P.S. Docket No. 30/37
July 27, 1989
In the Matter of the Complaint Against )
)
CARD REDEMPTION CENTER )
805 Third Avenue )
Suite 190 )
New York, NY 10022-7513 )
and )
INTERSTATE DISTRIBUTION CENTER )
DEPT. 190 )
805 Third Avenue Building )
New York, NY 10022-7513 )
and at )
NR HGHWY I-285 )
P.O. Box 2596 )
Smyrna, GA 30081-2596 )
and at )
1401 Johnson's Ferry Road )
Suite 328-B )
Marietta, GA 30082-6495 )
and )
SELECT DIRECT, INC. )
126 Fifth Avenue, Suite 8C )
New York, NY 10011-5606 )
and )
DAVID SCHWARTZ )
126 Fifth Avenue, Suite 8C )
New York, NY 10011-5606 ) P.S. Docket No. 30/37
Cohen, James A., Judicial Officer
APPEARANCES FOR COMPLAINANT:
Stacy M. Ludwig, Esq.,
Jerry Belenker, Esq.,
Jeffrey Kahn, Esq.,
Consumer Protection Division,
Law Department,
United States Postal Service,
Washington, DC 20260-1144
APPEARANCE FOR RESPONDENTS:
Robert Ullman, Esq.,
Bass & Ullman,
747 Third Avenue,
New York, NY 10017-2873
POSTAL SERVICE DECISION
Complainant has filed an appeal from the Initial Decision of an Administrative Law Judge which dismissed a Complaint alleging that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.
Background
The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint 1/ alleging that Respondents solicit money or property through the mail by means of postcards which make materially false representations in violation of 39 U.S.C. § 3005. Specifically, Complainant alleges that Respondents falsely represent:
"6. . . .
(a) the recipient of the postcard is entitled to receive the product based on the results of a contest, sweepstakes or drawing;
(b) the product is worth substantially more than the payment required to receive it;
(c) the remittance required to receive the product is for incidental costs of transporting the product to the recipient;
(d) the product has been set aside specifically for the recipient of the postcard;
(e) the postcard is other than an offer to sell the product;
(f) the payment required to receive the product is something other than its purchase price, with or without postage and
(g) the product is available to the recipient for only a limited time.
Respondents filed a timely Answer denying that they make the representations alleged in the Complaint and that the representations made in their postcards are materially false. Respondents admitted that the exhibits annexed to the Complaint are reproductions of advertisements distributed by Select Direct, Inc.
At a hearing 2/ before an Administrative Law Judge, both parties called one witness and introduced documentary evidence. 3/ The Administrative Law Judge issued an Initial Decision in which he found that Respondents do not make the representations alleged in paragraphs 6(a), (b), (c), (e) and (f) of the Complaint. Although the Administrative Law Judge found that Respondents make the representations alleged in paragraphs 6(d) and (g) of the Complaint, he concluded that these representations are not materially false. On the basis of these findings, the Administrative Law Judge dismissed the Complaint.
Complainant has filed six exceptions to the Initial Decision to which Respondents have filed a timely reply. Complainant's exceptions have been considered and are addressed hereafter.
Exceptions 1 and 5
Complainant takes exception to the Administrative Law Judge's findings that Respondents' postcards do not represent that the recipient is entitled to receive the product based on the results of a contest, sweepstakes or drawing and that the postcards are other than offers to sell the product (FOF 5 & 9 pertaining to Complaint PP6(a), (e)). 4/ Complainant argues that the Administrative Law Judge was too literal in his interpretation of Respondents' postcards and failed to give sufficient consideration to the inferences and overall impression which flow from the format and language used. According to Complainant, the language and format of the postcards obscure the fact that they are simply solicitations for the purchase of a product. Complainant relies on the sentence "This Is To Inform You That Your Lucky Name Appears Among A List Of People Eligible To Receive This Notice" and specifically points to the use of the word "eligible" and the reference to a "computerized list" as creating the overall impression that the recipient is entitled to receive the product based on the results of a contest, sweepstakes or drawing. Complainant also argues that the inclusion of the "official control no." and the simulated handwritten product name and price contribute to the overall impression that the recipient is entitled to receive a prize. Complainant recognizes that the postcards are headed "Notice of Solicitation," but contends that the remainder of the language used in the postcards contradicts any impression created by this phrase and would lead the less sophisticated recipient to believe that the postcard is other than an offer to sell the product.
