In the Matter of the Complaint Against

MID-AM. MARKETING, INC.,
A Corporation d/b/a,
NASHVILLE DIRECTORY COMPANY,
THE NASHVILLE DIRECTORY,
2120 Crestmoor
Nashville, TN 37215-2513

and

WADE L. WHITE,
Individually R.R. 4,
Box 58 Lincoln, NE 68528-8821

P.S. Docket No. 24/12

Cohen, James A. Judicial Officer

APPEARANCES FOR COMPLAINANT:
H. Richard Hefner, Esq.
Alan B. Ostroff, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1100

APPEARANCES FOR RESPONDENTS:
William D. Coston, Esq.
Karen Abrams, Esq.
Bishop, Liberman, Cook,
Purcell & Reynolds
1200 17th Street, N.W.
Washington, DC 20036-3006

POSTAL SERVICE DECISION

Complainant, the Consumer Protection Division, Law Department, United States Postal Service, has filed an appeal from an Initial Decision of an Administrative Law Judge dismissing a Complaint alleging that Respondents are in violation of 39 U.S.C. 3001 and 3005.

Background

This proceeding was initiated by the filing of a Complaint alleging that Respondents, by means of unsolicited mailings to businesses which request the recipients to purchase listings in a "yellow pages" telephone directory, make the following materially false representations:

"5. . . .

(a) The directory which will purportedly be published by Respondents is a geographically expanded version of a directory previously published by the publisher of The Nashville Directory.

(b) The Nashville Directory will be widely circulated throughout the Nashville area to all businesses.

(c) The Nashville Directory will be published within a reasonable time of receipt of each solicitation from Respondents.

(d) Nashville Directory Company is the publisher of the classified directory or 'yellow pages' normally supplied to all telephone subscribers in the recipient's area.

(e) The amount of money set forth on the statement is owing and due to Respondents by the addressee."

The Complaint further alleged in Paragraph 7 that the mailings employed by Respondents (1) are in the form of or reasonably could be construed as bills, invoices or statements of account due; (2) do not contain the disclaimer prescribed by 39 U.S.C. 3001(d),1/ or the regulations promulgated thereunder; and

1/ 39 U.S.C. 3001(d) provides in 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) 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.

(3) are nonmailable matter under 300l(d) which constitutes "prima facie evidence that Respondents are engaged in conducting a scheme or device within the purview of 39 U.S.C. 3005." In a timely filed Answer, Respondents denied making the representations alleged in Paragraph 5 of the Complaint and denied that the representations are materially false. Respondents further denied the allegations of Paragraph 7 of the Complaint.

At a hearing before an Administrative Law Judge, both parties introduced exhibits and presented the testimony of witnesses to support their respective positions. Complainant called three witnesses who had reviewed Respondents' solicitation during the course of their employment. Respondents presented the testimony of Respondent Wade L. White.

Following the hearing and after the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondents do not make the representations alleged in Paragraphs 5(a), (b), (d) and (e) of the Complaint and that the representation alleged in Paragraph 5(c), while impliedly made, is not false. Based on these findings the Administrative Law Judge concluded that Complainant had not established its case by a preponderance of the reliable and probative evidence of record. He therefore dismissed the Complaint.

Complainant's Exceptions

Complainant has filed seven exceptions to the Initial Decision. Six exceptions are taken to the Administrative Law Judge's findings of fact and the seventh exception pertains to his conclusion of law that Complainant failed to sustain its burden of establishing its case by a preponderance of the evidence. Respondents oppose Complainant's exceptions, generally contending that the Administrative Law Judge properly evaluated the evidence of record and reasonably construed their solicitation. Complainant's exceptions are addressed hereafter. Exception 4 is considered first since a ruling on that exception affects the remainder of the exceptions and permits a more orderly discussion of the issues presented on appeal.

Exception 4

By this exception Complainant challenges the Administrative Law Judge's finding that Respondents' mailings do not make the representation alleged in Paragraph 5(d) of the Complaint, that the "Nashville Directory Company is the publisher of the classified directory or 'yellow pages' normally supplied to all telephone subscribers in the recipient's area." In making this finding, the Administrative Law Judge relied on two paragraphs of the fine print in Respondents' solicitation which advises the recipient that the directory is an independent publication not part of nor associated with the "telephone company, household phonebook or directory" and that it is not a renewal notice for advertising "your business is presently running in any other Directory" (I.D. p. 6).

