In the Matter of the Complaint Against

IHS DEPARTMENT OF UNCLAIMED FUNDS
AND BENEFITS IHS DEPARTMENT OF
UNCLAIMED FUNDS DEPARTMENT OF
UNCLAIMED FUNDS AND BENEFITS
DEPARTMENT OF UNCLAIMED FUNDS
287 State Street, North at
Canton, OH 44767-0001

P.S. Docket No. 22/155

Mason, Randolph D.

APPEARANCES FOR COMPLAINANT:
Steven B. Caver, Esq.
Thomas P. Kuczwara, Esq.
H. Richard Hefner, Esq.
Hilda Rosenberg, Esq.,
on brief Consumer
Protection Division
Law Department
United States Postal Service
Washington, D.C. 20260-1112

APPEARANCES FOR RESPONDENTS: Stuart Lee Friedel, Esq. Janet B. Linn, Esq. Ronald R. Urbach, Esq. Davis & Gilbert 850 3rd Avenue New York, New York 10022

POSTAL SERVICE DECISION

This proceeding was initiated on November 19, 1985, when the Postal Service filed a Complaint alleging that Respondents are engaged in a scheme or device to obtain money through the mail by means of false representations in violation of 39 U.S.C. § 3005.

Specifically, the Complaint alleges in paragraph 4 that Respondents falsely represent, directly or indirectly, in substance and effect, whether by affirmative statements, implications or omissions, that:

(a) Respondents are associated with or constitute a branch or instrumentality of federal, state or local government.

(b) Respondents have conducted research which established that the addressee is entitled to receive unclaimed funds currently being held by federal, state or local government or by private organizations or individuals.

(c) Respondents will confirm or verify the addressee's eligibility to receive unclaimed funds in return for the addressee's completion and submission by mail to respondents of an "Eligibility Form" provided by Respondents and the addressee's payment by mail to Respondents of a "research compensation fee" or "compensation fee."

(d) Respondents will provide an addressee who meets the requirements described in (c), supra, information disclosing the location and amount of unclaimed funds to which he or she is entitled and instructions revealing where and how such funds may be claimed. In a timely filed Answer, Respondents denied that they made the above false representations or that they have otherwise violated the statute.

After agreeing to the issuance of a preliminary injunction by the U.S. District Court detaining Respondents' incoming mail, Respondents requested an expedited hearing by the Judicial Officer under 39 C.F.R. § 952.17. At the request of both parties, it was ordered that the undersigned Administrative Law Judge would serve as the Acting Judicial Officer to hear this case and issue the final agency decision.

A hearing was held by the undersigned on February 26-28 and March 3 and 5, 1986, in Washington, D.C. All parties were represented by counsel and afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. Complainant presented the testimony of consumer witnesses Doris Crowell and Frances Carter, Postal Inspector Greely C. Smith, State Officials Colleen Burback, Sandra Sadecki, and Marsha Nichols, and expert witness Paul A. Scipione, Ph.D. Respondents presented the testimony of Rodney Napier from the Suarez Corporation, expert witnesses John Pahmer, Stuart Herman, and Charles Winick, Ph.D. and consumer Elaine Session. In addition, both parties presented docu mentary evidence and entered into a number of written and oral stipulations. Thereafter, the parties filed proposed findings of fact and conclusions of law, reply briefs, and other briefs, all of which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence.

Based on the entire record herein, including my observation of the witnesses and their demeanor, the exhibits, stipulations, and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:

FINDINGS OF FACT

I. Respondents and the Promotion

Respondent Suarez Corporation, 4626 Cleveland Avenue, NW, Canton, Ohio 44709-1837, is a corporation organized and doing business under and by virtue of the laws of the state of Ohio. Respondent Benjamin D. Suarez, an individual, is the president of the corporate Respondent (Ans. § 3). International Home Shopping, sometimes referred to as IHS, is a division of the Suarez Corpora tion (Tr. 461). In 1985 Respondents began a direct-mail promotion seeking the remittance of $19 to either "Department of Unclaimed Funds, Regional Office," or "IHS, Department of Unclaimed Funds and Benefits, Main Office" in Canton, Ohio. The solicitation package was modified at least five times. Respondents mailed about 1.9 million of these solicitations and at least one million of those recipients were "opportunity seekers" who had previously responded to a solicitation for a $6 "diamond" and participation in a sweepstakes (Tr. 536-537, 598).

Prior to September 29, 1985, each solicitation package consisted of an outer carrier envelope, a letter, an "eligibility form", and a return envelope. After that date, the solicitation package also included a 4 page question and answer brochure (Tr. 483). ^1/ Persons who remitted the $19 received a loose-leaf booklet entitled "Unclaimed Funds, Merchandise and Benefits Documentation" (CX-18). The booklet listed the addresses of the various states' unclaimed funds departments, and discussed other possible sources of unclaimed money such as safe deposit boxes, overpaid taxes, and unclaimed products. These persons also received a "free" computer report entitled "Unclaimed Funds Office Contact and Eligibility Form Verification" setting forth the address and telephone number of the unclaimed funds office for the particular State in which the customer lives. Persons who submitted the eligibility form but did not remit $19 also received a similar free computer report providing the same information, but encouraging the prospective customer to order the "Documentation" (CX-16b).