Respondents argue that the Administrative Law Judge viewed their postcards as a whole and properly concluded they do not make the representations alleged in the Complaint. Respondents also argue that it is Complainant who places undue weight on isolated portions of the postcards and that the words and format relied on by Complainant do not convey the impression of a "contest," "sweepstakes" or "drawing." Respondents further argue that the words "contest," "sweepstakes" and "drawing" do not even appear on the postcards, and that the heading "Notice of Solicitation" would indicate to the ordinary reader that s/he was being offered a product for a specific sum of money. Respondents finally contend that the allegation in paragraph 6(e) of the Complaint is repetitious and that no evidence has been presented as to what the postcards represent themselves to be, if not offers to sell the particular products.
The Administrative Law Judge found that the postcards are designed to convey the impression that the recipient was specially chosen for the opportunity to acquire the product. However, he found the postcards to be nothing more than "clever, hyped offers" (I.D. at 5) which would not be understood by the ordinary recipient to make the representations alleged in paragraphs 6(a) and (e) of the Complaint.
Although Respondents' postcards do not specifically refer to a contest, they nonetheless convey the impression to the ordinary recipient that they are something other than an offer to sell the product. Indeed, the ordinary recipient relying on the format and organization of the postcards, as well as the words used, would most probably believe that they are entitled to receive the product based on a contest, sweepstakes or drawing. The concepts of luck and eligibility associated with a contest or drawing exist in the use of the language "Your Lucky Name" (CX-1 through 9) and "Eligible To Receive" (CX-1 through 7). The simulated handwritten product name creates the impression that the product is a specific award, as does the official control number printed below the product name and on the detachable receipt. Thus, viewed as a whole, Respondents' postcards represent that the recipient is entitled to the product based on the results of a contest, sweepstakes or drawing.
As Respondents argue, each of the postcards contain the heading "Notice of Solicitation." While the use of the word "solicitation" may alert some recipients to the true nature of the postcards, it does not dispel the overall impression created in the mind of the ordinary recipient by the language and format of the postcards that the recipient has won a prize. Moreover, even if the language in the postcards is 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. FTC, 208 F.2d 382, 387 (7th Cir. 1953), rev'd in part, 348 U.S. 940 (1955); Great Lakes Yellow Pages, Inc., P.S. Docket No. 25/79 at 8 (P.S.D. July 15, 1988).
The representation is false since the recipients were not selected through a contest, sweepstakes or drawing (Tr. 6). It is also material as the recipient would be induced to pay the required fee. See Lynch v. Blount, 330 F. Supp. 689, 693 (S.D.N.Y. 1971), aff'd, 404 U.S. 1007 (1972); Richard W. Verret, P.S. Docket No. 20/18 at 5-6 (P.S.D. Dec. 31, 1986). Since the postcards make the materially false representation that the recipient is entitled to receive the product based on the results of a contest, sweepstakes or drawing, it follows that the postcards make the materially false representation that they are other than an offer to sell the product. Accordingly, Complainant's Exceptions 1 and 5 are sustained.
Exception 2
Complainant takes exception to the Administrative Law Judge's finding that Respondents' postcards do not represent that the product is worth substantially more than the price charged (FOF 6 pertaining to Complaint P6(b)). Complainant argues that the Administrative Law Judge failed to give due consideration to the text and format of the postcards which create the overall impression that the product is worth substantially more than the required payment. Complainant points out that the language used in the postcards tends to disguise the fact that the required remittance includes the cost of the product. As a result, the ordinary recipient would be mislead into believing that s/he is not paying the actual price for the product. Complainant further contends that the representation is false regardless of the lack of evidence of the products' value since the recipient would believe s/he is winning rather than purchasing the product.