Complainant contends that the language used in Respondents' solicitation creates the impression that it is a mailing of the South Central Bell Yellow Pages, the telephone company in the Nashville area. Complainant relies on the solicitation itself as well as the testimony of its consumer witnesses to support its position. Respondents argue that the language of the solicitation, the testimony of Complainant's witnesses and a comparison with South Central Bell's solicitation do not support Complainant's exception.

Respondents' mailing is approximately the same size as the typical "yellow page" in a classified advertisement appearing in the South Central Bell Yellow Pages telephone directory. The mailing is yellow in color and contains two prominent (approximately l 1/4 inches square) logos -- one in each upper corner. One logo depicts a telephone receiver directly above an open book with the words "Yellow Pages" prominently displayed across the book. The other logo is almost identical to the "Walking Fingers" logo shown on directories published by telephone companies. The top center of the mailing contains in black bold print the statement "Advertise in the Yellow Pages of The Nashville Directory." Below an address shown for the Nashville Directory is the quoted phrase in smaller, but still bold distinct print, "Yellow Pages Working For You, 24 Hours a Day, 365 Days a Year." Directly below that phrase in larger distinct and dark print is the following message in capital letters: "CONCERNING DIRECTORY ADVERTISING SOLICITATIONS FOR THIS DIRECTORY - DUE TO THE EXPANDED MARKET COVERAGE AND LIMITED TIME - THIS MAY BE YOUR ONLY CONTACT." The remainder of the page contains (a) a box approximately 3 by 7 l/2 inches, which shows a proposed yellow pages advertisement and price for the advertisement, (b) information pertaining to proposed changes which could be made to the advertisement, and (c) ten paragraphs of information in small print (approximately l/l6 inch per line). Two of the ten paragraphs of small print contain the disclaimer language which the Administrative Law Judge found expressly negated the representation alleged in the Complaint.

Inconspicuous disclaimers or fine print qualifications of broad claims are not sufficient to dispel the effect of a false representation. Kurzon v. United States Postal Service, 539 F.2d 788 (lst Cir. 1976); Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). Both disclaimers contained in Respondents' mailing are in small print toward the bottom of the page and are insufficient to counteract the overall tenor of the mailing and the impression it would create on the ordinary reader. The impression created by an advertisement viewed in its entirety by the ordinary reader to whom it is directed is the criteria for determination of the existence of a false representation under 39 U.S.C. 3005. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387 (5th Cir. 1977). The solicitations themselves are the most persuasive evidence of the representations made. See TELEX & twx Directory, P.S. Docket No. 13/6 (P.S.D. April l, l983). Despite the disclaimer, the language, format, color and logos of Respondents' solicitation create the overall impression that Respondents are the publishers of the Yellow Pages directory supplied to all subscribers in the Nashville area.

The conclusion that the ordinary reader would believe that Respondents' solicitation was distributed by the area telephone company is buttressed by a reference on the reverse side of the advertisement to the availability of red display advertising, the color other than black or yellow included in the South Central Bell Directory, 2/ the use of the words "Yellow Pages" and the format of the examples of advertising. It is further supported in some instances by the content of the proposed directory advertisement contained in the mailings which was identical or almost identical to the recipients' current telephone company yellow page directory advertisements (Comp. Exhs. 10-12, 14, 15). In addition, while varying inferences may be drawn from the testimony of Complainant's consumer witnesses, the testimony is basically supportive of this conclusion (Tr. 18-19, 55-56, 63-64, 71).

Respondents argue that reliance should not be placed on the logos used in the solicitation because they are not copy- righted, and may, and are, used by other directory companies. While the logos are not copyrighted their use in the context of the entire solicitation creates the impression that the mail- ings were distributed by South Central Bell.

2/ See Comp. Exhs. l0 and ll, which are pages from the "Greater Nashville Yellow Pages" published by South Central Bell and contain red display advertisements.