II. The Expert Witnesses

Complainant's expert Paul A. Scipione, Ph.D., was clearly the most highly qualified and most persuasive of all of the expert witnesses. His testimony was forthright and credible. In reaching this conclusion, I have taken into consideration the minor incon sistencies in his testimony pointed out by Respondents. It has been stipulated that he is an expert in designing and conducting surveys of consumer perception, that he is an expert in consumer behavior and consumer psychology, and in the techniques and standard prac tices of the direct marketing industry (Stip. 3, para. 1). Dr. Scipione is a vice president of Response Analysis, a market survey research company (Tr. 286). He specializes in studying the atti tudes, motivations, and behavior of consumers and businessmen with regard to the marketing of products and services (Tr. 286). He is a consumer psychologist who has spent about 15 years testing adver tisements and commercials (Tr. 359). From his vast experience in testing direct-mail pieces and print ads, he knows what portions of a solicitation will be read and what portions will not be noticed (Tr. 414). His testimony directly corroborates my independent findings that the solicitations in issue make the representations set forth in paragraph 4 of the Complaint.

Respondents rely primarily on the testimony of Charles Winick, Ph.D., a graduate professor of sociology and a consulting psycholo gist in private practice (Tr. 729). It has been stipulated that Dr. Winick is an expert in consumer behavior and consumer psychology (Stip. 3, para. 2). Dr. Winick's testimony was based, in large part, on the assumption that ordinary readers of Respondents' soli citations would read the entire package, including all of the small print (e.g. Tr. 737-741). His experience with consumer perceptions of direct-mail solicitations is slight in comparison to that of Dr. Scipione. Accordingly, I have given little weight to his testimony.

Respondents also rely on the expert testimony of John D. Pahmer, an expert in the techniques and standard practices of the direct marketing industry (Stip. 3, para. 4). He did not address the consumer perception of the four representations in issue. ^2/ He demonstrated that Respondents' solicitations contained many of the techniques used in the direct marketing industry (Tr. 585).

Finally, Respondents rely on the testimony of Stuart Herman, an expert in designing and conducting surveys of consumer perceptions (Stip. 3, para. 3). Although Mr. Herman conducted two surveys concerning consumer perception of Respondents' solicitations, Respondents objected to the admission of the first survey (Wave I) on the ground that it was prepared for use in settlement negotia tions. Although I do not necessarily agree with Respondents on that point, I have not considered the Wave I survey (CX-36) in making the decision herein. The second survey (RX-12) actually supports Com plainant's position that the representations in issue are made by the solicitations. Mr. Herman appeared more like an advocate than an objective expert. Notwithstanding his own survey, it was his opinion that the alleged misrepresentations did not exist in the solicitations (Tr. 705). He was frequently evasive and presented testimony that was inconsistent with his prior deposition (Tr. 722).

III. The False Representations

Each of the solicitation packages in issue make the representa tions alleged in subparagraphs (a) through (d) of paragraph 4 of the Complaint, and the representations are both false and material. The reasons for these conclusions are set forth below under each of the quoted representations.

Representation (a)

"Respondents are associated with or constitute a branch or instrumentality of federal, state, or local government."

Each of the solicitation packages conveys the impression to the ordinary reader that Respondents are associated with or constitute a branch or instrumentality of federal, state or local government. My opinion is corroborated, to a large extent, by the testimony of Dr. Scipione when he analyzed the consumer perceptions to the package consisting of CX-3, 4, 8, 11, and CX-15 (Tr. 297-298, 412).

The following quotation from the Respondents' outer envelopes contributes to this representation:

"Department of Unclaimed Funds

Regional Office 287 State Street, North

Canton, Ohio 44767

WARNING]

$500 reward for information leading to the prosecution of any party unlawfully interferring with or tampering with the delivery of this official notification."

..."Letter of Certification" (CX-9).

In a later version, the return address and warning was changed as follows:

IHS

Department of Unclaimed Funds and Benefits

Main Office 287 State Street, North

Canton, Ohio 44767

WARNING

$500.00 reward will be paid by the IHS Department of Unclaimed Funds and Benefits, an independent division of International Home Shopping, a non- governmental agency, for information leading to the prosecution of any party unlawfully interfering with or tampering with the delivery of this notification. (CX-11)

The name "IHS" and also the name "Department of Unclaimed Funds and Benefits" give the impression of a government agency (Tr. 302, 319) also, the "WARNING" contains the words governmental agency on the left side, and many ordinary readers would not notice the "non-" appearing on the right hand side of the previous line. Reference to a "notification" in the "warning" also connotes a government commu nication (Tr. 320). Also, CX-11 contains a large red stamp with the words "VERIFIED LETTER", which looks similar to a certified or registered letter endorsement and further conveys the governmental impression (Tr. 320-321).

