In the Matter of the Complaint Against

CONTE & COMPANY, INC.,
a corporation d/b/a CONTE & CO.

and

GUS BAZARIAN,
individually and as an
officer of said corporation,
2137-H Flintstone Drive
Tucker, GA 30084-5009

and

P. O. Box 1648,
Decatur, GA 30031-1648

P.S. Docket No. 29/131

Grant, Quentin E. Chief Administrative Law Judge

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Kenneth F. Innes, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1144

APPEARANCE FOR RESPONDENTS:
Frank J. Shannon, III, Esq.
Henritze & Shannon
422 Candler Building 127
Peachtree Street, N.E.
Atlanta, GA 30303-1810

INITIAL DECISION

In a Complaint filed on February 19, 1988, the General Counsel of the Postal Service alleges that Respondents are violating the false representation and lottery provisions of 39 U.S.C. 3005 in connection with a "gift" promotion. Specifically, in Count One of the Complaint, it is alleged that Respondents seek remittances of money through the mail by means of a false representation, made in direct mail postcards, that recipients who remit the required $17.00 fee will receive one of the gifts listed thereon to use and enjoy without restrictions or additional costs. Count Two alleges that by means of the same promotional scheme, Respondents are conducting a lottery by offering recipients a chance to receive one of a number of prizes for a fee constituting consideration. The Complaint asks for appropriate remedial orders.

Respondents' answer asserts several constitutional defenses to the proceeding and denies that Gus Bazarian, individually, is a proper party thereto. The answer also makes certain admissions relative to Conte & Company, Inc. and Gus Bazarian but denies engaging in the promotion and lottery alleged in the Complaint.

A hearing was held on April 6, 1988. Complainant's witnesses were Postal Inspectors James Garrett and Joanne Jackaway and consumer Peter Addante. Respondents called no witnesses. Both parties have filed proposed findings of fact, conclusions of law, and written arguments all of which have been considered in arriving at this decision. To the extent indicated they have been adopted. Otherwise they have been rejected as irrelevant or contrary to the evidence.

FINDINGS OF FACT

1. Conte & Company, Inc. is a Georgia corporation. Its registered address is 2137-H Flintstone Drive, Tucker, Georgia 30084-5009. It does business as Conte & Co. and receives mail under that name at P. O. Box 1648, Decatur, Georgia 30031-1648 (Ans. 2; CX-1, 2, 11; Tr. 44).

2. Respondent Gus Bazarian, whose address is 2137-H Flintstone Drive, Tucker, Georgia 30084, is president of Conte & Company, Inc. (Ans. 3) and at the time of incorporation was the sole director of the corporation (CX-6). As of January 13, 1988, in a form filed with the Secretary of State of the State of Georgia, he also identified himself as chief executive officer and chief financial officer of the corporation. Gus Bazarian directs and controls the activities of the corporation involved in this proceeding (RX-1, 4).

3. Respondents send unsolicited postcards by mail advising recipients thereof that they have been awarded, and are entitled to receive, one of seventeen valuable gifts listed thereon (CX-1; RX-1, 4). Recipients are advised that their gift number, undisclosed on the postcard, will determine which gift they will receive. Recipients are further advised that in order to receive their award package they must mail to Conte & Co. a check or money order in the amount of $17.00, covering processing and handling, payable to Conte & Co. There is no indication on the postcard that there will be any additional cost for the gift beyond the $17.00 fee or any restrictions on its use and enjoyment.

4. After payment of the $17.00 fee, the sender receives from Conte & Co. an envelope enclosing a sealed envelope which is the "award package" or "gift package" or "National Gift House Extravaganza package" mentioned in the postcard solicitation. On the back of their gift package appears the following in small print:

For every 7,500 gift catalogues distributed a major gift will be given. The remaining recipients will receive world for less holiday for two certificates. At certain resorts enjoyment of the benefits conferred by the vacation certificate is contingent upon attendance at a time-sharing vacation presentation. Users are NOT required to buy anything. At some resorts certain surcharges may apply.

5. The gift package contains (a) a brochure illustrating and describing the seventeen gifts listed in the postcard, (b) a gift certificate containing the recipient's gift number to be mailed to National Gift House Extravaganza, and (c) a "special bonus gift" consisting of a free membership in Humpo's Film Club entitling the member to free Kodak film when he has his film processed by Humpo.

6. The gift numbered 21721, received by 7499 out of 7500 persons responding to the solicitation, is the "World For Less Holiday Guidebook" and certificate for a three days-two nights/four days-three nights holiday vacation for two at any of 95 resorts (CX-4). Meals and transportation are not included in the "gift" vacation. Recipients of this "gift" are advised in the guidebook and certificate that to take advantage of it they must send a check for $20.00 to Universal Vacations, agree to attend a sales presentation of the benefits of a vacation plan, and that there are numerous restrictions affecting the choice of resort and available times for the vacation. The guidebook also discloses that its purpose is to solicit persons to buy time share periods at the resorts involved.

