In the Matter of the Complaint Against

TELCOM DIRECTORIES, INC.
a corporation,

and

VERNON R. FRAZIER
individually and as an
officer or employee of
said corporation
2120 Crestmoor at
Nashville, TN 37215-2613

P.S. Docket No. 22/112

Bernstein, Edwin S.

APPEARANCES FOR COMPLAINANT:
H. R ichard Hefner, Esq.
Steven B. Caver, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, D.C. 20260-1112

APPEARANCE FOR RESPONDENTS:
Frank J. Shannon, III, Esq.
Henritze & Shannon
127 Peachtree Street
Atlanta, Georgia 30303-1810

INITIAL DECISION

Complainant alleged and Respondents denied that Respondents are mailing solicitations in the guise of bills or invoices in violation of 39 U.S. Code § 3001(d) and that Respondents are engaged in a scheme to obtain money through the mail by false representations in violation of 39 U.S. Code § 3005.

The Complaint alleged that Respondents' solicitations falsely represent that:

(a) The addressee has previously authorized a business listing in Respondents' classified directory;

(b) The amount set forth on the face of the solicitation is due and owed to Respondents;

(c) Telcom Directories, Inc. is a part of or affiliated with the telephone company serving the recipient's area; and

(d) Telcom Directories, Inc. is the publisher of the classified directory or "yellow pages" normally supplied to all telephone subscribers in the recipient's area.

By Order dated December 4, 1985, the Complaint was dismissed against Respondent Scott Wilcox. A hearing was held in Washington, DC on January 8 and 10, 1986. Postal Inspector Fred Sturdevant and Paul Scipione, Ph.D., testified for Complainant. Respondents presented no evidence at the hearing. The parties filed proposed findings of fact, proposed conclusions of law and memoranda on February 18 and 19 and Respondents filed a Supplemental Brief on March 17, 1986. All of these have been considered. To the extent indicated, they have been adopted. Otherwise, they have been rejected as irrelevant or not supported by the evidence.

FINDINGS OF FACT

I. The Use of the Mail

Respondent Telcom Directories, Inc. solicits remittances of money through the mail in connection with its sale of advertising space and listings in telephone directories that it publishes. Complainant's Exhibits (CX) 1, 2, 3, and 4 are solicitations designed to be mailed to addressees. Each addressee's name and address appears on the form designed to be sent to him. At the bottom of each form are the words, "Please return with your check in the enclosed envelope." CX-5 is a window envelope printed with Telcom's name and return address. At the bottom of the envelope are the words, "Attn: Accounts Payable (Yellow Pages Information Enclosed)." Postal Inspector Sturdevant testified that he received these exhibits from people who complained about receiving them in the mail (Tr. 120). Inspector Sturdevant stated that the Postal Service had received approximately 15 such complaints from recip ients of the solicitations (Tr. 113) although it appears that none of these complainants paid Respondents any money (Tr. 114). These complainants received solicitations similar to those at CX-1, 2, 3, and 4 in window envelopes similar to those at CX-5. CX-5 has a postage meter imprint. Although a postage meter imprint may be made without a document being mailed, upon consideration of all of the foregoing, I find that the Postal Service has jurisdiction of this matter since Respondents solicit remittances of money through the mail in connection with their sale of listings in their classified telephone directories.

Respondent Vernon R. Frazier admitted in his Answer that he is Telcom's president. He also contracted with a mail receiving service at 2120 Crestmoor, Nashville, Tennessee to receive Telcom's mail according to Inspector Sturdevant's testimony (Tr. 113, 136-37). I, therefore, find that Mr. Frazier is responsible for Telcom's policies and practices.

II. Compliance With 39 U.S. Code § 3001(d) and the Domestic Mail Manual

39 U.S. Code § 3001(d) provides:

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, shall not be carried or delivered by mail, and shall disposed of as the Postal Service directs, unless such matter bears on its face, in conspicuous and legible type in contrast by typography, layout, or color with other printing on its face, in accordance with regulations which the Postal Service shall prescribe--

(A) the following notice: "This is a solicitation for the order of goods or services, or both, and not a bill, invoice, or statement of account due. You are under no obligation to make any payments on account of this offer unless you accept this offer."; or

(B) in lieu thereof, a notice to the same effect in words which the Postal Service may prescribe.