The most recent outer envelope (CX-12) is similar to CX-11 except that the large red stamp says "VERIFIED DOCUMENT" instead of "VERIFIED LETTER". This envelope also gives a governmental impression.

Each of the letters also contributes to the overall impression that Respondents are a governmental agency. First, the letterhead on the July version (CX-1; Tr. 485-487) reads:

DEPARTMENT OF UNCLAIMED FUNDS

Regional Office 287 State Street, North

Canton, Ohio 44767

The letterhead on the remaining versions reads as follows:

IHS

DEPARTMENT OF UNCLAIMED FUNDS AND BENEFITS

Main Office, 287 State Street, North

Canton, Ohio 44767 (CX-20(A); CX-3; CX-13; CX-5)

The use of the initials "IHS" sounds governmental (Tr. 302). In addition, the "Department of Unclaimed Funds" and the "Department of Unclaimed Funds and Benefits" does not sound like a company name, but a governmental entity (Tr. 302).

All versions of the letter have a drab look that is unusual for advertisements and further conveys the governmental image (Tr. 303). Also, the words "Computer File" above the named addressee is not a personalization technique and appears more governmental (Tr. 304). In addition, Respondents refer to themselves as "this office" or "our office" in the letter instead of "our company" (Tr. 304).

With the exception of CX-5, each of the letters has the picture of an eagle in the upper left-hand corner. The eagle is clutching an American flag in CX-20(a), CX-3, and CX-13. The eagle also contributes to the overall governmental image (Tr. 303). CX-5 replaces the eagle with a red "verified document" stamp with a ten-digit number, which also looks official.

Dr. Winick testified that the disclaimer set forth under the eagle and the verified document stamp would show the consumer that the document came from a private enterprise (Tr. 737-738). These read as follows:

An Independent

Division of

International Home Shopping

a private enterprise

(CX-20(a); CX-3).

or

An Independent non-

governmental Division of

International Home Shopping,

a private enterprise (CX-13; CX-5).

However, these disclaimers are written in very small print and many ordinary readers would not notice them.

Also, each of the letters begins its second paragraph with the words "You are hereby notified" and the letters conclude with the words "Authorization By: J. Scott Cunningham. These also contribute to making Representation (a).

Dr. Winick also thought that the tiny copyright notice in the lower right hand corner "1985 International Home Shopping" would show the readers that it was a private enterprise (Tr. 738). How ever, many ordinary readers would not notice this.

Each of the Respondents' promotions also contains an "Eligibi lity Form", which looks very much like a government form (Tr. 310).

Each of the these forms contains, in large block print, the words "Department of Unclaimed Funds" (CX-2) or "IHS, Department of Unclaimed Funds and Benefits" (CX-19; CX-20(b); CX-4; CX-14; CX-6). Each of these has the same picture of an eagle (or in the case of CX-6, a "verified document" stamp) as appeared on the accompanying letter. The disclaimers under the picture are also the same with the exception of CX-19 which reads, in small print:

"An Independent

Agency of IHS"

The Eligibility Form begins with the following words: "NOTICE: This is an official document and must be completed only by those authorized. This form must be completed in its entirety and returned within 48 hours of receipt." (CX-2). The remaining eligi bility forms had the words "To insure our immediate attention" after the word "receipt". This notice gives a governmental impression (Tr. 311).

In addition to the name, address and telephone number, the form requires the recipient to fill in his social security number (Tr. 311).

Part two of eligibility form CX-19 states that "the IHS Depart ment of Unclaimed Funds and Benefits is a private agency of a governmental agency", with the words "governmental agency" appearing as the first words of the third line of Part two. Contrary to Respondents' assertion, this is not a typographical error and is consistent with the disclaimer in the upper left corner of the same exhibit, "An Independent Agency of IHS". (CX-19). The same words "governmental agency" also appear as the first words on the third line of Part two in CX-20(b), CX-4, CX-14, and CX-6. In each of the latter exhibits, the last word of the second line is the dangling, partial word "non-". All of the lines in Part two are in small print, the lines are close together, and the entire section is difficult to read. Therefore, it is clear that many ordinary readers would not notice the "non-" and would merely see the words "governmental agency." Obviously, those who saw the "non-" would look for the remaining part of that word or phrase, however, many would not see it due to the small print, the large number of words in each line, and the closeness of the lines. This same dangling "non-" also appears in the disclaimers under the eagle and verified document on CX-14 and CX-6 respectively, and on the outer envelopes for those documents (CX-21(A); CX-11, 12). The fact that many consumers would not read the dangling "non-" is confirmed by the testimony of Dr. Scipione (Tr. 316, 418, 439).

The light gray 60 percent bleed IHS logo on the reverse of the eligibility forms with the phrase "Bringing the world into your home" would not be noticed by many ordinary consumers. Moreover, although the logo picture of the home with a globe inside appears more private than governmental, this would not negate the overall impression given by the remaining materials.

The ability to pay by credit card tends to give the image of a private company; however, this item would not change the overall impression for many ordinary readers. Finally, the copyright "1985 International Home Shopping", which appears in very small print in the lower right hand corner of the eligibility form would not be noticed by many readers.