Respondents admit that they want recipients to believe they are getting a good value, but contend they do not represent that the product is worth substantially more, or even slightly more, than the required payment. In the alternative, Respondents argue that, if the representation is made, there is no evidence that it is false.
The Administrative Law Judge found that, although partially obscured, the words "product" and "product cost" are present in large print on all of the postcards and would be read by the ordinary recipient. Therefore, he concluded that the postcards do not make the representation. In addition, he found there was no evidence of the value of the products to prove the falsity of the alleged representation.
Each postcard (CX-1 through 9) contains a section describing the product for which the remittance is sought. The 35mm camera is described as "Professional" with numerous listed features (CX-1, 2, 6, 8). The Pierre Cardin Gourmet Mixer is described as a "top-value mixer" with a list of gourmet features (CX-3). The 4 Piece Luggage set is described as "[e]xclusive," having "designer styling," "[a]mple . . . capacity" and several additional features (CX-4, 5, 7, 9).
The descriptions of the products considered with the obscure reference to the product in the list of handling and administrative costs would most likely lead the ordinary recipient to believe that the postcards represent that the product is worth substantially more than the payment required. However, Complainant has not established that this representation is false. In order to prove that a product is worth more than the required payment, the value of the product must be shown. Complainant has presented no evidence of the value of the products involved in this case. See Mid-Am Marketing, Inc., P.S. Docket No. 24/12 at 10 (P.S.D. Jan 5, 1987) (Complainant bears burden of proving falsity). Accordingly, Complainant's exception is granted with respect to the existence of the representation, but denied insofar as it pertains to its falsity.
Exception 3
Complainant takes exception to the Administrative Law Judge's finding that the postcards do not represent that the remittance required to receive the product is for incidental costs of transporting the product to the recipient (FOF 7 pertaining to Complaint P6(c)). Complainant primarily relies on its arguments in connection with Exception 2 to establish that Respondents' postcards make this representation. In addition, Complainant contends that the postcards contain "superfluous and diversionary notifications" pertaining to transportation and handling which contribute to the overall impression that the required remittance covers only incidental costs of transporting the product.
Respondents, on the other hand, contend that the words "product" and "product cost" are included in the list of costs covered by the required fee and, therefore, would not mislead the ordinary recipient. Respondents also contend that the representation is not false because the required remittance covers incidental costs of transporting the product, as well as the cost of the product itself.
The Administrative Law Judge concluded that the representation was not made because the list of cost items include the words "product" and "product cost." He found that these words would be read by the average recipient interested in knowing exactly what the remittance covers (I.D. at 6).
As Respondents argue, the words "product" or "product cost" are included in the list of costs for which the remittance is sought. However, the list of handling and administrative costs in which the words "product" and "product costs" appear tends to obscure the fact that the required fee includes the cost of the product. Moreover, by conveying the impression that the recipient has been selected to receive the product as the result of a contest, sweepstakes or drawing, and that the product is worth substantially more than the required fee, it is unlikely that the ordinary recipient would believe s/he was paying the cost of the product. The ordinary recipient would more likely believe that the required remittance covered only incidental costs. See Borg-Johnson Elec., Inc. v. Christenberry, 169 F. Supp. 746, 751 (S.D.N.Y. 1959) (artfully designed advertisements may be misleading); see also, United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924) ("[i]t is not difficult to choose statements, designs and devices which will not deceive").
The representation is false, as the fee includes the cost of the product (Resp. Reply to Compl. Excep. at 9). It is material in that, along with the other representations found to be made, the recipient would be induced to remit the fee. Complainant's exception to the Administrative Law Judge's finding with respect to paragraph 6(c) of the Complaint is sustained.
