In the Matter of the Complaint Against

TELEX & twx DIRECTORY TELEX & twx DIRECTORY CENTER,

and

DIRECTORY PROCESSING CENTER
P. O. Box 4054
at Beverly Hills, CA 90213

P.S. Docket Nos. 13/6

04/01/83

Cohen, James A.

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.;
James A. Harbin, Esq.;
Consumer Protection Division,
Law Department,
United States Postal Service,
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENT:
Jerry L. Newton, Esq.; Newton & Newton,
415 North Camden Drive, Suite 100,
Beverly Hills, CA 90210-4428

POSTAL SERVICE DECISION

Respondent has appealed from an Initial Decision of an Administrative Law Judge which holds that, with regard to the sale of its TELEX & twx DIRECTORY, Respondent is engaged in a scheme for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

On December 8, 1981, the Consumer Protection Division, Law Department, United States Postal Service (Complainant), filed a Complaint which alleges that Respondent is engaged in a scheme or device to obtain money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005. Specifically, Complainant alleges:

"3. By means of such materials and others similar thereto, Respondent represents, directly or indirectly, in substance and effect, whether by affirmative statements, omissions, or implication that:

a. The recipients of the 'renewal notices' have previously authorized their listing in the TELEX and twx DIRECTORY;

b. The amount set forth on the face of the solicitations is owing and due to Respondent;

c. Recipients of the Order Form and Listing Verification who fail to submit a revision or cancellation are obligated to pay for their listing;

d. The TELEX and twx DIRECTORY is a comprehensive directory of subscribers to major teletype networks; and

e. The TELEX and twx DIRECTORY contains all necessary information to communicate with teletype subscribers.

"4. The aforesaid representations are materially false as a matter of fact.

"5. The materials described in Paragraphs 1 and 2 constitute matter within the purview of 39 U.S.C. § 3001(d) and fail to contain notice in the forms prescribed by that Section and by the regulations promulgated thereunder.

"6. The mailing of matter which is non-mailable under Section 3001(d) of Title 39 constitutes prima facie evidence that the mailer is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations."

In its Answer, Respondent admitted making certain of the representations alleged in paragraph 3 of the Complaint, but denied that any of the representations are false or in violation of 39 U.S.C. § 3001 or § 3005. Respondent also raised four affirmative defenses. At a hearing before an Administrative Law Judge, Complainant presented the testimony of Mr. James W. Collison, Jr. James M. Jordan, Mr. Julius Y. Kochmann, Ms. Gladys H. Brooks, Ms. Frances Poff, and Postal Inspectors Alice N. Elberson, Larry B. Johnson and Michael Crivelli. Respondent presented the testimony of Mr. Charles R. Abbott, Dr. Burton H. Marcus, Postal Inspector Wayne Collier and Mr. Raymond Milo. On the basis of the record presented, the Administrative Law Judge found that Respondent makes the representations alleged in paragraphs 3a - e of the Complaint and that they are materially false. He also concluded that Respondent's solicitations are nonmailable under 39 U.S.C. § 3001, as alleged in paragraphs 5 and 6 of the Complaint and as such are in violation of 39 U.S.C. § 3005. With respect to Respondent's affirmative defenses, the Administrative Law Judge concluded that they were without merit, unsupported by the evidence and/or without statutory or factual foundation.

RESPONDENT'S EXCEPTIONS TO THE INITIAL DECISION

Respondent argues that the Administrative Law Judge erred in admitting hearsay evidence into the record and that the decision is not supported by substantial evidence. In connection with the latter argument, Respondent takes exception to the findings of the Administrative Law Judge that its solicitations reasonably could be interpreted or construed as a bill, invoice or statement of account due, and that the allegations contained in paragraphs 3a - e of the Complaint are false. Each of Respondent's contentions are addressed hereafter.

"A. DPC was Denied Due Process Of Law And Was Effectively Prevented From Confronting And Cross-Examining Witnesses When The Administrative Law Judge Admitted Hearsay Evidence"

Respondent argues that except for the actual solicitations and statistical analysis, the evidence offered in support of the allegations of the Complaint, for the most part, consists of the hearsay and conclusory testimony of Ms. Poff and Inspector Johnson. According to Respondent the admission of this testimony has deprived it of its due process right to confront and cross-examine witnesses. Respondent recognizes that the rules of evidence may be relaxed in administrative proceedings and that hearsay evidence may be admissible under some circumstances. However, it contends that the evidence was completely lacking in probative value and reliability and its use in the hearing was fundamentally unfair.