Each promotion package also contains a return envelope. (CX-7, 8). These envelopes contain a notice to the postmaster as follows:

Mail in accordance with DMM SEC. 321.1,

ISSUE 18, 2-21-85.

SEC. 131.1, ISSUE 17, 12-20-84.

"This mail classified in accordance with the above section." CX-7 is addressed to "Department of Unclaimed Funds, Regional Office" and contains in large print "OFFICIAL BUSINESS, FIRST CLASS MAIL." CX-8 is addressed to IHS Department of Unclaimed Funds main office and has the following large notice:

FIRST CLASS MAIL

Official Business of the Dept. of Unclaimed Funds and benefits an independent division of international home shopping. The words "independent division of International Home Shopping" are close together and would not be noticed by many consumers (Tr. 412, 325) and the overall message would be that Respondent is a governmental agency (Tr. 324-325).

No earlier than September 29, 1985, Respondents began sending out a question and answer brochure (CX-15, 15a) along with the letter, eligibility form, and return envelope (Tr. 483). It will be assumed that this brochure accompanied the solicitations with the following letters: CX-3 (most were mailed in August, but some may have been mailed in September with CX-15), CX-13, and CX-5. Both of these brochures contain the same disclaimer which appears on the letter and the eligibility form:

An Independent non-

Governmental Division of

International Home Shopping,

a private enterprise

Again, this disclaimer would not be noticed by many ordinary readers. CX-15a has the picture of an eagle clutching an American flag. The document is entitled Your Questions Answered Concerning the IHS Department of Unclaimed Funds and Benefits and the Unclaimed Funds, Merchandise and Benefits Documentation. The third page of the brochure contains the following question and answer:

"5. In what capacity does the IHS Department of Unclaimed Funds and Benefits function?

The IHS Department of Unclaimed Funds and Benefits is an independent, non-governmental Division of International Home Shopping, a private enterprise and a division of a fifteenyear old corporation. This corporation is a member of the Canton, Ohio Better Business Bureau and participates in consumer arbitration.

Also, the back side of the brochure is entitled "Consumer Informa tion on IHS." The sixth line refers to IHS as a "national marketing and home shopping service." Later, it states that "IHS has been in business for over 15 years" and other computerized communications services of IHS are mentioned.

However, many ordinary consumers will form the impression that IHS is a governmental entity before they look at CX-15 (or CX-15a), and accordingly will not be interested in reading about the identity of IHS (Tr. 399, 402). Also, a majority of people do not read the back side of direct-mail pieces (Tr. 388). Since the predominant impression of a government agency would be formed long before the reader got to the brochure, the brochure would not detract from the overall impression of Representation (a) given by the remaining materials (Tr. 396). ^3/ Even the survey conducted for Respondents (RX-12) which will be discussed in detail below, demonstrated that at least 11.76 % of the readers who were exposed to the brochure in addition to the other materials still thought that Respondents were a federal or local government agency.

Other evidence in the record also corroborates my finding that Respondents make Representation (a). Dr. Scipione gave credible testimony that Representation (a) is made by the materials contained in CX-3, 4, 8, 11, 12, and 15 (Tr. 297-298, 412).

As previously mentioned, a survey (RX-12) was conducted for Respondents which indicated that 11.76 % of the readers would consider Respondents to be a governmental agency. Although this percentage by itself, would represent a significant number of ordinary readers, it is quite possible that this number would have been larger if the survey had been conducted properly. In this regard, it is noted that the survey began by asking a series of 15 questions relating to the relationship between direct-mail consumers and private companies, with particular emphasis on problems, guarantees, and returns (RX-12). This was highly irregular and improper and created an abnormal situation for the reader of the IHS materials (Tr. 347).

In addition, the unclaimed property division of the Wisconsin State Treasurer's Office received about 750 written inquiries and 400 telephone calls concerning the IHS promotion (Tr. 135). Many of the people contacting that office thought that the materials had come from a governmental agency (Tr. 139-140). Also, the office of unclaimed property of the Minnesota Department of Commerce received

about 700 oral inquiries and 300 written inquiries concerning the IHS promotion (Tr. 197-198). Again, many of these people thought that IHS was part of the government (Tr. 199). Finally, the Iowa State Treasurer received about 650 telephone calls and 1200 letters (Tr. 229-232). A large number of these people thought that IHS was a government agency (Tr. 232-233). Those who called in or wrote to these states with the mistaken idea that IHS was a part of the government did not get that impression from any publicity in the record.

Finally, Representation (a) is also supported by the testimony of Complainant's consumer witnesses (Tr. 18, 19, 24-26, 29; Tr. 61).

Since IHS is not a governmental agency, Representation (a) is false (Tr. 10). Also, the representation is material because it tends to induce the remittance of $19 to Respondents. Representation (b)

"Respondents have conducted research which established that the addressee is entitled to receive unclaimed funds currently being held by federal, state or local government or by private organizations or individuals."

