In the Matter of the Complaint Against:

THE WASHINGTON MINT, INC.,
1718 Connecticut Avenue, N.W.,
Washington, DC 20009-1148

and
FREDERIC L. BERG,
144 Goodhill Road,
Weston, CT 06883-1818

P.S. Docket No. 30/42

Grant, Quentin E., Chief Administrative Law Judge

APPEARANCE FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.,
Timothy J. Mahoney, Esq.,
Law Department,
Consumer Protection Division,
United States Postal Service,
Washington, DC 20260-1114

APPEARANCE FOR RESPONDENT:
Marion Edwyn Harrison, Esq.,
840 The Watergate,
2600 Virginia Avenue, N.W.,
Washington, DC 20037-1905

INITIAL DECISION

In a complaint filed April 15, 1988, Complainant, the General Counsel of the Postal Service, alleged that Respondents are violating 39 U.S.C. § 3005 by conducting a scheme or device for obtaining money or property through the mail by means of false representations in advertisements promoting the sale of an item called the "One Pound Silver Proof" (Silver Proof). The false representations alleged in paragraph 6 of the complaint are as follows:

(a) The Washington Mint is an agency of or is affiliated with the United States Government or an agency thereof;

(b) The offer for sale of "One Pound Silver Proof[s]" referred to in such advertisements is being conducted by or in affiliation with the United States Government or an agency thereof;

(c) The Washington Mint is a place in Washington, DC, located at the street address identified in such advertisements, where coins or medals are made by or for the United States Government or an agency thereof;

(d) A "One Pound Silver Proof" referred to in such advertisements is a legal tender United States coin;

(e) A "One Pound Silver Proof" referred to in such advertisements weighs one pound in the popularly understood sense, i.e., the avoirdupois pound consisting of sixteen ounces;

(f) The bullion value of the silver contained in a "One Pound Silver Proof" referred to in such advertisements is sixteen times the going market rate for an ounce of silver;

(g) The United States Government or an agency thereof has authorized the release on a specified date of the "One Pound Silver Proof[s]" referred to in such advertisements; and

(h) The opportunity for a reader of such advertisements to buy a "One Pound Silver Proof" in response to the advertisements constitutes a special sale or advance release in advance of the normal release of the "silver proofs" authorized by the United States Government or an agency thereof.

The complaint alleges that Respondents' ads solicit payment for the Silver Proof by check or money ordered mailed to a specified Washington, D.C. address or by means of a credit card transaction initiated by calling a toll-free telephone number also specified in the ads. It alleges that both methods of payment involve remittances of money through the mails as part of a scheme or device prohibited by 39 U.S.C. § 3005. Respondents' answer to the complaint generally admits advertisement and sale of the Silver Proof and the methods of payment alleged but denies the making of the alleged false representations and denies jurisdiction of the Postal Service in this proceeding as to the paragraphs of the complaint alleging that payment through credit card transactions falls within the scope of 39 U.S.C. § 3005.

The answer also set forth as an affirmative defense the allegation that in this proceeding Complainant is selectively prosecuting Respondents as a means of continuing harassment. Complainant denied this defense on its facts and as a valid defense, whether true or not.

A hearing was held on June 13, 1988, in Washington, DC. Each party presented four witness and introduced documentary evidence. Complainant's witnesses were (1) Postal Inspector James Hilton, (2) David Garrett, security officer of Dominion Bankshares, (3) Eugene Essner, Deputy Director of the United States Mint, and (4) Nelson Whitman, a professional numismatist and owner of Capitol Coin Co. in Washington, DC. Respondents' witnesses were (1) Respondent Frederic L. Berg, majority shareholder and an officer of Washington Mint, Inc., (2) William Whitehead, a minority shareholder and vice-president of Washington Mint, Inc., (3) David L. Ganz, an expert in numismatics, and (4) Lynda M. Maddox, an expert in advertising.

The parties have filed proposed findings of fact, conclusions of law and written argument all of which have been fully 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. Respondent The Washington Mint, Inc. (hereinafter The Mint) is a Delaware corporation the address of which is 144 Goodhill Road, Weston, CT 06883 (admitted).

2. Respondent Frederic L. Berg is an officer of The Mint who directs and controls the activities of that corporation (admitted).

3. By means of advertisements placed in publication of general circulation, The Mint offers for sale an item referred to as the "One Pound Silver Proof" (admitted). A copy of one such advertisement (Exhibit One to Cplt.) is attached hereto as Exhibit A.

4. Exhibits CX-2 and RX-3A, 3B, and 4 are also examples of advertisements placed by Respondents promoting the sale of the Silver Proof.

5. Respondents' ads have appeared in approximately 65 large urban area daily newspapers such as the Chicago Tribune, Hartford Courant, Seattle Post & Times, Baltimore Sun, Los Angeles Times, Boston Globe, and the Atlanta Journal Constitution (Tr. 123, RX-13).