As recognized by Respondent and as is clear from the cases it cites, hearsay evidence, if probative and fairly used, may be admitted in an administrative proceeding. Calhoun v. Bailar, 626 F.2d 145, 148-150 (9th Cir. 1980) and cases cited therein. Moreover, such evidence, if reliable and credible, may serve as the basis for an administrative decision. See Richardson v. Perales, 402 U.S. 389, 407-08 (1971); Calhoun v. Bailar, supra; Hoonsilapa v. Immigration & Naturalization Service, 575 F.2d 735 (9th Cir. 1978). A review of the record supports the conclusion that the Administrative Law Judge did not err in admitting that the testimony of Ms. Poff and Inspector Johnson. The testimony had a tendency to prove the issues in dispute and to some extent corroborated the testimony of the other witnesses presented by Complainant, the documentary evidence admitted into the record and certain of the evidence presented by Respondent. Thus, the testimony was properly admitted into evidence. While properly admitted, the Administrative Law Judge di not place much reliance on the testimony of either witness. Ms. Poff's hearsay testimony was not relied on by the Administrative Law Judge in his findings of fact. Testimony of Inspector Johnson elicited by Respondent on cross-examination was relied on in the findings of fact as part of the evidence establishing the falsity of allegation 3a of the Complaint. As discussed later in this decision we do not rely on Inspector Johnson's testimony. However, no error was committed and no due process rights were violated by the admission of the testimony of either witness.

Accordingly, there is no merit to this exception.

"B. Assuming, Arguendo, The Hearsay Was Properly Received, There Was Still No Substantial Evidence to Support Judge Duvall's Finding

1. "The Test of Substantial Evidence"

Respondent first argues that under 5 U.S.C. § 706 a reviewing court "must hold unlawful and set aside agency action, findings and conclusions found to be unsupported by substantial evidence." Although it is not altogether clear, it appears Respondent is contending that in reviewing an appeal from an Initial Decision the Judicial Officer, like a court, is required to apply the substantial evidence test.

While Respondent is correct in its contention that court review of an administrative decision is based on the substantial evidence test, the same standard is not required to be applied by the Judicial Officer in reviewing an Initial Decision. The Postal Service statute under which an order is sought to be issued in this proceeding, 39 U.S.C. § 3005, authorizes remedial action "[u]pon evidence satisfactory to the Postal Service." This provision does not impose any specific evidentiary standard on the Postal Service, but rather leaves to its discretion the quantity and quality of evidence satisfactory for purposes of issuing a false representation order. See Public Clearing House v. Coyne, 194 U.S. 497 (1904); American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F.Supp. 1180 (E.D.N.Y. 1978); N. Van Dyne Advertising Agency Inc. v. United States Postal Service, 371 F.Supp. 1373 (S.D.N.Y. 1974). In prior administrative proceedings initiated under this statutory provision the preponderance of evidence test has been applied. See e.g., Contemporary Mission, Inc., P.S. Docket No. 8/159 (P.S.D. June 30, 1981); United States Great Lakes Federal Surplus Depository, P.S. Docket No. 7/136 (P.S.D. March 31, 1981); Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. April 4, 1980); Michigan Bulb Co., P.S. Docket No. 7/43 (P.S.D. Oct. 30, 1979); U.S. Zip Code Service, P.S. Docket No. 2/171 (P.S.D. April 15, 1974). This standard is employed both by the Administrative Law Judges in reaching their Initial Decisions and on review of Initial Decisions by the Judicial Officer in issuing the final agency decision.

