P. S. Docket No. 37/105
March 12, 1993
In the Matter of the Complaint )
Against )
)
SERGIO & SPIEGEL TELEVISION FOR )
ONCOR, INC. )
c/o Oliver Meservy )
821 Riverside Drive )
Reno, NV 89503-5518 )
and )
ONCOR )
P.O. Box 29012 )
Phoenix, AZ 85038-9012 )
and )
TAYLOR-WRIGHT PHARMACALS, INC. )
1023 Edwards Road )
Burlingame, CA 94010-2318 )
and )
WILLIAM SERGIO )
PETER SPIEGEL )
2714 Pico Blvd., Suite 200 )
Santa Monica, CA 90405-1951 )
and )
ROBERT T. McILVENNA )
WINNIE O. McILVENNA )
1023 Edwards Road )
Burlingame, CA 94010-2318 ) P. S. Docket No. 37/105
APPEARANCES FOR COMPLAINANT: Geoffrey A. Drucker, Esq.
Betty A. Garner, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, D.C. 20260-1144
APPEARANCES FOR RESPONDENTS: Kirkpatrick W. Dilling Esq.
TAYLOR-WRIGHT PHARMACALS Ronald C. Nesmith, Esq.
& ROBERT and WINNIE Dilling & Dilling
McILVENNA 150 N. Wacker Drive, #1242
Chicago, IL 60606-1606
Arthur Wells, Jr., Esq.
1171 Cragmont Avenue
Berkeley, CA 94708-1641
APPEARANCE FOR RESPONDENTS: Dale B. Hinson, Esq.
SERGIO & SPIEGEL 900 17th St., N.W., #900
TELEVISION FOR ONCOR, INC., Washington, DC 20006-2596
PETER SPIEGEL & WILLIAM SERGIO
POSTAL SERVICE DECISION
Respondents William Sergio, Peter Spiegel, and Sergio & Spiegel Television For Oncor, Inc. (collectively referred to as Respondents SST) and Respondents Taylor-Wright Pharmacals, Inc. and Robert T. and Winnie O. McIlvenna (collectively referred to as Respondents TWP) have filed separate appeals from an Initial Decision of an Administrative Law Judge which concluded that both sets of Respondents are engaged in 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. Complainant opposes Respondents' appeals.
Background
The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint, subsequently amended, alleging that Respondents, by the use of a program-length television advertisement sometimes known as an infomercial,1/ are engaged in 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. Specifically, Complainant alleges in Paragraphs 8 and 9 of the Amended Complaint (hereinafter referred to as Complaint) that Respondents falsely represent:
"a.SST Super Stories is a talk show that regularly features and reviews products and is not a program length commercial;
b. Oncor is recommended by impartial health professionals who are independent from the distributor of the product;
c. Oncor can cure or treat impotency;
d. Oncor can increase sexual desire in men;
e. Oncor is recognized by the medical community as an effective drug for the treatment of impotency;
* * * * *
k. Oncor is safe and nonhabit forming for all users;
* * * * *
m. Oncor is recommended by someone who has no reason to be biased."2/
Respondents filed answers which, as amended, denied they make the representations alleged the Complaint or that those representations are materially false.
Following a hearing at which the parties presented witness testimony and introduced documentary evidence, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondents make the representations alleged in the Complaint. With the exception of a portion of the representation alleged in Paragraph 8(k) of the Complaint, the Administrative Law Judge found that all of the representations are materially false. As a result, the Administrative Law Judge concluded that Respondents are conducting a scheme for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005 and that the cease and desist order attached to the Initial Decision should be issued against all Respondents. Respondents SST and TWP have filed two separate appeals in which they take issue with the Administrative Law Judge's findings and conclusions and the recommendation for issuance of the proposed cease and desist order attached to the Initial Decision.
Exceptions and Discussion
I. EXCEPTIONS OF RESPONDENTS SST
SST first contends that the Administrative Law Judge incorrectly concluded that the infomercial in issue does not adequately inform the viewer that it is a program length commercial advertising the sale of the product Oncor. Complainant counters that the Administrative Law Judge properly relied on the commercial itself in arriving at the conclusion that it falsely represents that it is a talk show which regularly features and reviews products, rather than a program length commercial.