Each of the Respondents' promotion packages creates this impression to the ordinary reader. Those portions of the promotion packages contributing to this overall impression are set forth below:

Each of the letters tends to indicate that a file has been set up for the individual recipient, which tends to indicate that IHS has performed research. All letters have the words "Computer File:" above the name and account number of the individual recipient. They also indicate "Status: Open" and a "Date code."

Other portions of CX-1 making Representation (b) are as follows:

"This office is presently conducting a preliminary audit of those who may be eligible to receive unclaimed funds, money or merchandise.

You are hereby notified that your name appears on our files as a potential recipient of such unclaimed funds.

The following categories are those now under audit:....

. . .

There may be reason to believe that you are entitled to any of the above money, funds or merchandise. You do not have to know actual sources of unclaimed funds. The Department of Unclaimed Funds will research the entire fifty states Unclaimed Funds Bureaus for you. To prevent loss of benefits we strongly urge you to return the enclosed Eligibility Form within 48 hours of receipt so that we may determine the extent of your eligibility. The above letter was created in July of 1985 (Tr. 485-487). The second paragraph of the letter was changed in July to read as follows:

"You are hereby notified that your name appears on our files as a person eligible to receive our documentation to aid in determining whether you are eligible to receive such unclaimed funds or benefits." (CX-20A).

The words "You are hereby notified...to receive our" constitute the first line of that paragraph. The subsequent versions were revised as follows:

"You are hereby notified that your name appears on our computer list files as a person eligible to receive our documentation to aid in determining whether you are eligible to receive such unclaimed funds or benefits." (CX-3, 13, 5).

In these versions the words "You are hereby notified that your name appears on our computer list files as a person eligible" appears as the first line of that paragraph. The remaining words of that sentence are very ambiguous and most consumers would not fully understand the meaning (Tr. 405). Many ordinary readers would get the overall impression that individual research had been done for them and they would fail to see the qualifying language. (Id.)

With the exception of CX-1, the third paragraph reads:

"The following categories are the principal sources of unclaimed funds, money, merchandise or benefits that we have researched:...." (CX-20(A), CX-3, 13, 5).

This, too, adds to the impression (Tr. 325).

The following language also supports Representation (b):

"...There may be reason to believe that you are potentially entitled to one or more of the above money, funds, merchandise or benefits. You do not have to know actual sources of unclaimed funds or benefits. The IHS Department of Unclaimed Funds and Benefits will provide you with the Unclaimed Funds, Merchandise and Benefits Documentation...so that you may immediately begin the process of determining the extent of your eligibility. We will also prepare for you (whether or not you ordered the documentation) at no charge a personal computer report on your Unclaimed Funds Office contact that will include verification of the enclosed eligibility form."

This language implies that Respondents have done prior research (Tr. 326). The use of the word "may" and "potentially" in the first sentence above does not change this result (Tr. 406). Many readers would think that the research had been done and that only their social security number and date of birth need be checked to see whether they were the proper person to receive funds (Tr. 313). In this regard, the eligibility form in each version requests the date of birth and social security number.

Part two of the eligibility form CX-2 states as follows:

I hereby certify that I have received an official notification informing me that I am a potential recipient of unclaimed monies or merchandise...I enclose my research compensation fee of $19 for the researching of the state records and filing a written report to me.

Subsequent versions of Part two of the eligibility form were modified to read as follows:

I hereby certify that I have received official notification informing me of your service to aid in determining my eligibility as a potential recipient of unclaimed money, merchandise or unused benefits.

Block 8 reads:

I have enclosed my $19 compensation fee for the Unclaimed Funds, Merchandise and Benefits Documentation. (CX-20(B), CX-4, 14, 6). This also contributes to the representation (Tr. 330).

All versions also have an "INTER-OFFICE USE ONLY" box with a handwritten "Case Number" which implies that prior steps have been taken for the recipient as an individual (Tr. 314). In addition this box contains the following language:

'TO BE COMPLETED UPON RETURN:

Amount of unclaimed money: $

Amount of unclaimed merchandise: $

Approved by:_______________________________(CX-2)

or

"TO BE COMPLETED AFTER PROCESSING:

Amount of unclaimed money: $

Amount of unclaimed merchandise: $________

Benefits eligible for: ___________________

Indeterminate:____________________________ (CX-4, 6, 14, 19, 20(B))

This box contributes to Representation (b) by implying that the recipient is eligible for some amount and that Respondents will fill in those amounts (Tr. 318).

As previously discussed, the consumers who also received the question and answer brochure as part of their solicitation package would form their impressions primarily on the letter and the eligibility form (Tr. 399, 402). Also, a person who has already formed the impression that research has been done establishing his eligibility would not be looking for an "answer" about that matter in the brochure. In any event, the brochure is ambiguous and is not directly inconsistent with Representation (b) (Tr. 397, 399-400).

The fact that Respondents' materials make Representation (b) is also fully supported by the testimony of Dr. Scipione (Tr. 298-299).

In addition, the Respondents' own survey (RX-12) found that 31.37 % of the persons who read these materials, including the brochure, said that they would receive money. This strongly indi cates that they thought that research had been done for them.