The preponderance of evidence test has also been held to be applicable in proceedings subject to the Administrative Procedure Act. Steadman v. SEC, 450 U.S. 91 (1981). In Steadman the SEC employed the preponderance of evidence standard in reviewing the decision of an Administrative Law Judge. Interpreting § 5 and 7 of the Administrative Procedure Act, 5 U.S.S. § 554 & 556, particularly § 7(c), 5 U.S.C. § 556(d), the court concluded that the agency decision, which under 39 U.S.C. § 3005 is the decision of the Judicial Officer, ^1/ must not be premised on less than a preponderance of the evidence. ^2/ Steadman v. SEC, supra at 102. Even where a statute specifically prescribed that the initial determination within an agency was to be based on substantial evidence the Court of Appeals for the Fourt Circuit stated: "in the absence of an explicit contrary statement in the [statutory] amendments, we conclude that the Secretary's right of review was not limited to a review merely for substantial evidence. Fairfax Hospital Assoc., Inc. v. Califano, 585 F.2d 602, 612 (4th Cir. 1978). Cf. United States v. Raddatz, 447 U.S. 667, 680 (1980); Universal Camera Corp. v. NLRB, 340 U.S. 474, 492 (1951).

Thus, it is concluded that the proper standard to be applied on review of the Initial Decision in this proceeding is the preponderance of the evidence standard.

"2. There is no Substantial Evidence to Indicate DPC Violated Any Allegation Contained in the Complaint

A. 'Solicitations' vs. 'Invoices'"

Respondent argues the evidence does not support a finding it mailed solicitations in the form of invoices in violation of 39 U.S.C. § 3001. According to Respondent the survey (RXs 20 & 21) conducted on its behalf and presented through the testimony of its witness, Dr. Marcus, supports a finding that its solicitations were interpreted as order forms and not invoices. Respondent also argues that certain of the order forms used are not misleading, and that the fact that no orders were received from the mailing of some of its solicitations further supports its position that a recipient of ordinary mind would not interpret the forms as invoices.

The Administrative Law Judge, relying on the solicitations themselves, the testimony of witnesses who had received the solicitations and the survey conducted by Respondent's witness, concluded that Respondent's solicitations (RXs 3 and 7) are in the form of and reasonably could be construed as a bill, invoice, or statement of account due. He therefore found that such solicitations are nonmailable under 39 U.S.C. § 3001(d) are in violation of 39 U.S.C. § 3005(a). ^3/

Under 39 U.S.C. § 3001, Complainant, in order to establish a prima facie case, need only prove that solicitations are "in the form of and reasonably could be interpreted or construed as a bill, invoice or statement of account due," and that they do not contain the required statutory notice. This determination is to be based on the totality of the solicitations and the impression created in the minds of those to whom they are directed. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Borg-Johnson Electronics v. Christenberry, 169 F.Supp. 746 (S.D.N.Y. 1959); Vibra-Brush Corp. v. Schaffer, 152 F.Supp. 461 (S.D.N.Y. 1957); rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958). This does not mean that the trier of fact is limited to the interpretation which a majority of recipients would place on the solicitations. Rather, the trusting are to be protected as well as the wary. Donaldson v. Read Magazine, supra, at 189. In determining the effect of the solicitations on the ordinary mind, testimony in addition to the solicitations, while admissible, is unnecessary. Vibra-Brush Corp. v. Schaffer, supra.

Using these standards, the exhibits which Respondent claims are not solicitations in the guise of invoices or bills under 39 U.S.C. § 3001 are considered hereafter.

Respondent's Exhibit 3A

Respondent argues that 116,966 of these forms were mailed and only 1,712 paid orders (1.46%) were received. It also argues that the survey conducted on its behalf indicated that the vast majority of those viewing this exhibit believed it to be an order form, not a bill. Thus, it contends it was error to conclude that the exhibit reasonably could be interpreted as a bill, invoice or statement of account due.

The most compelling evidence that Respondent's Exhibits 3A is in the form of or reasonably could be construed as a bill, invoice, or statement of account due, is the exhibit itself. On the face of the exhibit is a prominent red arrow containing the words "PLEASE PAY THIS AMOUNT" and pointing toward a box in which the amount allegedly due is printed. Above the narrow is the statement "Return this form with payment." Two witnesses testified that they construed this exhibit to be an invoice (Tr. 10-11, 66).

