In the Matter of the Complaint Against

THE HOUSE OF RENEE,
1 Wolf's Lane at
Pelham, New York 10803,

ADVANCED BEAUTY PRODUCTS,
1 Wolf's Lane at Pelham,
New York 10803,

FOREVER BEAUTIFUL,
1255 Post Street, Suite 609 at
San Francisco, California 94109,

BEAUTY INNOVATIONS,
1255 Post Street, Suite 609 at
San Francisco, California 94109,

SPECIALTY BEAUTY COMPANY,
1 Wolf's Lane at
Pelham, New York 10803

P.S. Docket No. 10/9

Edwin S. Bernstein Administrative Law Judge

APPEARANCE FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Law Department
U.S. Postal Service
Washington, D.C. 20260

APPEARANCE FOR RESPONDENTS:
Lee H. Harter, Esq.
2256 Van Ness Avenue
San Francisco, CA 94109

BEFORE: Judge Edwin S. Bernstein

INITIAL DECISION

Complainant, United States Postal Service alleged and Respondents denied that Respondents are engaged in conducting a scheme or device to obtain money or property through the mail in violation of 39 U.S. Code 3005. The November 24, 1980 Complaint named The House of Renee and Advanced Beauty Products as Respondents. Forever Beautiful, Beauty Innovations and Specialty Beauty Company were added by subsequent orders.

The Complaint alleged that Respondents misrepresented that GeGe Lotion:

1. Will remove stretch marks from the stomach, thighs, hips, breast and buttocks of users of the product;

2. Will remove stretch marks from the bodies of users of the product; and

3. Is not an ordinary creme or lotion but is an effective treatment for stretch marks.

The Answer included affirmative defenses of laches and "Statute of Limitations." At the March 4, 1981 hearing in San Francisco, California, Dr. Karl J. Kramer testified for Complainant and Dr. Peter A. Pollat testified for Respondents. Both witnesses are dermatologists who have excellent credentials. They agreed in many respects. Dr. Kramer defined a stretch mark as a linear lesion or abnormality of the skin which usually begins as a long purplish or reddish lesion and over a period of months to years fades to a whitish or lightish appearing line. At first it may be elevated but with time it will generally flatten. The skin in the area of the stretch mark will have a wrinkled appearance. (Tr. 24). Dr. Pollat gave a similar definition. (Tr. 73, 74). The witnesses agreed that stretch marks can be caused by pregnancy, adolescence, excessive weight loss or gain or other medical conditions. (Tr. 28, 73). Both witnesses knew of nothing that would change the structure or appearance of stretch marks. (Tr. 33,76,81,89). GeGe Lotion contains hydroquinone. This interferes with the production of melanin. (Tr. 33,34,76,77). Other ingredients include titanium dioxide, which has a whitish color, and ferric oxide, which has a tanish or reddish color. (Tr. 34,83).

Dr. Kramer stated that the lotion will have no permanent or temporary effect on the underlying structure or causes of stretch marks. (Tr. 38). Hydroquinone lightens an area to which it is applied. However, Dr. Kramer stated that it will lighten the area surrounding the stretch marks as well as the stretch marks. Since the area surrounding the area to which the lotion is applied will then be darker, this will create a unattractive contrast. (Tr. 51, 58,59). Dr. Kramer stated that titanium dioxide and ferric oxide, which give the lotion color, could cover the stretch marks with pigments. However, the directions state that the lotion should be applied until absorbed. If applied until absorbed, the lotion will not change the skin's pigment or act as a covering lotion. (Tr. 38,52).

Dr. Kramer stated that his recommended treatment for stretch marks is to reassure the patient they will improve and that their reddish-purplish color will become less pronounced with time. (Tr. 58). His experience is that most patients hope for a cure for stretch marks and probably would use a product so represented.

Dr. Pollat agreed that GeGe Lotion will not remove stretch marks but stated that its hydroquinone may lessen the pigment in some areas. (Tr. 76). He agreed with Dr. Kramer that there is nothing available to remove or effectively treat stretch marks (Tr. 81) and that titanium dioxide and ferric oxide are shade ingredients. (Tr. 83). He stated that time may help stretch marks; that de does not prescribe any product for stretch marks; and that he does not use GeGe Lotion or any other product for stretch marks in his practice. (Tr. 89).

FINDINGS OF FACT

1. The Use of the Mails

I find that Respondents solicit money and property by mail in their sale of GeGe Lotion. All of Respondents' advertisements that were admitted into evidence contain an order form which invites the prospective customer to remit a check or money order through the mails to purchase GeGe. (CX-1-3, 6-9).