In addition, each of the representatives from the Wisconsin, Minnesota, and Iowa state unclaimed funds offices also established that many ordinary persons contacting them about the IHS promotion thought that research had been done establishing their eligibility to unclaimed funds (Tr. 139, 199, 215, 217, 219, 232-233, 249, 256).

Finally, Representation (b) is also supported by the testimony of Complainant's consumer witnesses (Tr. 22, 63-64).

Representation (b) is admittedly false (Tr. 10). The represen tation is material in that it tends to induce the remittance of $19 as a research compensation fee.

Representations (c) and (d)

"(c) Respondents will confirm or verify the addressee's eligibility to receive unclaimed funds in return for the addressee's completion and submission by mail to Respondents of an "Eligibility Form" provided by Respondents and the addressee's payment by mail to Respondents of a "research compensation fee" or "compensation fee."

(d) Respondents will provide an addressee who meets the requirements described in (c), supra, information disclosing the location and amount of unclaimed funds to which he or she is entitled and instructions revealing where and how such funds may be claimed.

Each of the solicitation packages makes Representations (c) and (d) to the ordinary reader. Those portions contributing to this overall impression are set forth below:

Each of the letters in the promotion packages contributes to these representations. In CX-1, the following language indicates to the ordinary reader that the Respondents will provide the necessary documentation so that the reader will know how much he is entitled to and how to go about obtaining the money:

...You do not have to know actual sources of unclaimed funds. The Department of Unclaimed Funds will research the entire fifty states Unclaimed Funds Bureaus for you. To prevent loss of benefits we strongly urge you to return the enclosed Eligibility Form within 48 hours of receipt so that we may determine the extent of your eligibility. (CX-1).

The remaining versions of the letter contribute to this repre sentation as follows:

The IHS Department of Unclaimed Funds and Benefits will provide you with the Unclaimed Funds, Merchandise and Benefits Documentation... Return the enclosed Eligibility Form and your documentation compensation fee within 48 hours of receipt so that you may immediately begin the process of determining the extent of your eligibility. We will also prepare for you (whether or not you order the documentation) at no charge a personal computer report on your Unclaimed Funds Office contact and the report will include verification of the enclosed eligibility form." (CX-3, 20(A), 13, 5).

An ordinary reader would assume that he would receive "documentation" after remitting his "documentation compensation fee." The word "documentation" means the use of documentary evidence or a furnishing with documents to substantiate a claim. (Random House College Dictionary, 1975). The average person would assume that this "documentation" would show him the "extent of his eligibility" (Tr. 327-328). He would expect that Respondents would reveal the dollar amount of his unclaimed funds (Tr. 328).

The Eligibility Form itself implies by its name that the person who remits the $19 and sends in the form will have his eligibility confirmed. CX-2 states in Part two as follows:

I understand that the Department of Unclaimed Funds is offering me the opportunity to determine my eligibility and entitlement of such monies or merchandise by researching each of the fifty states' unclaimed funds bureaus. The Department of Unclaimed Funds will also gather additional documentation on my behalf not normally recorded in the state unclaimed funds offices such as sweepstakes, contests, lotteries and other benefits to which I may be entitled.... The Department will help to expedite the transfer of such money or merchandise to me. To compensate the Department of Unclaimed Funds, I enclose my research compensation fee of $19 for the researching of the state records and filing a written report to me." (CX-2).

Part two of the later versions was changed, in part, to read as follows:

"I hereby certify that I have received official notification informing me of your service to aid in determining my eligibility as a potential recipient of unclaimed money, merchandise or unused benefits. I understand that Respondents are ...offering me the opportunity to help me determine my eligibility and entitlement to such money, merchandise or benefits by providing me with the Unclaimed Funds, Merchandise and Benefits Documentation."

Thereafter, Part two refers to the "documentation compensation fee of $19 for the providing of the IHS Department of Unclaimed Funds and Benefits Service and Documentation" and again refers to the personal computer report "which will also include a verification of this eligibility form." This quoted material again supports the making of Representations (c) and (d) (Tr. 331, 441).

Finally, the "INTER-OFFICE USE ONLY" box leads the ordinary reader to believe that Respondents will fill in the dollar amount of unclaimed money when it receives the completed eligibility form and $19. In this regard, the box will be completed "upon return" (CX-2) or "after processing" (CX-19, 20(b), 14, 4, 6). This strongly supports the making of Representations (c) and (d) (Tr. 331). Dr. Winick's opinion that a consumer reading this would not anticipate that a particular amount of money due him would be entered there (Tr. 751) is rejected.

As previously discussed, many ordinary recipients of this material would not read the question and answer brochure and would form their impressions based upon the other materials. Moreover, even if persons did read the brochure, many ordinary readers would not notice the phrases tending to contradict Representations (b) and (c). For example, it is doubtful that many would notice the follow ing sentence appearing at the end of the third paragraph of the answer to Question 1:

"However, with the information that we provide, you can begin the process of determining whether or not you are one of those lucky persons." (CX-15, 15a).