The Administrative Law Judge correctly concluded that the infomercial does not adequately inform the viewer that it is a program length commercial. The format and content of the infomercial would most probably lead the ordinary viewer to believe that the program is a regularly scheduled talk show that features and reviews products. The disclaimers included in the program are not sufficiently prominent or strategically placed during the course of the program to put ordinary viewers on notice that they are watching a commercial (Exhs. CX-3 & -4).3/ Thus, for the reasons stated in the Initial Decision, the Administrative Law Judge did not err in concluding that the representation in Paragraph 8(a) of the Complaint is made by Respondents' advertising.
SST's primary contention on appeal is that the Administrative Law Judge erred in concluding that a cease and desist order should be issued in this proceeding (I.D., Conclusions of Law (COL) ¶ 10). In support of this contention, SST asserts that a cease and desist order is similar to an injunction and should only be issued where there has been a knowing and persistent violation of the false representation statute. According to Respondents SST, since they relied on the advice of counsel that their infomercial was in compliance with all federal advertising requirements, they cannot be found to have intended to violate the Postal Service statute. In addition, SST contends that no evidence was presented establishing that they purposely engaged in a generalized scheme to violate § 3005, engaged in other past illegal conduct, or are likely to engage in any illegal conduct in the future.
Complainant asserts that factors such as intent and the likelihood of future violations should not be considered in determining whether SST has violated 39 U.S.C. § 3005 or whether a cease and desist order should be issued. Even if the likelihood of future violations is considered, however, Complainant contends that Respondents SST have not satisfied their burden of presenting evidence showing that they are unlikely to engage in such future violations.
Under 39 U.S.C. § 3005(a)(3), a cease and desist order may be issued when evidence satisfactory to the Postal Service establishes that a person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations. Such cease and desist orders have been routinely issued against businesses and individuals responsible for making false representations in order to protect the public from future false representation schemes. See Pub. L. 98-186, 97 Stat. 1315 (1983); 1983 U.S. Code Cong. and Admin. News, p. 2014 (for legislative history on purpose of 1983 amendment to § 3005). See also FTC v. Standard Educ. Soc'y, 302 U.S. 112, 119-210 (1937); Finderhood, Inc., P.S. Docket No. 34/102 at 19-21 (P.S.D. Mar. 20, 1992), aff'd, (P.S.D. July 24, 1992); United Savers of Am., P.S. Docket No. 33/98 at 4 (P.S.D. June 7, 1991); W.G. Charles Co., P.S. Docket Nos. 19/105, et al. at 43-44 (P.S.D. Sept. 30, 1985).
Although SST contends that case law involving the issuance of injunctions is also applicable to the issuance of cease and desist orders, and would preclude SST's inclusion in any cease and desist order issued in this proceeding, we do not agree. The statutory policy of protecting the public from future violations of the Postal false representation law distinguishes a cease and desist order issued under 39 U.S.C. § 3005 from the more limited focus of the typical injunction. Thus, because the public interest is involved, we have not relied on the cases cited by SST which pertain to the issuance of injunctions. Since the Administrative Law Judge determined that all of the Respondents including SST were responsible for the false representations alleged in the Complaint, he did not err in including SST in the cease and desist order which he recommended for issuance in this proceeding.
As Complainant contends, a showing of intent to deceive is no longer required in order to establish that a violation of 39 U.S.C. § 3005 has occurred. See United States v. International Term Papers, Inc., 477 F.2d 1277, 1280 (1st Cir. 1973); M.K.S. Enter., Inc. v. USPS, 459 F. Supp. 1180, 1183 (E.D.N.Y. 1978); Lynch v. Blount, 330 F. Supp. 689, 692-93 (S.D.N.Y. 1971), aff'd, 404 U.S. 1007 (1972); Health Care Products, Inc., P.S. Docket No. 28/90 at 10 (P.S.D. June 27, 1990). Therefore, advertising which involves misrepresentations, even though innocent and based on the advice of counsel, is considered to be a false representation scheme and the basis for issuance of a cease and desist order under 39 U.S.C. § 3005. See Athena Products, Ltd., P.S. Docket No. 7/99 at 36 (P.S.D. June 26, 1981); U.S. Zip Code Service, P.S. Docket No. 2/171 at 7 (P.S.D. April 15, 1974).
Similarly, where a party has been found to have been engaged in a false representation scheme, factors such as that party's good faith, past practices or the likelihood of future violations will not serve as a basis for denying the issuance of a cease and desist order, unless a strong showing of a change in circumstances has been made which will assure that the public is protected from future misconduct. Such a showing has not been made by SST in this case. Cf. Professional Opportunity Magazine, Inc., P.S. Docket No. 33/55 at 6 (P.S.D. Sept. 14, 1990); The New Body Boutique, Inc., P.S. Docket No. 11/95 at 5 (P.S.D. Jan. 12, 1983); Conan Research, P.S. Docket No. 12/7 at 3 (P.S.D. July 29, 1982).