In implementation of that statute, Domestic Mail Manual (DMM) 123.4 sets forth the following requirements for solicitations in the form of invoices:

Nonmailable Written, Printed or Graphic Matter Generally .41 Solicitations in the Guise of Bills, Invoices, or Statements of Account (39 U.S.C. 3001(d); 39 U.S.C. 3005). Any otherwise mailable matter which reasonably could be considered a bill, invoice, or statement of account due, but is in fact a solicitation for an order, is nonmailable unless it conforms to .41a through .41h below. A nonconforming solicitation constitutes prima facie evidence of violation of 39 U.S.C. 3005.

a. The solicitation must bear on its face the disclaimer prescribed by 39 U.S.C. 3001(d)(2)(A) or, alternatively, the notice: THIS IS NOT A BILL. THIS IS A

SOLICITATION. YOU ARE UNDER NO OBLIGATION TO PAY UNLESS YOU ACCEPT THIS OFFER. The statutory disclaimer or the alternative notice must be displayed in conspicuous boldface capital letters of a color prominently contrasting (see .41g below) with the background against which it appears, including all other print on the face of the solicitation and at least as large, bold and conspicuous as any other print on the face of the solicitation but not smaller than 30-point type.

b. The notice or disclaimer required by this section must be displayed either:

(1) Diagonally on the center of line drawn from the vertex of the lower left corner to the vertex of the upper right corner as in the following example; or example omitted

(2) Overprinting each portion of the solicitation which reasonably could be considered to specify a monetary amount due and payable by the recipient.

c. The notice or disclaimer must stand conspicuously apart on the page. It must not be preceded, followed, or surrounded by words, symbols, or other matter that reduces its conspicuousness or that introduces, modifies, qualifies, or explains the prescribed text, such as "Legal notice required by law."

d. The notice or disclaimer must not, by folding or any other device, be rendered unintelligible or less prominent than any other information on the face of the solicitation.

e. If a solicitation consists of more than one page, the notice or disclaimer required by this section must be displayed on the face of each page at a location permitted by .41b.

f. Regardless of the number of pages comprising the solicitation, if any page is designed to be separated into portions (e.g., by tearing along a perforated line), the notice or disclaimer required by this section must be displayed in its entirety on the face of each portion that might reasonably be considered a bill, invoice, or statement of account due.

g. For purposes of this section, the phrase "color prominently contrasting" excludes any color, or any intensity of an otherwise included color, which does not permit legible manual, mechanical, electronic, and photographic reproduction, and which is not at least as vivid as any other color on the face of the solicitation. For the purposes of this section the term "color" includes black.

h. Any solicitation which states that it has been approved by the Postal Service or by the Postmaster General or that it conforms to any postal law or regulation is nonmailable.

I find that Respondents' solicitations (CX-1, 2, 3, and 4) are in the form of, and could reasonably be construed as, bills, invoices, or statements of account due. Paul Scipione, Ph.D., testified con cerning this issue. Dr. Scipione is a vice president and group director of Response Analysis Corporation, a market research firm located in Princeton, New Jersey. Before joining Response Analysis Corporation, Dr. Scipione was vice president of Kenneth Hollander Associates and was manager of copy research and marketing research at Young and Rubican Advertising Agency in New York City. He is a consumer psychologist who is responsible for between 75 and 100 separate studies each year. Of those, he directs about one-third himself. 30 to 40 percent of those deal with advertising and 40 to 50 percent of those have to do with direct mail campaigns. Many of his surveys or studies evaluate for a direct mail campaign or adver tising campaign what the likely impact of the direct mail pieces or advertisements will be on the typical consumer (Tr. 159-160).

Dr. Scipione has published three texts and he is the author of more than 20 professional papers. He is a member of a number of professional associations and is a Professor of Marketing at Mont clair State College.

Dr. Scipione has directed a study for a major utility company to see what elements should or should not be on an invoice so that residential customers and business customers could fairly understand the nature of the charges. He also has conducted Yellow Page mar keting studies for AT&T, NYNEX and a division of Dun & Bradstreet that is also engaged in directory advertising (Tr. 173-174). He earned the degree of Doctor of Philosophy in environmental psycho logy and economic geography at Rutgers University. He cross-trained in consumer psychology and has specialized in consumer psychology since 1973 (CX-9, Tr. 157-165).

I found Dr. Scipione to be a highly experienced, well qualified marketing expert, qualified by experience, training, and skills to analyze and testify regarding Respondents' solicitations and the various telephone companies. I found him to be a truthful and highly reliable witness. I did not find the fact that Mr. Scipione has done consulting work for telephone companies, along with many other clients, in any way compromised his testimony.