The survey results referred to by Respondent also support this conclusion. The survey was conducted by Respondent's witness Dr. Marcus who interviewed persons who were employed in positions in which they would normally receive and open incoming business mail (Tr. 416). When interviewees were asked "what would you do with" Respondent's Exhibit 3A, 7% said they would send it with a check (Tr. 431). When asked "will a bill for the amount due follow this," 22% answered "no because they will pay so a bill wouldn't follow" (Tr. 431). Thus, while a majority of those interviewed did not construe the solicitation as a bill, a sizable number did.

Based primarily on the form itself, but also on the testimony of the two witnesses who received the form and the survey results, it is concluded that Respondent's Exhibit 3A, which does not contain either the statutory or regulatory disclaimer, ^4/ reasonably could be interpreted or construed as a bill, invoice, or statement of account due, by many of those to whom the solicitation is directed.

Respondent's Exhibit 3B

Respondent contends that 113,581 of these solicitations were sent to prospective subscribers and no orders were received. Coupled with the survey results which it says overwhelmingly labeled this an order form, Respondent argues that the evidence establishes that this exhibit is an order form, not a bill, invoice or statement of account due.

This form has the words "ORDER FORM" prominently displayed in red block letters. It contains a "negative option," telling recipients that if they do not respond by cancelling the listing they will automatically be billed. The general appearance is not that of a bill or invoice in that it does not have a place for, or show, an amount due. One of Complainant's witnesses testified that he did not construe the form as an invoice (Tr. 67). The survey indicates that 12% of those interviewed considered it a bill (Tr. 445-46). When asked what they would do with it, 5% said it should be paid (Tr. 446). When asked if another bill would follow, 15% said the form was a bill (Tr. 446).

While some of the individuals surveyed did interpret the form as a bill, the direct witness testimony was to the contrary, and the appearance of the form itself, with the words "ORDER FORM" prominently displayed in red, leads to the conclusion that the form could not be reasonably construed as a bill, invoice or statement of account due.

Respondent's Exhibit 3C

Respondent contends that the failure to receive any orders in response to 95,807 reminder notices mailed, and the survey results which indicated that most people did not consider the mailers to be bills or invoices establishes that the notices do not violate 39 U.S.C. § 3001.

While the survey indicates that, in response to the "what do you do with it" and "will a bill follow" questions, that some interviewees may have considered this exhibit a bill, only 3% directly characterized it as a bill, while 2% considered it a reminder to pay a bill. Two of Complainant's witnesses did not construe this form as an invoice (Tr. 50, 67). The form is headed "ORDER CONFIRMATION FOR 1982 LISTING" and does not show an amount due, have a blank space for an amount due, or in any other way seek payment. Thus, based on the appearance of the form itself, the responses of Complainant's witnesses, and the survey results, it is concluded that Complainant has not established that this form could reasonably be construed as a bill, invoice, or statement of account due.

Respondent's Exhibit 3D

As Respondent points out, these exhibits clearly purport to be and are invoices and do not contain the statutory or regulatory disclaimer. They are sent after no cancellation is received from those tho whom the negative option order forms, Respondent's Exhibits 3B and C, were sent (Tr. 570). In order for these invoices to be mailable under 39 U.S.C. § 3001 it would have to be concluded that an order had been placed. Silence following receipt of the initial solicitation does not constitute an order or an agreement to be billed (See discussion infra.). These exhibits considered in the context of the prior mailings and in the absence of an order or consent to be billed are clearly solicitations in the guise of invoices which are nonmailable under 39 U.S.C. § 3001.

Respondent's Exhibits 7A & B

Respondent argues that these two exhibits are renewal order forms sent to past subscribers and not solicitations in the guise of invoices. According to Respondent the orders received from these mailings, 7.04% with respect to one and 6.7% for the other, were not out of line for mailings sent to past subscribers. Thus, it contends that these exhibits could not be reasonably construed as a bill or invoice.

Both of these forms contain the large red arrow which states "PLEASE PAY THIS AMOUNT" and points to a block containing the amount allegedly due. Above the arrow is the statement "Return this Form with Payment." Neither form contains the statutory or regulatory disclaimer. One of Complainant's witnesses testified that he construed Respondent's Exhibit 7A to be an invoice (Tr. 42). An affidavit was introduced into evidence by Respondent which stated that the declarant had received Respondent's Exhibits 7A & B but did not consider them to be invoices (RX 28). However, the appearance of the two forms, with the red arrow and request for payment of the amount shown so prominently displayed, reasonably could be interpreted or construed, as a bill, invoice, or statement of account due.