Both parties agree "The Nashville Directory" is an independent organization, not connected in any manner with the telephone company servicing the Nashville area. Thus, the representation to the contrary is false. The representation is also material in that, by its nature, it will induce recipients to accept the offer and make payment. See Lynch v. Blount, 330 F. Supp. 689 (S.D.N.Y. 1971), aff'd 404 U.S. 1007 (1972); Dermacure Co., P.S. Docket No. 17/31 (P.S.D. Dec. 31, l984); Standard Research Labs., P.S. Docket Nos. 9/63 & 9/64 (P.S.D. Aug. 31, l981); Athena Products, Ltd., P.S. Docket No. 7/99 (P.S.D. June 26, 1981).

Accordingly, it is concluded that Respondents make the representation alleged in Paragraph 5(d) of the Complaint and that the representation is materially false. Complainant's exception is sustained and the Administrative Law Judge's finding and conclusion to the contrary are reversed.

Exception Nos. 1, 2 and 3

By Exceptions l and 2, Complainant takes issue with the findings of the Administrative Law Judge that Respondents' mailings do not make the representations alleged in Paragraphs 5(a) and (b) of the Complaint. In Paragraphs 5(a) and (b) of the Complaint it is alleged that Respondents represent that "The directory . . . is a geographically expanded version of a directory previously published by the publisher of the Nashville Directory," and that "The Nashville Directory will be widely circulated throughout the Nashville area to all businesses." In Exception 3, Complainant challenges the Administrative Law Judge's finding that the representation alleged in Paragraph 5(c) of the Complaint that "The Nashville Directory will be published within a reasonable time of receipt of each solicitation . . .," although impliedly made, is not false.

With regard to Exceptions 1 and 2, Complainant alleges that the words "Expanded Market Coverage" and "Working For You, 24 Hours a Day, 365 Days a Year" which are included in Respondents' solicitations in the boldface headlines would be reasonably understood by the ordinary reader to make the representations alleged in Paragraphs 5(a) and (b). In connection with the representation alleged in Paragraph 5(c), Complainant argues that the evidence establishes that Respondents had not taken the steps necessary to have the directory published within a reasonable time from the distribution of their solicitations or by their own target date for publication.

Respondents rely principally on the disclaimer language included in the solicitations to support their position that their mailings do not make the representations alleged in Paragraphs 5(a) and (b). Respondents cite the evidence relied on by the Administrative Law Judge and the testimony of their witness to support their position that the representation alleged in Paragraph 5(c) is not false.

In determining the effect of representations on ordinary readers, reasonable implications of advertisements are to be given weight, as well as express statements. Spiegel, Inc. v. F.T.C., 411 F.2d 481 (7th Cir. 1969); Baslee Products Corp. v. United States Postal Service, 356 F. Supp. 84l (D.N.J. l973); Nutritional Research, P.S. Docket No. 17/117 (P.S.D. Dec. 14, 1984); cf. The New Body Boutique, Inc., P.S. Docket No. 11/95 (P.S.D. July 30, 1982). The representations alleged in Paragraphs 5(a) and (b) of the Complaint are reasonably implied and necessarily flow from the primary false representation that Respondents' mailings are those of the local telephone company or its agent. Thus, the ordinary reader, believing the local telephone company was responsible for the mailings, would view the bold print language of the advertisement "DUE TO THE EXPANDED MARKET COVERAGE . . ." to mean an expanded market coverage of the local telephone company yellow pages and that the directory would be widely circulated throughout the Nashville area to all businesses. The disclaimers included in the small print would not dispel this notion.

It is thus found that these representations are made. They are material inasmuch as they serve as an inducement to purchase a listing in the directory. However, the record does not support a finding that the representation alleged in Paragraph 5(b) of the Complaint is false. The burden of proving the falsity of a representation in a proceeding under 39 U.S.C. 3005 rests with Complainant. Contemporary Mission, Inc. P.S. Docket No. 8/159 (P.S.D. Nov. 26, 1981); Rush Industries, P.S. Docket No. 7/50 (P.S.D. April 10, 1980). There is no evidence in the record that the directory would not be as widely circulated as represented. Complainant has thus failed to sustain its burden of establishing the falsity of representation 5(b).