CONCLUSIONS OF LAW

1. The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959). Express representations are not required. It is the net impression that the advertisement is likely to make upon purchasers to whom it is directed that is important. 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 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). Vibra-Brush Corp. v. Schaffer, supra; Aronberg v. Federal Trade Commission, 132 F.2d 165, 167 (7th Cir. 1942).

2. An advertisement as a whole may be completely misleading although every sentence separately considered is literally true. This may be because things are omitted that should be said, or because the advertisement is composed or purposefully printed in such a way as to mislead. Donaldson v. Read Magazine, Inc., supra.

3. It is not each separate word or a clause here and there of an advertisement that determines its force, but the totality of its contents and the impression of the entire advertisement upon the general populace. Donaldson v. Read Magazine, Inc., supra, at 185-86 (1948); Gottlieb v. Schaffer, 141 F. Supp. 7, 17 (S.D.N.Y. 1956).

4. Applying the foregoing standards of interpretation to Respondents' solicitation, I conclude that it makes by omission and implication the representation alleged in the Complaint. Respondents' omission from the solicitation of any indication of additional cost and restrictions in connection with the vacation gift created the implication that there would be no such cost or restriction on the use and enjoyment thereof.

5. The representation found above is false because there are additional costs and restrictions imposed on the use and enjoyment of the vacation.

6. The false representation is material because it has the tendency to persuade recipients of the solicitation to remit to Respondents the $17.00 fee required to receive a gift.

7. The necessary elements of a lottery or scheme for distribution of money or property by chance as prohibited by 39 U.S.C. 3005 are the furnishing of consideration, the offering of a prize, and the distribution of the prize by chance. Horner v. United States, 147 U.S. 449 (1893); Brooklyn Daily Eagle v. Voorhies, 181 F. 579, 581 (E.D.N.Y. 1910); Tenpen Sales Corporation, P.O.D. Docket No. 2/35 (D.D. May 10, 1961); N.E.S.T., Inc., P.S. Docket No. 14/89 (P.S.D. Aug. 7, 1984). Respondents' promotion involves the required elements. The $17.00 fee paid to Conte & Co. constitutes consideration. The gifts listed in the solicitation are prizes. They have been selected by Respondents but persons responding to the solicitation do not learn what gift they will receive until they have tendered payment. Therefore, the element of chance is present. See, Adtel, P.S. Docket No. 13/131 (I.D. Aug. 3, 1982).

Respondents cite three cases in support of their contention that the courts have regularly and routinely ruled that the offering of a prize and the distribution of a prize by chance means, or relates to, a situation where the drawing for the prize takes place subsequent to the furnishing of consideration. France v. United States, 164 U.S. 676 (1897); United States v. Halseth, 342 U.S. 277 (1952); and United States v. 83 Cases of Merchandise, 29 F. Supp. 912 (D.C. Md. 1939). All three cases involve various aspects of lotteries but none of them stands for the proposition argued by Respondents.

8. Respondents argue that they cannot be held to be conducting a lottery because it was stipulated in an ancillary proceeding in the United States District Court for the Northern District of Florida that the gifts involved are awarded by American Gifthouse Extravaganza. The stipulation referred to was placed in evidence by Respondents as RX-1. It was signed for the government by an Assistant United States Attorney, not by Complainant's counsel herein. This stipulation is not binding in this administrative proceeding (39 U.S.C. 3007(a)). Furthermore, there is no mention of American Gifthouse Extravaganza in any of the exhibits relating to the promotion. All the relevant evidence shows that the awards are made by Conte & Co., although gifts are mailed by National Gift House Extravaganza.

9. Complainant has met its burden of proof by a preponderance of the reliable and probative evidence of record.

10. Respondents are engaged in the conduct of a scheme for obtaining money or property through the mail by means of a false representation and are also engaged in conducting a lottery, gift enterprise, or scheme for the distribution of property by lottery, chance, or drawing, all in violation of 39 U.S.C. 3005.

11. Respondent Gus Bazarian has been shown to be intimately involved, in his individual capacity, in the day-to-day operations of Conte & Company, Inc. d/b/a Conte & Co. as president, chief executive officer, and chief financial officer. He is, therefore, properly included in the proposed Cease and Desist Order.

12. Respondents' constitutional arguments are bare assertions, without specification or citation of authority, that this proceeding and the remedial orders sought violate Respondents' rights under the First and Fifth Amendments to the Constitution of the United States. It has been held that this administrative proceeding is not the proper forum for determining the constitutionality of 39 U.S.C. 3005. Athena Products, Ltd., P.S. Docket No. 11/107 (P.S.D. Aug. 31, 1982).

13. False representation and lottery orders and an order to cease and desist in the forms attached hereto should be issued against Respondents.