Respondent's Exhibit 7C

Respondent contends that the failure to receive any orders in 18,433 mailings, together with the format of the solicitation makes it "impossible" to construe this exhibit as a bill, invoice or statement of account due.

Some of the interviewees in the survey conducted on Respondent's behalf indicated either this exhibit was a bill (4%); that they would pay it or send it to accounts payable (14%); or that a bill would not follow and they would pay from the exhibit (4%) (Tr. 427-28). The appearance of the form is such that there is little to indicate that it is a bill, invoice, or statement of account due. It does contain the negative option language, but that is not sufficient to interpret it as a bill given its overall format. Essentially, it is a card with one paragraph of relatively small print and nothing which might, on a superficial reading, create the impression that it is an invoice. No amount is shown to be due. Accordingly, it is concluded that Respondent's Exhibit 7C could not be reasonably interpreted or construed as a bill, invoice, or statement of account due.

In summary, it is concluded that Respondent's Exhibits 3A1, 3D2, 3D4, 7A and 7B are solicitations which are in the form of and reasonably could be construed as bills, invoices, or statements of account due. The evidence introduced by Respondent to the contrary is not persuasive. Accordingly these solicitations are in violation of 39 U.S.C. § 3001 and 3005(a).

With regard to Respondent's Exhibits 3B, 3C and 7C, it is concluded that Complainant has not established that these solicitations are in the form of and reasonably could be construed as bills, invoices or statements of account due. Although the forms contain other misrepresentations, the finding of the Administrative Law Judge regarding these exhibits is reversed with respect to the allegations contained in paragraphs 5 and 6 of the Complaint.

"B. Fraud [Misrepresentation] Allegations"

Respondent contends that the Administrative Law Judge erred in finding that the representations alleged in paragraph 3 of the Complaint are false. Each of the representations is addressed hereafter.

3a "The recipients of the 'renewal notices' have previously authorized their listing in the TELEX and twx DIRECTORY;"

In the Initial Decision the Administrative Law Judge found that Respondent makes this representation and that it is materially false. This finding was based on the testimony of Postal Inspector Johnson about the reactions of recipients of Respondent's Exhibit 7A and the testimony of Respondent's president, Mr. Milo, that there were 21,500 renewal notices mailed, although there were only 7,000 subscriptions to the previous years directory (I.D. p. 46).

Respondent admits that it represents that recipients of the renewal notices had previously authorized their listing in its directory. It contends, however, that this representation is not false. Complainant argues that the evidence establishes the falsity of this representation. Complainant recognizes that the Initial Decision was "based" on the fact that recipients of Respondent's 1982 renewal notices (RX 7A) had not previously expressed an intent to subscribe to and authorize a listing in, the 1981 TELEX and twx DIRECTORY, whereas the actual wording of the allegation was not limited to authorization for the 1981 Directory. However, Complainant contends that it was essentially alleging that the authorizations were for the 1981 Directory, and therefore the allegation of the Complaint should be amended to conform to the proof.

Complainant's request to have the Complaint amended is denied. Complainant has not even alleged, let alone shown, that the issue was tried by the implied consent of the parties as required by 39 C.F.R. § 952.12. Thus, there is no basis on which the amendment should be allowed.

The question remaining is whether the evidence establishes the falsity of the representation alleged in the Complaint. Respondent contends its renewal notices were sent only to prior subscribers which included both subscribers to the 1981 Directory and subscribers to the directories published in prior years.

The evidence supports Respondent's position (Tr. 751-74). With respect to specific complaints received by Complainant, (CX 19-24), Respondent produced evidence establishing that it had signed authorization cards from each of the complaining individuals or business concerns (Tr. 541-42). Inspector Johnson's testimony concerning the nature of the complaints received is not sufficiently persuasive to contradict this evidence. While all recipients of renewal notices had not authorized their listing in the 1981 Directory, the preponderance of the evidence leads to the conclusion that authorizations had been received in prior years. Accordingly, it is concluded that the representation in paragraph 3a of the Complaint, is not false. Therefore, the Initial Decision is reversed with regard to this paragraph of the Complaint.