Complainant has also failed to sustain its burden of proving the falsity of representation 5(c). The evidence of record supports a finding that Respondents intended to publish their directory within a year from the date of their first solicitation mailing (Tr. 133-34). Although it might be expected that there would be no more than a short lag between initial contact and publication (Tr. 75-6), the unrebutted testimony establishes that most directories are published within nine months to two years after solicitations for advertisements are distributed (Tr. 134-36). In the absence of any contrary evidence of what constitutes a reasonable time for publication, the Administrative Law Judge properly found that representation 5(c) is not false.

Accordingly, it is concluded that Respondents make the representations alleged in Paragraphs 5(a), (b), and (c) of the Complaint. The representation alleged in Paragraph 5(a) of the Complaint is materially false but not the representations alleged in Paragraphs 5(b) and (c). Complainant's Exception l is thus sustained, and the Administrative Law Judge's finding and conclusion to the contrary are reversed. Complainant's Exceptions 2 and 3 are denied to the extent indicated.

Exception No. 5

Complainant's fifth exception relates to Paragraph 5(e) of the Complaint. The Administrative Law Judge found that Respondents' solicitation does not represent that "The amount of money set forth in the statement is owing and due to Respondents by the addressee." The finding is supported by a preponderance of the evidence.

The bold print of the mailing specifically states that it is seeking to have the recipient "Advertise in the Yellow Pages" and that it is an "Advertising Solicitation." The previously described 3 by 7 1/2 inch box on the mailing states in dark print at the top "With your approval, your ad as it appears will be published in our new Directory" emphasis added . Further, the format of the solicitation is not the ordinary format of a bill, and the payment language differs from that ordinarily found in a bill. Additionally, the solicitation includes a signature block for authorization for the publisher to insert the "advertising in its directory subject to the terms and conditions hereof which the applicant has read." Finally, the reverse side which contains "Samples of Advertising" would tend to distinguish the solicitation from a bill. Thus, the overall impression created by the solicitation is that the recipient of the mailing was not obligated to advertise, that the act of advertising was purely voluntary and that no money would be due unless the recipient affirmatively chose to advertise. On this record it cannot be concluded that the solicitation makes the representation alleged in Paragraph 5(e) of the Complaint. Thus, the Administrative Law Judge correctly ruled on this issue.

Exception 6

Complainant contends the Administrative Law Judge erred in failing to find that Respondents' mailings are in the form of, or reasonably could be construed as, bills, invoices or statements of accounts due. (See par. 7 of the Complaint). For the reasons stated in connection with the discussion of Exception No. 5, the mailings would not reasonably be construed as a bill obligating the recipient to make payment unless the offer was accepted. Accordingly, there is no merit to this exception.

Exception 7

Under this Exception, Complainant takes issue with the Administrative Law Judge's conclusion that Complainant has failed to meet its burden of proving through a preponderance of reliable and probative evidence that Respondents are engaged in the conduct of a scheme proscribed by 39 U.S.C. 3005. The findings of fact on which this conclusion is based have been previously addressed. To the extent the findings of the Initial Decision have been reversed, the conclusion that Complainant has not sustained its burden of proof is also reversed.

Respondents' Contention

Respondents contend that Complainant's Brief on Appeal is defective and could be dismissed since it does not take specific exception to any particular finding of fact as required by 39 C.F.R. 952.25(e)(3). While it is true Complainant's brief does not comply in all respects with the requirements of 39 C.F.R., Respondents have not shown that they were handicapped in the preparation of their reply brief. The sense of Complainant's exceptions and the findings to which they pertain are clearly evident on examination of the Initial Decision. Respondents' Brief on Appeal shows a clear understanding of Complainant's arguments and the findings and conclusion which they address. Thus, no substantive error has occurred.

Conclusion

After consideration of the entire record it is concluded that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Complainant's appeal is sustained to the extent indicated and the Initial Decision is reversed in part. The Orders authorized under 39 U.S.C. 3005 are issued with this Decision.