.

III. The ALJ erroneously concluded that GeGe Lotion would not cause stretchmarks to be so improved that they would no longer be obvious and/or noticeable when the user wears revealing clothing.

IV. The ALJ erroneously concluded that the alleged representation that GeGe Lotion is more effective 'than just an ordinary cream or lotion' and will 'actually do the job' was a material misrepresentation; thereafter, the ALJ compounded the error by finding that the representation was materially false as a matter of fact.

V. The ALJ erroneously concluded that GeGe Lotion would not improve 'stretchmarks' after one application."

Before discussing each exception, a short summary of the evidence is helpful to an understanding of the Initial Decision and the exceptions taken by Respondent. Briefly stated, "GeGe Lotion" is a lotion containing Vitamin E Acetate (0.4% by weight), Methyl Paraben (a preservative, not quantified), Hydroquinone (1.08% by weight) and Quinone (0.004% by weight). The only skin lightener present in the product is Hydroquinone. Any degradation of Hydroquinone would appear as Quinone. The quantity of Quinone present in the sample tested by Complainant's witness indicates insignificant degradation of Hydroquinone (I.D., F.F. 3).

Hydroquinone is commonly used in the form of a cream or salve to lighten brown spots on the skin. Hydroquinone does not remove pigmentation already present but tends to inhibit the formation of new pigment (I.D., F.F. 5). It is not 100% effective in the treatment of brown spots. Up to 64% of users may see some decrease in darkness of brown spots if a 2% concentration of Hydroquinone in the form of a salve is applied twice daily over a period of 6 weeks. A lotion such as "GeGe Lotion" with a lesser amount of Hydroquinone would be less effective (Tr. 49).

Stretch marks are areas of perceptible change in the texture and appearance of the skin. In over 95% of the cases of stretch marks they are lighter than the surrounding skin. GeGe Lotion has no effect on a stretch mark that is lighter than the surrounding skin (I.D., F.F. 6, 11, 13).

With this background the exceptions taken by Respondent are considered in the order presented.

"I. There is no factual basis in the initial decision (nor in the evidence) supporting the ALJ's finding that the advertisement makes the 'representations concerning "GeGe Lotion" substantially as characterized in paragraph III of the complaint.'"

Respondent contends that the Initial Decision contains no findings or citations from the advertisement to support the general finding or conclusion that the representations alleged in the complaint were made. Respondent cites 5 U.S.C. § 557(c)(A), 39 C.F.R. § 952.24(a)( and Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C. Cir. 1970), cert. denied 403 U.S. 923 (1971), as requiring findings or citations from the advertisement to support the ultimate finding or conclusion with respect to the disputed representations of paragraph III of the complaint.

Respondent admits the representations alleged in paragraphs III(A) (as modified in the Initial Decision) and III(C), but denies the existence of the representations alleged in paragraphs III(B) and III(E), and further denies the materiality of the representation alleged in paragraph III(D).

The remedy sought by Respondent for the alleged deficiency in the Initial Decision is the reversal of that decision or a remand to the ALJ for further findings. Respondent recognizes that the deficiencies could be corrected by the Judicial Officer but contends that because the Judicial Officer is appointed by the Postmaster General he does not act as an independent fact finder.

The treatment of the disputed representations, paragraphs III(B) and (E), in the Initial Decision is rather cursory, but not violative of the cited statute or regulation. Under the criteria of the Greater Boston case cited by Respondent, as well as the cases cited by Complainant, Union Mechling Corp. v. United States, 566 F.2d 722 (D.C. Cir. 1977); Alabama Association of Insurance Agents v. Board of Governors of the Federal Reserve System, 533 F.2d 244 (5th Cir. 1976); and Hoving Corp. v. FTC, 290 F.2d 803 (2d Cir. 1961), a decision will not be disturbed if it can be determined that the presiding officer took a "hard look at the issues with the use of reasons and standards," or the basis for the decision is obvious from the record. Under either test the Initial Decision should not be disturbed on appeal. A review of the Initial Decision, particularly the comments in paragraph 1 of the Conclusions of Law concerning the use of the term "condition" in paragraph III(A) of the complaint, and Findings of Fact No. 2, indicates that a hard look was taken at the representations. Further, the language of the advertisement, which serves as the basis of each paragraph of the complaint, is quoted in the complaint itself. It is reasonable to conclude, particularly from Findings of Fact No. 2, that the Administrative Law Judge found that the allegations of the complaint are supported by the language quoted in each of the paragraphs of the complaint.