Dr. Scipione was asked to review Respondents' solicitations as an expert in consumer psychology. He was asked whether there are any physical elements that the Telcom mailing pieces contained that would lead people to believe they are invoices or statements of accounts. He testified there are a number of elements of Respond ents' direct mail communications that would have a significant pro bability of leading a consumer to believe they were bills requiring payment (Tr. 167). Among those he enumerated are the fact there is no advertising on the front of the mailing pieces; the size of the piece is that traditionally associated with being an invoice; it is sent in a window envelope with no advertising messages on it; the window envelope is specifically directed to the attention of the accounts payable personnel in businesses (Tr. 164-171); the price is quite prominently displayed on the bottom half of the form in the invoice format; and the directions in red including "PLEASE RETURN WITH YOUR CHECK IN THE ENCLOSED ENVELOPE" (Tr. 177).

I agree with Dr. Scipione that because of these elements Respondents' solicitation is in the form of and could reasonably be construed as an invoice.

Although the solicitation contains a disclaimer which uses the language specified in DMM 123.41, the disclaimer does not comply with other requirements of that provision. The disclaimer is not "displayed in ... a color prominently contrasting ... with the back ground against which it appears." Sub-section (g) defines this concept as follows:

For purposes of this section, the phrase "color prominently contrasting" excludes any color, or any intensity of an otherwise included color, which does not permit legible manual, mechanical, electronic, and photographic reproduction, and which is not at least as vivid as any other color on the face of the solicitation. For the purposes of this section the term "color" includes black.

CX-1, CX-2, CX-3 and CX-4 are copies of Respondents' solici tations. Except for the information that describes the addressee - his name, address, telephone number and type of business or pro fession - the forms contain the same language. On all forms, the disclaimer appears in letters larger than any other type on the form and in green ink. However, the darkness of this ink differs among these exhibits. None of these exhibits complies with DMM 123.4. As shown by CX-2a and CX-3a, photocopies of CX-2 and CX-3, respec tively, the disclaimers on these versions of the solicitations disappeared when photocopied. As shown by CX-1a and 4a, CX-1 and CX-4 did not permit legible photocopying. Inspector Sturdevant testified that the photocopies at CX-1a, CX-2a, 3a and 4a were made on a photocopy machine at the regular setting (Tr. 122). Respond ents imply that such photocopies should not be relied upon in the absence of evidence that the photocopy machine was in good working order and was properly filled with chemicals. I disagree. I also note that Respondents offered no photocopies of their own to contra dict Complainant's evidence that the invoices did not photocopy legibly.

III. The Advertising Representations

I further find that Respondents' solicitation makes the repre sentations alleged in Paragraph 8 of the Complaint for the following reasons.

(a) The addressee has previously authorized a business listing in Respondents' classified directory.

(b) The amount set forth on the face of the solicitation is due and owed to Respondents.

The fact that Respondents' solicitation is in the form of an invoice and does not contain a legible disclaimer represents to the ordinary business recipient that the solicitation is an invoice for a business listing previously ordered in Respondents' directory and that the amount set forth on the face of the solicitation is due and owed to Respondents by the recipient. As Dr. Scipione testified there are a number of elements of the solicitation that convey these impressions (Tr. 169-178). The solicitation's size and format are similar to those used for invoices. There is no advertising on the front of the solicitation. The impression given is that an order already has been placed rather than that one is being solicited. The emphasis on payment by the words, "Please return this card with payment," "Please make checks payable to" and "Please return with your check in the enclosed envelope" also reinforces the impression that this is a bill or invoice. As in many invoices, the price is emphasized. Also, as Mr. Scipione stated, the use of a window envelope is typical for many invoices and unusual for advertising messages. Additionally, the language on the envelopes, "ATTN: ACCOUNTS PAYABLE" further reinforces the message. Finally, as Dr. Scipione testified, the amount billed itself, $87., is low enough so that many firms would pay it routinely without raising any special questions about the "bill" (Tr. 249-251).

(c) Telcom Directories, Inc. is a part of or affiliated with the telephone company serving the recipient's area.

(d) Telcom Directories, Inc. is the publisher of the classified directory or "yellow pages" normally supplied to all telephone subscribers in the recipient's area.

-11-

Both Respondents' solicitation and its window envelopes promi nently display the logo that shows fingers walking over the pages of an open directory. This is virtually identical to the logo used by the Bell System or its successor companies. CX-9 and CX-10, photo- copies of the front and back covers of the District of Columbia's yellow pages, demonstrate the use of that walking pages logo by the local telephone company, C&P Telephone. Dr. Scipione, who has conducted marketing studies for various telephone companies, demonstrated a familiarity with AT&T and its successors (CX-9, Tr. 185-187). He stated that his office has directories for 300 or 400 communities around the country in about 35 states and most of these telephone company directories use the walking fingers logo (Tr. 245-247). Also, as Dr. Scipione testified, the name "Telcom" sounds like an acronym for a telephone company (Tr. 188). The foregoing, therefore, creates the impression that Telcom is affiliated with the local telephone company that serves the recipient's area and is the publisher of that telephone company's yellow pages.