2. The Advertising Representations

I also find that Respondents' advertisements make the represen- tations alleged in Paragraph 3 of the Complaint. At the hearing, Respondents' counsel moved to dismiss the Complaint on the ground that Respondents did not make these representations. I denied that motion and gave my reasons on the record. (Tr. 18-19). Headlines in Respondents' advertisements such as "At last...Your Stretch Mark Problems Gone For Good" (CX-1,6,8) and "I Was So Ashamed Of My Ugly Stretch Marks...I Was Embarrassed To Wear A Bathing Suit. Then I tried GeGe Lotion. In just one week I could see a difference. The marks became Lighter and began to fade ." (CX-2,3,7), create the impression that GeGe Lotion will remove stretch marks and is an effective treatment for stretch marks.

3. Stretch Marks and GeGe Lotion

A stretch mark is a linear lesion or abnormality of the skin, which usually begins as a long purplish or reddish lesion and over a period of months to years fades to a whitish or lightish appearing line. At first it may be elevated, but with time it will generally flatten. The skin in the area will have a wrinkled appearance. Stretch marks can be caused by pregnancy, adolescence, excessive weight loss or gain, or other medical conditions. Neither GeGe Lotion nor any other product will remove or effectively treat stretch marks. GeGe contains hydroquinone. This will lighten the area to which it is applied. However, hydroquinone will lighten the area around the stretch mark as well as the stretch mark itself. This will not improve the appearance of the stretch mark. GeGe also contains titanium dioxide until absorbed, these ingredients will not change the skin's color or act as a covering lotion. There are no other ingredients in GeGe which effect skin color or appearance.

CONCLUSIONS OF LAW

In the leading case, Donaldson v. Read Magazine, Inc ., 333 U.S. 178 (1948), the Supreme Court stated that the purpose of mail fraud orders is to prevent future injuries to the public by denying the use of the mails to aid in fraudulent schemes. In determining whether an advertisement is misleading, a court must analyze the advertisement's impact upon an ordinary reader, not just upon educated or suspicious persons, since this law was enacted to protect trusting as well as suspicious individuals. The Court held:

"Advertisements as a whole may be completely misleading although every sentence separately considered is literally true. This may be because things are omitted that should be said, or because advertisements are composed or purposely printed in such a way as to mislead."

Similarly, in Borg-Johnson Electronics, Inc. v. Christenberry , 169 F. Supp, 746, 751 (S.D.N.Y. 1959), the Court quoted the following rule:

"[E]ven if an advertisement is so worded as not to make an express misrepresentation, nevertheless, if it is artfully designed to mislead those responding to it, the mail fraud statutes are applicable." to the same effect, in Vibra-Brush Corp v. Schaffer , 152 F. Supp. 461, 465 (S.D.N.Y. 1957), the Court held:

"It is not each separate word or a clause here and there of an advertisement which determines its force, but the totality of its contents and the impression of the entire advertisement upon the general populace."

Similarly, in American Image Corp. v. United States Postal Service , 370 F. Supp. 964 (S.D.N.Y. 1974) the Court held:

"The cases are clear that such advertisements are to be viewed not with a lawyer's eye to 'fine spun distinctions' but with an eye to their over-all effect on the average reader."

Also, in Gottlieb v. Schaffer , 141 F. Supp. 7, 17 (S.D.N.Y. 1956), the Court held, "Nor do the disclaimers inserted inconspi- cuously in the sales literature, unsay what is said elsewhere..."

Proof of actual deception is not required. In Farley v. Heininger , 105 F. 2d 79, 84 (D.C. Cir. 1939), the Court stated,

"The decisive factor therefore, is not whether 'anyone complains of fraud, or was in fact defrauded', but whether the mails are being used to project a scheme which may result in obtaining money from members of the public by means of false and fraudulent statements."

In that case, the Court also held that a mail stop order should be issued even if the advertiser promised to refund the purchase price if the article was unsatisfactory.

In determining the totality of an advertisement a court will examine inferences. For instance, in Aronberg v. Federal Trade Commission , 132 F. 2d 165, 168 (7th Cir. 1942) the Court stated:

"The term 'relief' is not of definite connotation or entirely free from ambiguity; in a common sense, it connotes permanent removal of organic or functional disturbances, as distinguished from alleviation of discomfort."

The Court continued, "A representation that a medicine is 'for' or a 'treatment for' a disorder is equivalent to labelling it 'as a cure or remedy'."

Applying these principles to the facts, I find that the statement in Respondents' advertisements, (CX-1 and others) "At Last...Your Stretch Mark Problems Gone For Good]" in huge letters above the copy of the advertisement conveys the impression to an ordinary reader that GeGe Lotion will remove and effectively treat stretch marks. This claim was reinforced by the next statement, "If you're ashamed of ugly Stretch Marks, and really want to do something about them, then it's time you tried GeGe Lotion]" Then there is a testimonial, "Then I tried GeGe Lotion. In just one week, I could see the difference. The marks became lighter and began to fade. It certainly worked wonders for my skin." Later the advertisement contains the words "CAUTION; DO NOT BE FOOLED BY IMITATIONS] GeGe Lotion truly works. It has been praised by satisfied users the world over."