3b. "The amount set forth on the face of the solicitations is owing and due to respondent;"

The Administrative Law Judge found this representation to be made on Respondent's Exhibits 3A1, 3D2, 3D4, 7A and 7B (I.D. pp. 43-44). Respondent contends that only Respondent's Exhibits 3A and 7A had amounts set forth as due and owing. It argues that the evidence establishes that recipients of these mailings, as well as recipients of all of its mailings, would not conclude that amounts were due and owing. The evidence cited by Respondent to support its position is an affidavit (RX 28) and the statistical survey performed by Dr. Marcus (RX 20 & 21).

Each of the mailings which the Administrative Law Judge found makes this representation has the words "PLEASE PAY THIS AMOUNT" either inside or immediately to the left of an arrow pointing to a block in which an amount either is, or is intended to be, shown. Based primarily on this feature of the mailing, the Administrative Law Judge found the representation to be made and to be false because the mailings are solicitations.

The findings of the Administrative Law Judge are supported by the record. The prominence of the "PLEASE PAY THIS AMOUNT" arrows on Respondent's Exhibits 3A1, 7A and 7B and the total appearance of the solicitations would lead to the conclusion that the amounts set forth on the face of the solicitation are owing and due Respondent as alleged in alleged in paragraph 3b of the Complaint. Respondent's Exhibits 3D2 and 3D4 purport to be invoices, and state unequivocally that the amounts shown are due and owing.

Respondent's Exhibits 3A1, 7A and 7B are solicitations and thus the amounts shown are not due and owing (see discussion supra). Respondent's Exhibits 3D2 and 3D4 are based on negative options and thus are not bills for orders previously placed. Therefore, as discussed elsewhere in this decision the amounts shown are not due and owing.

Accordingly, it is concluded that Respondent makes this representation and that it is false. Respondent's contention to the contrary is without merit.

3c "Recipients of the Order Form and Listing Verification who failed to submit a revision or cancellation are obligated to pay for their listing."

The Administrative Law Judge found that Respondent's Exhibits 3B1, 3C1 and 7C include the "negative option" language and as such make this representation. As no obligation can arise from an unsolicited offer, he found the representation to be false. Respondent does not expressly challenge the finding that the representation is made, but asserts that it is not false.

The three forms in question contained language substantially as follows:

"If your revision or cancellation is not received by [date] this listing order form will automatically be processed as is. After the correction deadline expires you will receive a separate bill ($120.00) for 1982 complete annual listing."

RX 3B1. Cf. RX 3C1 and 7C.

Respondent asserts that other companies use the negative option, and that the Administrative Law Judge did not have jurisdiction to find that negative options are, or are not, functionally equivalent to falsehoods. It further contends that Respondent in its solicitations with negative options is telling its potential customers that if they don't respond, they will get a bill. Inasmuch as that is what happens, it is argued that the representation is not false.

Respondent's negative option language advises recipients that if they take no action they will be billed for a listing in Respondent's directory. This language, together with the subsequent bill creates the impression that an obligation to pay Respondent arises from the recipient's inaction. However, the recipients did not consent or agree to purchase the directory and no obligation to make payment arises. The merchandise received as the result of the failure to respond to a negative option must be considered unordered: ^5/

"It should be here plainly set forth that an offeror has no power to cause the silence of the offeree to operate as an acceptance when the offeree does not intend it to do so." CORBIN ON CONTRACTS, § 73. See also RESTATEMENT (2nd) OF CONTRACTS § 69.

Thus, no obligation to make payment arises and the representation is therefore false. Accordingly, Respondent's contention is without merit.

3d. "The TELEX and twx DIRECTORY is a comprehensive directory of subscribers to major teletype networks; and

3e. The TELEX and twx DIRECTORY contains all necessary information to communicate with teletype subscribers."

The Administrative Law Judge found that these representations were made in a bulletin enclosed with other solicitation forms which purport to alert potential customers to the existence of fraudulent and unsolicited invoices for Telex listings. The specific language relied on by the Administrative Law Judge to support his conclusion that Respondent makes these representations is as follows:

"The people who produce the TELEX and twx DIRECTORY believe you deserve to have the most complete and up-to-date publication possible. A 1982 edition will provide listings for more than 158,500 subscribers to major teletype networks in the U.S., including Western Union, W.U.I., R.C.A., I.T.T., and T.R.T."

