In the Matter of the Complaint Against

NATIONAL MARKETING COMPANY
127 Main Street and
P. O. Box 244 at Dundee, IL 60118

P.S. Docket No. 7/46;

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
H. Richard Hefner, Esq.
Consumer Protection Division
Law Department
U. S. Postal Service 475 L'Enfant Plaza West
SW Washington, DC 20260

APPEARANCE FOR RESPONDENT:
Willard B. Widerberg, Esq.
6 North State Street Elgin, IL 60120

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of Chief Administrative Law Judge William A. Duvall in which Judge Duvall holds that, with regard to the sale of its "Typing or Addressing Envelopes" program, Respondent is engaged in a scheme or device for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

On April 6, 1979, the Consumer Protection Division, Law Department United States Postal Service (Complainant) filed a complaint alleging that National Marketing Company (Respondent) is engaged in a scheme for obtaining money through the mail in violation of 39 U.S.C. § 3005. Specifically, section 3 of the complaint alleges that Respondent's advertising expressly or impliedly represents to the public in substance and effect that:

"(a) Respondent has available employment which will enable readers of his advertisement to 'EARN up to $200 weekly part time, typing or addressing envelopes, ...'.

(b) Respondent has developed a program by which persons are assured they will '...earn $500.00 to $1000.00 per week, starting anytime in the near future?'

(c) Purchasers of Respondent's program will earn the income referred to in subparagraph (b) while putting in '...approximately 2 hours work per day]'

(d) The 'Manual' being sold by Respondent will assure the purchaser of substantial financial returns from conducting a mail order business. (e.g., 'I can show you how to earn $50,000 next year, and only work 2 hours per day]' 'I believe before you can make $500,000, you must learn how to make $100,000, and before you can make $100,000, you must learn how to make $50,000.' etc.)"

The complaint further alleges that these representations are materially false.

At a hearing held on the complaint, Complainant's primary witness was Mr. Robert Bobowski, who possesses approximately thirty years of experience in the advertising and merchandising industry (Tr. 16). On the basis of his experience, which was reviewed in some detail (Tr. 16-35), he was accepted as an expert witness in the field of marketing through the mail (Tr. 34).

Respondent presented the testimony of the co-owners of Respondent's business who testified with regard to the procedures followed and the success realized in Respondent's business operations (Tr. 82-109).

Judge Duvall concluded that Respondent makes the representations alleged, that such representations are material and that they are false. Accordingly, he concluded that Respondent is engaged in activities which are in violation of 39 U.S.C. § 3005.

RESPONDENT'S EXCEPTIONS

TO THE INITIAL DECISION

Respondent has taken 9 exceptions to the Initial Decision. The exceptions are initially set forth in Respondent's brief in what it identifies as its "subject Index." The exceptions are further addressed in the body of Respondent's brief. Respondent's exceptions and arguments in support thereof are addressed individually below. The exception quoted is taken from Respondent's Subject Index.

EXCEPTION 1

"Exception is taken to the finding that Respondent is engaged in a scheme or device for obtaining remittances of money through the mail in Paragraph 2 of Page 6 of the Initial Decision."

By this exception, Respondent apparently objects to the application of the term "scheme or device" to its program since there is no evidence of intentional misrepresentation. This argument has been considered in other cases and found to be without merit. See Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. 1980) and the cases cited therein. As used in 39 U.S.C. § 3005, the terminology "scheme or device" applies to innocent as well as intentional misrepresentations. A "scheme or device" exists if a business seeks remittances of money through the mail by means of a plan or program involving a misrepresentation. Accordingly, Respondent's first exception is without merit.

EXCEPTION 2

"Exception is taken to the finding that the ad referred to in the first full paragraph of Page 7 of the Initial Decision offers employment."

This exception refers to that portion of the Initial Decision which states:

"...The language used in this advertisement naturally and logically leads the reader to believe that Respondent is offering employment of the type and for the pay advertised..." (I.D. p. 7.)

Contrary to this finding, a review of Respondent's advertising is not persuasive that an offer of employment is made. Nowhere do the advertisements use the term "employment." Rather, they specifically state that what is being offered is a "mail order business of your own" and that Respondent will provide " s pecific details on how to start and operate your own mail order business from your kitchen table..." (CX 3). This language considered with the entire contents of Respondent's advertisements would not lead an ordinary reader to conclude that employment was being offered. See Karfax and Karfax Industries, P.S. Docket No. 7/36 (I.D. 1979, aff'd P.S.D. 1979). Accordingly, Respondent's Exception 2 is well taken.

EXCEPTION 3

"The Respondent takes objection to all findings based upon the testimony of Mr. Bobowski and contends further that he was not qualified as an expert in this case, and his testimony should be stricken."