Another of Respondents' advertisements (CX-2), contains, in large headlines, the words "I Was So Ashamed Of My Ugly Stretch Marks, I Was Embarrassed To Wear A Bathing Suit...then I tried GeGe Lotion. In just one week I could see the difference] The marks became lighter and began to fade. Your lotion has really worked wonders for my skin." Further down the advertisement reads in large capital letters, "THE RESULTS WERE ASTOUNDING] IN JUST A FEW SHORT WEEKS THOUSANDS OF WOMEN WERE USING 'GeGe' AND MANY WERE RECOMMENDING IT TO THEIR FRIENDS." Toward the bottom of that advertisement it states in large type, "Now, be beautiful in the bedroom...or at the beach] Don't delay-Order GeGe Lotion toady."

I find that this language represents to the ordinary reader that GeGe will remove or significantly improve the appearance of stretch marks. The testimony of both Complainant's and Respondents' dermatologists is to the contrary. GeGe does not remove stretch marks. It will lighten skin, but it will lighten skin around the stretch marks as much as the stretch marks. This tends to make stretch marks no less conspicuous then they were before. Also GeGe applied as directed until absorbed is not a covering agent. Thus, GeGe neither removes nor significantly improves the appearance of stretch marks. Therefore, the advertisements are false and misleading.

In their post hearing brief, Respondents argue "The testimony shows that most of the 'Problems' with stretch marks is that of appearance, and appearances are not a medical criteria; therefore, both 'experts' testified about matters over which they are not experts." I disagree. The dermatologists testified that there was no medicine known to science which will cure stretch marks. They also testified as to the effect of the ingredients in GeGe Lotion on the skin's color. As dermatologists, knowledgeable about stretch marks and the effects of these ingredients, they were qualified to testify on these matters. Also, Respondents argued that testimony should have been taken as to the meaning of these advertisements. However, the cases have consistently held that a judge is qualified to determine if the advertisements are misleading by determining their impact on the average, unsophisticated reader.

In their Answer and at the hearing, Respondents raised affirmative defenses of "Statute of Limitations" and laches. However, Respondents' counsel conceded at the hearing that there is no applicable statute of limitations (Tr. 98). Therefore, that defense has no merit.

In order to successfully invoke the doctrine of laches, there must not only be a delay, but a showing that the delay resulted in a distinct disadvantage to the party who asserts the defense. Curtis v. Maryland Baptist Union Association , 176 Md. 430, 5 A 2nd 836, 838, (1939). In dismissing a similar estoppel claim as lacking merit, the Court in Institute for Weight Control v. Klassen , 348 F. Supp. 1304, 1316 (N.J. 1977), explained:

"[I]t could well be argued that for a period since October of 1971, until the commencement of the administrative proceeding now under review, the advertisement in question, subsequently, had been used to considerably enrich the plaintiff, at the expense of a hoodwinked public." Tray Laboratories, Inc. , P.S. Docket 2/17 (1974), cited Institute for Weight Control , in rejecting a laches defense, holding:

"[I]naction on the part of the postal authorities for a period of time is not a basis for failing to protect the public from being mislead by false representations."

This refusal to apply the laches doctrine is consistent with decisions involving other public agencies. Corvallis Sand and Gravel Corp. v. State Land Board , 250 Or. 319, 439 P. 2nd, 575 (1981); United States v. Summerlin , 310 U.S. 414 (1940); Thompson v. United States 312 F. 2nd 516 (10th Cir. 1962).

Most recently laches, was rejected in the U.S. Postal Service v. Athena Products, Ltd. , (N.D.Ga) Civil Action 81-358A (Memorandum Opinion dated March 30, 1981) in which the Court stated:

"The defense of laches is principally a question of the inequity of permitting the claim to be enforced, an inequity founded on some intermediate change in conditions. Bleckley v. Bleckley , 189 Ga 47, 5 S.E. 2nd 206 (1939). Defendant has made no showing of the alleged six months to one year 'delay' in bringing suit has prejudiced it in any way, or rendered the ascertainment of the truth in this case difficult. See e.g. , Johnson v. Sears , 199 Ga 432, 34 S.E. 2nd 541 (1945). The necessity of defending a suit is not the type of 'prejudice' against which the defense of laches protects."

Respondents have not shown how laches applies and have not shown that they were harmed by any alleged delay. Therefore, that defense does not apply.

I conclude as a matter of law, that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations within the meaning of Section 3005 of Title 39, U.S. Code. Therefore, a mail stop order substantially in the form attached should be issued against Respondents.