Respondent contends that neither representation is made. With regard to the alleged falsity of paragraph 3d, Respondent argues that the only reference to quality pertains to the scope of the 1982 Directory which has not been published and therefore its quality cannot be determined. With regard to paragraph 3e Respondent contends that the directory does contain the necessary information to communicate with teletype subscribers.

The language relied on by the Administrative Law Judge (quoted above) makes the representation alleged in paragraph 3d of the Complaint. While the evidence tends to show that another directory may be more comprehensive and accurate, the representation alleged in paragraph 3d of the Complaint is only that another directory may be more comprehensive and accurate, the representation alleged in paragraph 3d of the Complaint is only that Respondent represents its directory is "a comprehensive directory of subscribers." Although Respondent's prior directories may not have been the best, and may have included inaccuracies, it has not been shown that they or the directory proposed for publication in 1982 are not comprehensive. Accordingly, it is concluded that Complainant has not sustained its burden of proof with regard to the falsity of allegation 3d of the Complaint. Therefore, with respect to this allegation of the Complaint, the Initial Decision is reversed.

A fair reading of the language relied on by the Administrative Law Judge as making this representation as well as the totality of Respondent's solicitations would lead to the conclusion that Respondent represents that the directory contains all necessary information to communicate with teletype subscribers. Complainant has presented evidence to show inaccuracies in Respondent's directory as compared to the Western Union Directory for the same period. Additionally, Respondent's directory includes various international carriers, but it does not list which carrier belongs to which number. Without that information, those numbers are not usable within the United States (Tr. 60). Respondent argues, in effect, that all that is needed to communicate is a TELEX or twx number, and that its directory contains that information. While Respondent's arguments are essentially correct for communication between Western Union listings in the United States, it does not answer the deficiency with respect to communication with international carriers. Further, a considerable degree of inaccuracy is demonstrated by Complainant's study (see, generally, Elberson testimony). That study, as found by the Administrative Law Judge, is reliable. The information necessary to communicate with teletype subscribers is not simply numbers, but correct numbers. Accordingly, the representation is false, as the directory does not contain all necessary information to communicate with teletype subscribers.

CONCLUSION

After consideration of the entire record it is concluded that to the extent indicated herein, Respondent's solicitations are nonmailable and that it is engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Respondent's appeal is denied. A remedial order under 39 U.S.C. § 3005 is being issued with this decision.

1/ See 39 U.S.C. § 204 as implemented by 39 C.F.R. § 224.1(c)(4) and 952.26.

2/ The substantial evidence test is generally recognized as requiring something less than a preponderance of the evidence. See e.g. Steadman v. SEC, supra at pp. 98-100; Consolo v. Federal Maritime Commission, 383 U.S. 607, 620 (1966); Brennan v. National Hotel Co., 476 F.2d 17, 21 (5th Cir. 1973).

3/ 39 U.S.C. § 3001, "Nonmailable Matter," in subsection (d) provides in relevant part:

"(d) Matter otherwise legally acceptable in the mails which - (1) is in the form of, and reasonably could be interpreted or construed as, a bill, invoice, or statement of account due; but, (2) constitutes, in fact, a solicitation for the order by the addressee of goods or services, or both; is nonmailable matter, . . . unless such matter bears on its face [a prominent notice that it is not a bill, invoice or statement of account due." Under 39 U.S.C. § 3005(a) the mailing of nonmailable matter as defined in § 3001(d) "shall constitute prima facie evidence that such person is engaged in conducting a scheme or a device for obtaining money or property through the mail by false representations."

4/ See 39 U.S.C. § 3001(d) subsections (A) and (B) and § 123.41 of the Domestic Mail Manual.

5/ See 39 U.S.C. § 3009. Although certain of negative options are permissible, as regulated by the Federal Trade Commission, they contemplate a pre-existing contractual agreement between the partcipating parties. 16 C.F.R. 425. No such pre-existing contractual obligation exists in this case.