During the hearing Mr. Bobowski testified as to his knowledge, training and experience in the field of marketing through the mails (Tr. 15-34). Respondent examined the witness concerning his qualifications and at the conclusion of its examination did not object to the witness being considered as an expert in the mail marketing field (Tr. 21-34). Although Respondent now contends that the expert is not qualified as an expert, it has not referred to portions of the transcript which show the qualifications of the witness to be lacking in any respect, nor in its argument has it pointed out why it was improper to allow the witness to give opinion testimony.

The Initial Decision recites the qualifications of Mr. Bobowski and gives references to the transcript of the hearing. A review of the referenced transcript pages and the record as a whole supports the determination that the witness is an expert in the mail marketing field. Therefore, the admission of the testimony of the witness and the reliance placed thereon by the presiding judge was proper. Accordingly, there is no merit to this exception.

EXCEPTION 4

"Respondent takes exception to the use of the words 'assured' and 'assure' in the first full paragraph on Page 14 of the Initial Decision."

Respondent argues that its sales letter does not use the words "assurances, assure, or assured" and that " i t is incredible that the findings could contain such language." The portion of the Initial Decision to which Respondent takes exception is the recitation of Mr. Bobowski's opinion that Respondent has not developed a program which would assure the results represented in Respondent's literature.

The Initial Decision correctly summarizes the witness' opinion testimony (see Tr. 42). Nevertheless, Respondent is correct that its sales literature does not specifically use the words: "assurances, assure, or assured." However, the interpretation of its sales literature is not confined to a review of the literal meaning of the specific words used, but includes the inferences that may be reasonably drawn from that language and the effect they would most probably produce on ordinary minds (see cases cited at p. 6 of I.D.). Respondent's sales literature (CX 1, 3 and 6; I.D. pp. 7-8) is replete with language which would most probably be understood by ordinary minds as constituting an assurance of specified earnings. In Complainant's Exhibits 1 and 6 it is stated:

"Earn up to $200 weekly..." (CX 1)

"Earn $200 weekly..." (CX 6)

Complainant's Exhibit 3 includes the following language:

"Would you like to earn $500.00 to $100.00...?"

* * *

"By the way, there will be a certain amount of time commitment on your part to earn this kind of money..."

* * *

"National Marketing Company also has but one product. A manual outlining specifically how you may accomplish the exact same goal] '$500.00 to $1000.00 per week while working only 2 hours per day'"

* * *

"...I can show you how to earn $50,000 next year, and only work 2 hours per day]"

* * *

"I've done it, and so can you with the instructions we provide]"

The quoted language read in context with the remainder of Respondent's advertising clearly implies an assurance of specified earnings. Accordingly, there is no merit to this exception.

EXCEPTION 5

"Respondent takes exception to the finding that the expert witness testifies for the whole world as indicated in the last paragraph, beginning on Page 15, and ending on Page 16 of the Initial Decision."

The portion of the Initial Decision cited by Respondent sets forth the Chief Administrative Law Judge's conclusion that Mr. Bobowski's opinions represent the consensus of opinion of informed persons in the mail advertising and marketing industry. That conclusion is supported by the witness' testimony (Tr. 46, 47). The witness recognized that some individuals in the field might vary on some points but stated that his testimony is in accord with standardized techniques and current literature in the field. Respondent offered no evidence to rebut this testimony. A consensus of opinion may properly be based on the uncontradicted testimony of an expert witness. See U.S. Health Club Inc. v. Major, 292 F.2d 665 (3rd Cir. 1961); Owen Laboratories Inc. v. Schroeder, 284 F.2d 445 (7th Cir. 1960); Hauser, Inc., P.S. Docket No. 7/77 (I.D. 1979, aff'd P.S.D. 1980); Health Guard, P.S. Docket No. 6/114 (P.S.D. 1979). Thus, there is no merit to this exception.

EXCEPTION 6

"The Respondent takes exception that Respondent's ad is false in regard to employment of prospective customers as stated in the Initial Decision on Page 19, third full paragraph."

Respondent argues that the word "employment" is not used in its advertising and it claims that neither is employment implied by the words used.

This exception is essentially the same as Exception 2 which has been found to have merit. Accordingly, this exception also has merit.

EXCEPTION 7

"The Respondent takes exception to the finding that they make any assurances that the average person is going to be financially successful as stated in the last paragraph beginning on Page 20 and ending on Page 21 of the Initial Decision."

In connection with this exception, Respondent states that it would like to be shown the portions of its advertising which give assurances that an average person is going to be financially successful.