IV. The Falsity of the Representations

It is clear and undisputed that all four representations set forth in Paragraph 8 of the Complaint are false. CONCLUSIONS OF LAW

1. Postal Service False Representation Orders do not violate the First Amendment of the Constitution. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Lynch v. Blount, 330 F. Supp. 689 (S.D.N.Y. 1971); Hollywood House International, Inc. v. Klassen,

508

F.2d 1276 (9th Cir. 1974); and United States Postal Service v. Beamish, 466 F.2d 804 (3d Cir. 1972). In the latter case, the Court held "Advertisers possess no constitutional right to disseminate false or misleading materials. Therefore, Congress has the power to prohibit such deceptions through appropriate legislation." p. 807. See also, Bolger v. Young's Drug Products Corp., 463 U.S. 60 (1983).

2. An advertisement must be considered as a whole and its mean ing will be determined in the light of its probable effect on per sons of ordinary minds. Donaldson v. Read Magazine, Inc., supra; Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958).

3. The impression of promotional representations on the ordi nary mind generally is a question for the judge to determine. Expert testimony on interpretation is not required, but it is within the discretion of the judge to permit such testimony. Vibra-Brush Corp. v. Schaffer. The impression of advertising on the ordinary mind may be determined by the trier of fact solely on the basis of the advertising itself. Vibra-Brush Corp. v. Schaffer; Delta Enter prises, P.S. 14/72 et al, (P.S.D. July 3, 1984).

4. Express misrepresentations are not required. It is the net impression that the advertisement as a whole is likely to make upon individuals to whom it is directed that is important. Even if a solicitation is so worded as to not make an express representation, but is artfully designed to mislead those responding to it, the false representation statute is applicable. G. J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); See also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S.

748

(1976), quoting United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924): "It is not difficult to choose statements, designs, and devices which will not deceive." In Vibra-Brush Corp. v. Schaffer, supra, the Court stated:

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. p. 465.

5. 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 overall effect on the average reader."

5. Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co., Inc. v. Federal Trade Commission, 208 F.2d 382, 387, (7th Cir. 1953); Ralph J. Galiano, P.S. Docket No. 19/15, (P.S.D. May 2, 1985); Bruce Roberts Co., P.O.D. Docket No. 3/78, (I.D. August 16, 1971); Money makers et. al., P.S. Docket No. 16/1, (I.D. June 20, 1983).

6. Applying the foregoing standards, the average person who reads Respondents' advertisements would interpret them substantially as characterized in Paragraph 8 of the Complaint.

7. As expressed in Chaachou v. American Central Insurance Co., 241 F.2d 889, 893 (5th Cir. 1957), a representation is material if it would ". . . cause the other party to do other than that which would have been done had the truth been told." Applying the Chaachou test, Respondents' representations are material because they have the effect of inducing individuals to remit money through the mail to purchase classified advertising listings from Respondents.

8. The representations in Paragraph 8 of the Complaint are false.

9. Respondents' solicitations violate 39 U.S.C. § 3001(d) and DMM 123.41. The use of a light green ink to print the disclaimer is not "of a color prominently contrasting with the background against which it appears" since it does not permit legible reproduction.

10. Although an astute person might recognize that Respondents' mailing pieces are solicitations and not invoices, this does not detract from their tendency to "deceive the ignorant, gullible and less experienced." Gottlieb v. Schaffer, 141 F. Supp. 7, 16 (S.D.N.Y. 1956). The false representation statute was intended to protect such persons as well. Donaldson v. Read Magazine, Inc., supra.

11. A decision in the U.S. District Court in a proceeding pur suant to 39 U.S. Code § 3007 is not res judicata in this matter. Section 3007 states, "An action taken by a court hereunder does not affect or determine any fact at issue in the statutory proceedings."

12. Respondent Vernon R. Frazier as Telcom's president is responsible for its policies and practices. Therefore, it is appropriate that Mr. Frazier be made subject to a cease and desist order.

13. Therefore, Respondents are violating 39 U.S.C. § 3001(d) and are engaged in the conduct of a scheme for obtaining money or pro perty through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. Accordingly, a False Representa tion Order and a Cease and Desist Order in the forms attached should be issued against Respondents.