My conclusion that Respondents make Representations (c) and (d) is corroborated, in part, by the testimony of Dr. Scipione (Tr. 299-300).

In addition, the survey introduced by Respondents (RX-12) found that 40.19 % of those who read Respondents' materials, including the question and answer brochure, were of the opinion that Respondents would provide a personal search for them after the form and $19 was returned to Respondents (RX-12 at p. 27). In addition, 18.62 % were of the opinion that they would receive information about where, how much, and how to claim the money (RX-12 at p. 33).

The representatives of the three State unclaimed funds offices further corroborated the fact that Representations (c) and (d) are made. It was established in one State that about 60% of the people thought IHS would confirm or verify their eligibility to receive unclaimed funds (Tr. 166). Many people wanted to know where their money was, how much money it was, and what the property consisted of (Tr. 139). In another State at least half of the people that con tacted the unclaimed funds office were under the impression that the office was definitely holding funds for them (Tr. 199, 215, 217, 219). In another state, "the majority" of the persons contacting the office had the same impression (Tr. 232-233, 249, 256).

Finally, Complainant's consumer witnesses thought that Represen tations (c) and (d) were made. In this regard, Mrs. Crowell thought that Respondents had the information available to complete the inter-office use only block on the eligibility form (Tr. 25) and she expected to receive particular information advising her where her unclaimed funds were located (Tr. 23, 27). Frances Carter was under the impression that Respondent was holding funds for her (Tr. 63-4).

In conclusion, it is found that each of the Respondents' solici tation packages makes Representations (c) and (d) to a person of ordinary mind. These representations are false (Tr. 10). They are clearly material in that they tend to induce the reader to remit $19 to the Respondents.

Conclusions of Law

Each of Respondents' solicitation packages must be considered as a whole and the meaning is to be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U.S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, ll84 (E.D.N.Y. 1978); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. l956); Leo Daboub, P.S. Docket No. l9/l85 (P.S.D. July l0, l986).

Express representations are not required. It is the net impression which the advertisement is likely to make upon individuals to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it, the false representation statute is applicable. G.J.Howard Co. v. Cassidy, l62 F. Supp. 568 (E.D.N.Y. l958); See also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). 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. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985 at p. 9). In addition, inconspicuous disclaimers are not sufficient to dispel the effect of false representations. Leo Daboub, supra; Gottlieb v. Schaffer, supra.

The Administrative Law Judge and the Judicial Officer can determine whether the representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980); The Robertson-Taylor Company, P.S. Docket Nos. 16/98-102, 16/120-121, (P.S.D. March 31, 1986 at p.29); Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958).

Applying the foregoing standards, I find that each of the Respondents' solicitation packages makes the representations alleged in § 4(a)-(d) of the Complaint. The language contained in these solicitations, when read in context, which directly or impliedly makes these representations is set forth in the Findings of Fact.

In addition, the representations are admittedly false and are material. Complainant has established its case by a preponderence of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978).

Respondents argue that the Postal Service should apply the following deception standard recently adopted by the Federal Trade Commission in Cliffdale Associates, Inc., 103 F.T.C. 110 (March 23, 1984):

... the Commission will find an act or practice deceptive if, first, there is a representation, omission, or practice that, second, is likely to mislead consumers acting reasonably under the circumstances, and third, the representation, omission, or practice is material.

These elements articulate the factors actually used in most earlier Commission cases. Id. The Commission further clarified its position on this standard as follows:

...the requirement that an act or practice be considered from the perspective of a "consumer acting reasonably in the circumstances" is not new. Virtually all representations, even those that are true, can be misunderstood by some consumers. The Commission has long recognized that the law should not be applied in such a way as to find that honest representations are deceptive simply because they are misunderstood by a few. (f.n. omitted). Thus the Commission has noted that an advertisement would not be considered deceptive merely because it could be "unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons to whom the representation is addressed."

The Postal Service is clearly not bound by cases of the Federal Trade Commission; however, it may look to FTC decisions and court cases construing the FTC Act for guidance. Moreover, the federal court cases construing the postal false representation statute are legion. Accordingly, it is not necessary to decide whether the FTC deception standard is in conformity with the standards established by the courts and the Postal Service for cases arising under 39 U.S.C. § 3005.

However, assuming arguendo that the FTC deception standard could properly be applied in the instant case, Respondents would still be found to make the representations alleged in the Complaint. First, the solicitations are so ambiguous that a significant number of ordinary and "reasonable" readers would get the overall impression set forth in Representations (a)-(d). Also, since about a million solicitations were sent to "opportunity seekers," it is possible that an even greater number of those recipients would interpret the materials in a manner consistent with the above representations. In this regard, the fact that a million of Respondents' recipients had previously paid $6 for a "diamond" and a chance in the sweepstakes indicates a group who "would like to get something for free" (Tr. 598).

Respondents have failed to persuade that the recipients of their solicitations are more sophisticated and intelligent than the ordinary, average person. Although Respondents' expert, John Pahmer, was of the opinion that the number of direct mail purchasers with higher incomes had increased nationwide, and that the latter probably, although "not necessarily," were better educated, Respondents did not establish that their recipients were above average in intelligence.