This exception is essentially the same as Exception 4. In connection with that exception it was concluded that, by means of implication and inference, Respondent does make representations which would most probably be understood by those purchasing Respondent's plan as assurances of financial success. The language relied on and the legal precedents applicable to such an interpretation are discussed or referred to under Exception 4. Accordingly, this exception is without merit.

EXCEPTION 8

"The Respondent takes exception to the finding

of the second full paragraph on Page 21 of the

Initial Decision that the business requires two

partners, or any employees, and, also, the finding

that a novice cannot earn $500 - $1,000 per week.

*Without excepting thereto, the Respondent excepts

that there was no evidence or mention made of any

information from an official publication of the

U.S. Government Bureau of Labor Statistics as

referred to on Page 21, the last paragraph of the

Initial Decision, and Page 22 throughout, and the

finding in the first and second paragraph of Page

23, which is in violation of the Evidence Rules,

Section 952.18 e of Title 39 of the Code of Federal

Regulations."^1/

In connection with this exception, Respondent argues:

"Taking the entire evidence on Mr. Edin and Mr. Wickboldt Respondent's owners to find that the functions require both of them to run this organization is incredible and, further, since they have chosen to be a partnership as testified to and pursuant to the inadmissible evidence upon which the Judge based this Initial Decision as referred to in the Subject Index, and particularly concerning the age of this business, that of less than six months, considering the entire operation is making $46,800.00 net; which is divided between two partners as testified to, the finding is without any merit and, furthermore, the Respondent objects to the use of the word 'novice' in said finding."

The Initial Decision states:

"...the operation of this business requires, at least briefly, the managerial skills of the two partners, plus the clerical skills of three full-time and two part-time employees..." (I.D. p. 21.)

This portion of the Initial Decision is based on the testimony of the two partners of Respondent (Tr. 89, 92, 103, 105; See I.D. p. 18). Although the partners did not testify that the business "requires" both of their managerial skills, they did testify that each briefly contributes their managerial skills to the operation of the business on a daily basis for one partner, and a weekly basis for the other partner (Tr. 89, 103). The testimony of the partners supports the conclusion that 5 employees are needed to operate the business (Tr. 105).

With regard to the exception pertaining to the use of the word "novice," one of Respondent's partners stated that persons already engaged in a business probably would not be interested in the type of business Respondent offers (Tr. 107). When this statement is coupled with the representation in Respondent's advertisements that no experience is necessary, it is apparent that Respondent's literature is addressed to one lacking experience, such as a novice.

With regard to the objection to the reference to data obtained from the Bureau of Labor Statistics, reliance on sources outside the record, such as public records, for facts not subject to reasonable dispute falls within the evidentiary principles of judicial notice.

See Cosvetic Laboratories, P.S. Docket No. 7/38 (P.S.D. 1980). In its appeal Respondent has not argued that the data is inaccurate nor has it presented contrary evidence prior to the final agency decision (see 5 U.S.C. § 556(e)). Therefore, reliance on such data, while not advisable or appropriate in all cases, was not improper in this instance.

EXCEPTION 9

"The Respondent excepts the findings of fact, namely numbers 1, and 2, as to the use of the words 'scheme or device' and further excepts that their advertising is a misrepresentation of any sort as set forth in no. 3 of the findings, Pages 23 and 24, and also excepts that the representations of the Respondent as to the finding on Page 24, no. 4, are material misrepresentations as well as except the finding in no. 5 on Page 24 that the representations of the Respondent are false."

Respondent's position with regard to the term "scheme or device" has previously been addressed in connection with Exception 1 and found to be without merit. Its arguments relating to an offer of employment and an assured substantial income have been addressed in connection with Exceptions 2, 4, 6 and 7. The realization of substantial income through approximately 2 hours of work a day, is addressed in detail in the Initial Decision at pages 10, 13, 14, 21-23 and Respondent has presented no evidence or arguments which are persuasive that the conclusion reached by the Chief Administrative Law Judge in this regard is incorrect.

With regard to the question of whether the representations are materially false, a Judge is qualified to determine the effect of representations on the minds of ordinary men and whether such representations are materially false. See Standard Research Laboratories, supra, at page 13 and the decisions cited therein. The evidence in the record supports the conclusions reached by the Chief Administrative Law Judge with the exceptions noted in this decision. Accordingly, Exception 9 is without merit.

CONCLUSION

After consideration of Respondent's exceptions and the record as a whole, it is concluded that the Initial Decision, correctly holds that Respondent is engaged in a scheme or device for obtaining money through the mail by means of materially false representations. Accordingly, Respondent's appeal is denied and a remedial order under 39 U.S.C. § 3005 is being issued contemporaneously with this decision.

1/ The purpose or meaning of the asterisk at the beginning of the 6th line of the quote is unknown.