Exception 4
Complainant takes exception to the Administrative Law Judge's finding that the representation that the product has been set aside specifically for the recipient is not material (FOF 8 pertaining to Complaint P6(d)). Complainant argues that the representation is material because the postcards create the impression that the product is special and valuable, therefore, inducing the recipient to purchase the product. Respondents argue that the Administrative Law Judge correctly found that the representation is not material and that he could have found that the representation is neither made nor false.
The Administrative Law Judge found the representation is made in Respondents' postcards by the use of simulated handwriting, the expiration dates, the word "NOTICE," the phrase "YOU CAN NOW DEFINITELY OBTAIN" and the inclusion of the box titled "Carrier." However, without the other representations alleged in the Complaint, the Administrative Law Judge concluded that the representation was not material.
While the postcards contain language which indicates that the product is available for the recipient, viewed as a whole they do not represent, nor would the ordinary recipient believe, that the product has been set aside specifically for the recipient. Moreover, even if made, there is no evidence that the representation is false. Accordingly, Complainant's exception to the Administrative Law Judge's finding with respect to paragraph 6(d) of the Complaint is denied.
Exception 6
Complainant takes its final exception to the Administrative Law Judge's finding that the representation that the product is available for only a limited time is not false (FOF 10 pertaining to Complaint P6(g)). Complainant argues that, regardless of Respondent Schwartz' testimony that orders received after the expiration date are not honored, the representation is false when viewed in light of the alleged misrepresentation that the product is held specifically for the recipient. Respondents contend that the unrebutted evidence in the record establishes the truth of this representation.
The Administrative Law Judge found that Respondents' postcards make this representation. However, relying on the testimony of Respondent Schwartz, he concluded that the representation is not false.
As the Administrative Law Judge found, the only evidence presented on the falsity issue was Respondent Schwartz' testimony that the representation is true (Tr. 47-48). Complainant has shown no reason to reject this unrebutted testimony. Therefore, it is concluded that the Administrative Law Judge correctly found that Respondents' products are available for only a limited time. Accordingly, Complainant's exception is denied.
Summary and Conclusion
After consideration of the entire record, it is concluded that each of Respondents' postcards falsely represent that (1) the recipient of the postcard is entitled to receive the product based on the results of a contest, sweepstakes or drawing; (2) the remittance required to receive the product is for incidental costs of transporting the product to the recipient; (3) the postcard is other than an offer to sell the product and (4) the payment required to receive the product is something other than its purchase price, with or without postage. Each of Respondents' postcards also represent that the product is worth substantially more than the payment required to receive it and that the product is available to the recipient for only a limited time. However, these representations have not been shown to be materially false. Respondents' postcards do not represent that the product has been set aside specifically for the recipient of the postcard.
Accordingly, to the extent indicated, Complainant's exceptions are granted and the Initial Decision is reversed. The Orders authorized by 39 U.S.C. § 3005 are issued with this decision.
1/ Complainant's motion to amend its Complaint by including Card Redemption Center, 805 Third Avenue, Suite 190, New York, New York 10022 as a Respondent, by including 1401 Johnson's Ferry Road, Suite 328-B, Marietta, Georgia 30082 as an additional address for Respondent Interstate Distribution Center and by deleting Counts II, III and IV of the Complaint was granted at the hearing (Transcript (Tr.) 20-21; 23).
2/ The hearings in P.S. Docket Nos. 30/35, 30/36 and 30/37 were consolidated in one proceeding.
3/Respondents also offered five exhibits, RX-7 through 11, in P.S. Docket No. 30/36 which are applicable to this case (Tr. 44).
4/ Complainant also takes exception to the Administrative Law Judge's finding that Respondents' postcards do not represent that the payment required to receive the product is something other than its purchase price, with or without postage (FOF 9 pertaining to Complaint P6(f)). Based on the discussion of Exception 3, infra, the representation is found to be made and to be materially false. Therefore, Complainant's Exception 5 is sustained insofar as it addresses paragraph 6(f) of the Complaint.