Respondents also argue that the degree of miscomprehension of their solicitations shown by their survey (RX-12) falls within the "noise level", i.e. the level of miscomprehension present in any scrupulously honest communication. As previously stated, the solicitations in issue are highly ambiguous and are susceptible to more than one interpretation. The average reader of Respondent's solicitations would easily find the interpretations alleged as Representations (a)-(d). Since clear, lucid advertisements are not involved here, Respondents' contention is rejected. Moreover, Respondents' survey (RX-12) shows that 11.76% of the readers thought that IHS was a government entity. This percentage alone represents a significant number. Cf. Firestone Tire & Rubber Co. v. FTC, 481 F.2d 246, 249 (6th Cir. 1973) (10% or 15% of consumers mislead was considered sufficient for violation of FTC Act). The percentages for the other representations in issue were much higher. Also, in view of the fact that the volume of Respondents' mailings has been high (1.9 million by their estimate), a very large number of people have already been mislead by these representations.

In reaching the conclusions herein, no reliance has been placed on the Herman "Wave I" survey (CX-36). Accordingly, it has not been necessary to decide whether that document is admissible for the purpose of proving consumer perception. In addition, the fact that 2,300 people filed complaints or inquiries regarding the Respond ents' promotion with the Postal Service has not been a significant factor in reaching the decision.

Respondents also argue that the "first" solicitation package (CX-1,2,7,9), which is clearly the most misleading, should not be considered in this proceeding because that promotion was allegedly discontinued. Respondents contend that they intended to perform actual research of unclaimed funds in the 50 states for those who remitted $19, that they sent out the solicitations before they realized that the state files were not available to them, and that they returned the remittances when they realized they would not be able to perform the services. They then state that they developed a new promotion to sell the loose-leaf booklet containing sources of unclaimed funds.

Respondents' contention must be rejected. In the first place, it is not clear that the CX-1,2,7,9 solicitation was the first version. In this regard, it was created and mailed in July of 1985 (Resp. Proposed Findings of Fact No. 57; Tr. 485-487). Respondents' Director of Marketing, Rodney Napier, testified that the promotion was developed in January l985 (Tr. 463; Resp. Memorandum of Law, p.19) and the record contains a "Department of Unclaimed Funds" mailing envelope with an April 19, 1985 postmark (CX-9). The CX-1,2,7,9 solicitation is so similar to the later versions that it is likely that it is another example of the "new" promotion. How ever, it does not matter whether this is a "new" or "old" promotion for the purposes of this decision because this solicitation makes the same false representations that are contained in the later versions. Accordingly, it cannot be said that the false representa tions were, in fact, discontinued. Moreover, in any event, discon tinuance of an advertisement is generally not sufficient to make the issues moot. Profit and Churches of the New Octave, P.S. Docket No. 6/5 (P.S.D. Oct. 14, 1977); see also, United States v. W. T. Grant Co., 345 U. S. 629, 632 (1953).

Respondents also contend that there was no detriment to con sumers because the solicitations offered a money-back guarantee. However, it is well established that a promise to refund if a customer is dissatified will not dispel the effect of false adver tisements. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939); Borg-Johnson Electronics, Inc. v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959).

Finally, Respondents contend that their promotion is protected by the First Amendment to the Constitution. However, constitutional guarantees against restrictions of freedom of speech do not protect false advertisements. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948). Advertisers possess no constitutional right to dissemi nate false or misleading materials. United States Postal Service v. Beamish, 466 F.2d 804, 807 (3rd Cir. 1972).

Conclusion

After consideration of the entire record, it is concluded that as to each of Respondents' solicitations Respondents are engaged in a scheme to obtain money through the mail by means of false repre sentations. Accordingly, the False Representation Order and Cease and Desist Order authorized by 39 U.S.C. § 3005 are issued herewith.

1/ The following solicitation packages, or portions thereof, set forth to some extent in Stipulation 1, are considered herein: (I) CX-1, 2, 7, 9; this was mailed in July 1985 (Resp. PFOF 57; Tr. 485-487); (II) CX-19; (III) CX-20(A), 20(B), 8; (IV) CX-3, 4, 8, 11, 15 and/or 15a; (V) CX-13, 14, 8, 15 and/or 15a, 21(A); (VI) CX-5, 6, 8, 12, 15 and/or 15a. An earlier version was mailed April 19, 1985 (CX-9).

2/ On cross-examination he mentioned that it was "reasonably clear" what was being offered (Tr. 605), but later admitted that the format of the "documentation" was unclear (Tr. 607).

3/ Respondents' expert John Pahmer admitted many consumers do not read everything, so each piece of a solicitation package should stand on its own (Tr. 604). He said many consumers would read the eligibility form first (Tr. 593). Dr. Winick does not have the requisite direct mail experience, and his opinion that consumers will read about IHS in the question and answer brochure before reading the letter and eligibility form in detail (Tr. 735, 757) is rejected. Dr. Scipione's testimony on this is credible.