However, as a matter of policy the pertinent portions of the advertisement which are the basis for a finding that disputed representations were made should be specifically referenced in an Initial Decision. In lieu of remanding the matter to the Administrative Law Judge, the language of the advertisement which supports the finding will be considered in this opinion by the Judicial Officer who is an independent officer charged with the authority and responsibility for finally deciding cases arising under 39 U.S.C. § 3005.

Paragraph III(B) of the complaint alleges that Respondent's advertisement represents that Respondent's "product will cause 'stretch marks' to be so improved that they will no longer be obvious and/or noticeable when the user wears revealing clothing." That Respondent's advertisement makes this representation is reasonably inferred from the bold heading of the advertisement which states:

"I Was So Ashamed Of My Ugly Stretch Marks, I Was Embarrassed To Wear A Bathing Suit...then I tried GEGE LOTION. In just 1-week I could see a difference. The marks became LIGHTER and began to Fade." coupled with the language appearing in capital letters in the

right-hand column of the advertisement:

"NOW, BE BEAUTIFUL IN THE BEDROOM...OR AT THE BEACH. ORDER NEW, IMPROVED, GEGE LOTION TODAY. DON'T DELAY." The pictures showing women in two-piece bathing suits followed by the caption "IF THESE PROBLEM AREAS ARE A SOURCE OF EMBARRASSMENT TO YOU, THEN IT'S TIME YOU TRIED GEGE LOTION." also support the allegation of the complaint.

The language to support the allegation of paragraph III(E) of the complaint, that Respondent's advertisement represents GeGe Lotion will improve stretch marks after one application, is found in the language attributed to a purportedly satisfied customer referred to as "File No. 81776" which states in part:

"...I must tell you that after using the lotion one time, it has really worked wonders for me."

From the quoted text of the advertisement, and its pictures, as well as the tenor and thrust of the remainder of the advertisement, I find that Respondent has made the representations alleged in paragraphs III(B) and (E) of the complaint.

The only remaining issue raised by Respondent's first exception relates to the materiality of the allegation of paragraph III(D) of the complaint. The Initial Decision concludes that the representation alleged in this portion of the complaint is material. This conclusion is proper and supported by the reason given, which is "because of the importance which our society attaches to all aspects of physical appearance." (Conclusion of Law No. 3)

From a review of the record I find that the advertisement which is the subject of the complaint makes the material representations concerning GeGe Lotion substantially as characterized in paragraph III of the complaint.

"II. The ALJ erroneously concluded that GEGE

Lotion would not improve the appearance

of uneven, unsightly discoloration of the

skin, commonly known as stretchmarks."

Respondent argues that because the expert witnesses agreed that appearances are subjective, the Complainant cannot prove through testimony of a medical doctor that appearance will not be improved by use of GeGe Lotion and similarly Respondent cannot prove the truth of the proposition. Respondent further argues that the problem is compounded by the construction of the term "stretch mark" as not including the surrounding areas of the skin.

Although the witnesses did testify that appearance is subjective, the context in which this testimony was given convinces me that the witnesses were referring to a possible placebo effect of the application of a product (Tr. 94, 97). The testimony reasonably construed seems to be that there is no actual improvement in appearance but because of the placebo effect someone might think "something is happening" (Tr. 73, 93, 96). The placebo effect of a product will not be considered in determining whether a misrepresentation has taken place (Stauffer Laboratories, Inc. v. FTC, 343 F.2d 75 (9th Cir. 1965).