6. The readership of daily newspapers is the most upscale of all media readership because it is composed of middle aged males of higher than average education and higher than average income (Maddox, Tr. 167).

7. The Mint's advertisements solicit interested persons to place orders for the Silver Proof by telephoning a toll-free number specified in the ads or by mailing an order with a check or money order to The Washington Mint, Inc. at 1718 Connecticut Avenue, NW, Washington, DC 20009.

8. Dr. Lynda M. Maddox testified for Respondents as an expert in advertising with reference to consumer perception of their advertisements. Dr. Maddox holds a BA and MA in advertising and a PhD. in communications, majoring in advertising. She is an associate professor of business administration at The George Washington University. She was formerly director of the marketing program in the School of Government and Business Administration of that university, has done a large amount of teaching, lecturing and consulting in the field of advertising, has hands-on experience in the creation of advertising, and has written a large number of papers and articles in the field of advertising (Tr. 165, 166; RX-1). Dr. Maddox is a highly qualified expert in the field of consumer perception of advertising. She was a forthright and credible witness. I found her opinions helpful and, to the extent indicated below, I have accepted them.

9. According to Dr. Maddox, the first thing the typical age 40 and above, male newspaper reader would notice in Respondents' ads (RX-3A and 4) would be the illustration, followed by the headline, "Giant 'Silver Eagle'." His attention would then drop to the bottom portion and read the words "The Washington Mint, Inc." and the disclaimer, "The Washington Mint is not affiliated with the United States Government" and the disclosure that The Washington Mint is a private mint. The disclaimer as it appears in the published full-size ads is much more prominent than it appears in the reduced copy attached hereto as Exhibit 1. An interested reader of those portions of the ad, would then, because of the substantial cost of the product, read the rest of the ad with some interest, discovering in the process that the Silver Proof, because of its size (3.5" diameter, weighing one troy pound) is probably not legal tender (Tr. 168-172, 199).

10. Having learned from reading the ads that The Washington Mint, Inc. is a private mint, not affiliated with the United States Government, and that the product is not legal tender, the ordinary reader will not interpret other portions of the ad - the illustration, the words "Silver Eagle" "limited advance release," "advance release," "special limited issue," "limited minting," the Washington, DC address of "The Washington Mint," or the use of the word "Mint" in the corporate name - individually or in combination to come to contrary conclusions. In the unlikely event that an interested reader, having read the ad in the way described by Dr. Maddox, would have any doubt whatsoever as to the nature of The Mint, its affiliation with the government, whether the pound the product weights is troy or avoirdupois, whether the Silver Proof is legal tender, or whether the sale, release, or issue thereof is authorized by the United States Government or an agency thereof, I believe that he would make inquiry before placing an order because of the substantial expenditure involved.

11. Customers and prospective customers have not indicated confusion or misunderstanding as to whether The Mint is affiliated with, or is an agency, of the government of the United States or whether the Silver Proofis legal tender (Tr. 127, 128). Returns of the product have been less than 1 percent and The Mint has received many repeat orders (Tr. 129). There is no evidence that any of the returns were based on one or more of the representations alleged in the complaint. These facts tend to corroborate the opinions of Dr. Maddox, and my beliefs, as to the perceptions the average interested reader would gain from a reading of Respondents' ads.

12. I find that Respondents' advertisements make none of the representations alleged in the complaint.

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. In concluding that Respondents' advertisements do not make the representations alleged in the complaint I have applied the foregoing standards of interpretation.

5. Dr. Maddox was a highly qualified expert witness. I find her opinions persuasive on the subject of reader perceptions of Respondents' ads and on the representation issues. They accord with my own interpretation of the ads. The numerous portions of the ads relied on by Complainant to establish its case do not carry that burden.

6. In connection with Dr. Maddox's opinions relating to reader perceptions, I found her testimony as to the demographics of urban daily newspaper readership relevant and particularly important. It is highly unlikely that the ordinary interested reader of Respondent's ads in those newspapers would find the representations alleged in the complaint or be deceived thereby. There is, in fact, no evidence in the record that any reader was so deceived. Such evidence is not necessary to establish a case of false representation but its absence in this case tends to corroborate Dr. Maddox's opinions and my own perceptions.

7. Although Respondents agreed in a settlement agreement, effective April 1, 1988, in P.S. Docket No. 29/68 that the type size of its government affiliation disclaimer would be 80 percent as large as the name of The Mint, its failure to do so in the ads for the Silver Proof do not alter my view that the disclaimer will be read and understood by the ordinary interested reader of such ads.

8. Because the false representations have not been proved, I make no findings as to the Respondents' credit card transactions and whether or not they may be part of a scheme or advice for obtaining money through the mail under 39 U.S.C. § 3005 and no findings relative to the affirmative defense of selective prosecution.

9. Complainant has failed to sustain its burden of proving that Respondents advertisements make any of the representations alleged in the complaint.

10. The complaint is dismissed.