The conclusion in the Initial Decision that the use of GeGe Lotion would not improve the appearance of stretch marks is supported by the evidence in the record (I.D., F.F. 3, 5, 6, 7, 8, 9, 11, 13). Furthermore the failure of the Administrative Law Judge to consider the surrounding skin areas was not improper in view of the representations of the advertisement which clearly and unequivocally, from the bold headlines throughout the entire text, refers specifically to stretch marks. Even if the surrounding areas were to be considered the evidence does not establish anything more than a theoretical possibility that the product would have an effect on this adjacent skin (Tr. 96). Moreover, there is evidence that the effect on the adjacent skin could make the entire area more noticeable (Tr. 101). Accordingly the conclusion that GeGe Lotion will not improve the appearance of stretch marks is affirmed.

"III. The ALJ erroneously concluded that GeGe Lotion

would not cause stretchmarks to be so improved

that they would no longer be obvious and/or

noticeable when the user wears revealing clothing."

Respondent argues that the same facts which show that GeGe Lotion will improve the appearance of stretch marks and the surrounding skin establishes that the product will cause stretch marks to be so improved in appearance that they will no longer be obvious and/or noticeable when the user wears revealing clothing. I have previously addressed Respondent's argument with respect to the appearance of stretch marks and concluded that GeGe Lotion will not improve their appearance. The findings of the Initial Decision, particularly Findings 3, 5, 6, 7, 8, 9, 11, 13, which are supported by the evidence in the record support the conclusion that GeGe Lotion will not cause stretch marks to be so improved they will no longer be obvious and/or noticeable.

"IV. The ALJ erroneously concluded that the alleged

representation that GeGe Lotion is more effective

'than just an ordinary cream or lotion' and will

'actually do the job' was a material misrepresentation;

thereafter, the ALJ compounded the error by finding

that the representation was materially false as a matter

of fact."

Respondent contends that the words of the advertisement on which paragraph III(D) of the complaint is based are permissible puffing and not a material misrepresentation which should subject Respondent to the harsh sanctions of 39 U.S.C. § 3005. According to Respondent the test to determine whether a representation is materially false is whether the representation standing along would induce a postal patron to part with his money.

The representation that is the subject of paragraph III(D) of the complaint is: the product is more effective than other products and will achieve the results otherwise promised in the advertisement. Because of the importance society attaches to physical appearance this representation would induce a reader to purchase the product.

The Initial Decision relied on the testimony of Complainant's expert in reaching the result that GeGe Lotion would be no more effective than an ordinary cream (I.D., F.F. 12). Respondent takes issues with the Administrative Law Judge's reliance on the testimony of this witness and argues that the Administrative Law Judge should have accepted the testimony of Respondent's expert. Great weight should be placed on the presiding officer's conclusion with regard to the credibility of a witness. Moreover, the testimony of Respondent's witness is equivocal on this point whereas Complainant's witness is more positive. Therefore, without regard to the presiding officer's view, based upon an independent review of the evidence I would reach the conclusion that the GeGe Lotion would not be more effective than an ordinary cream in achieving the results promised.

"V. The ALJ erroneously concluded that GeGe Lotion

would not improve 'stretchmarks' after one

application."

The testimony of Respondent's own witness does not establish that the use of GeGe Lotion would improve stretch marks after one application (Tr. 96, 97). I am persuaded by the testimony of both expert witnesses that one application of GeGe Lotion will not improve stretch marks (Tr. 51, 52, 96).

CONCLUSION

Respondent's exceptions to the Initial Decision are disallowed for the reasons stated herein and that decision is hereby affirmed. A mail stop order under 39 U.S.C. § 3005 is being issued contemporaneously with this decision.