Accordingly, even though SST may not have intended to violate the Postal false representation statute and sought legal advice in connection with the formulation of the Oncor commercial, the Administrative Law Judge did not err in concluding that a violation of 39 U.S.C. § 3005 has occurred, that a cease and desist order should be issued and that SST should be included in the order.
SST additionally complains that Paragraph III, subparagraphs 1, 2 and 6, of the proposed cease and desist order are overly broad and unjustifiably vague,4/ and therefore, violate their First Amendment right to engage in commercial speech. According to SST, the need for greater specificity is particularly important in a Postal false representation case because of the civil penalties which may be assessed under 39 U.S.C. § 3012. SST also contends that a cease and desist order should not be issued because there are no guidelines for determining when a advertisement is misleading and it is improper to leave such determinations to a case-by-case determination by an Administrative Law Judge.
Complainant asserts that the Postal Service has authority to issue cease and desist orders prohibiting future false representations and that such false representations are not entitled to First Amendment protection. In addition, Complainant contends that the proposed provisions of the cease and desist order are sufficiently specific to place SST on notice of the conduct prohibited and, in the event SST is uncertain of their meaning and application to future advertisements, they may seek an advisory opinion from the Postal Service's General Counsel.
As Complainant contends, the Postal Service is authorized by 39 U.S.C. § 3005 to issue cease and desist orders limiting future misconduct,5/ and this authority is not limited by the absence of specific Postal Service regulations. Rather, court and administrative decisions6/ provide sufficient guidance to prospective advertisers on what constitutes a false representation, and what, if any, disclaimers may be sufficient to alert the ordinary reader to the true import of advertising solicitations. Cf. Ron Cooper, P.S. Docket No. 35/112 at 6 (P.S.D. Feb. 7, 1992), aff'd, (P.S.D. Mar. 20, 1992). Moreover, there is no impropriety in having an Administrative Law Judge and the Judicial Officer serve as the triers of fact and decide on a case-by-case basis7/ what constitutes a false representation. As SST itself points out, the distinction between deceptive and nondeceptive advertising may require resolution of exceedingly complex and technical factual issues and the consideration of nice questions of semantics. These questions can most appropriately be answered on a case-by-case basis by the Postal Service Administrative Law Judges and the Judicial Officer, who are charged with the responsibility for making factual and legal determinations in cases arising under the Postal false representation law. Thus, the absence of regulations providing guidance to advertisers or the fact that the falsity of representations is determined by an Administrative Law Judge and the Judicial Officer does not infringe on SST's First Amendment rights nor deprive SST of due process of law.
As SST recognizes, false commercial advertising is not protected by the First Amendment.8/ Further, cease and desist orders containing broad provisions, commonly referred to as fencing-in provisions, have been consistently upheld when (1) they are reasonably related to the unlawful act found to exist, Jacob Spiegel Co. v. FTC, 327 U.S. 608, 613 (1946), and (2) there is a likelihood, based on the violator's past conduct, that he will commit additional violations. American Home Products Corp. v. FTC, 695 F.2d 681, 705-06 (3d Cir. 1983). See also FTC v. Mandel Bros., Inc., 359 U.S. 385, 392-93 (1959); FTC v. National Lead Co., 352 U.S. 419, 430 (1957); FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952); American Genealogies, Inc. v. USPS, 717 F. Supp. 8;5, 899 (D.D.C. 1989); Paul W. Schuette, P.S. Docket No. 29/117 at 5 (P.S.D. Mar. 16, 1989). Clearly, a reasonable relationship exists between the provisions proposed in the cease and desist order and the prior materially false representations made by SST in the Oncor infomercial. Moreover, SST is in the business of producing infomercials (Tr. 228-31 & 250-51) without regard to the product involved, and the terms of the cease and desist order are intended to preclude the use of infomercialt to misrepresent any product SST may be involved in promoting. Thus, the inclusion in the cease and desist order of the prohibition against representing that a commercial is something other than a commercial, i.e. a regularly scheduled television program; a product is recommended by impartial experts; or that a product is endorsed by someone who is unbiased, all of which were falsely represented in the Oncor infomercial, are related and reasonable restrictions on SST's future advertising.9/
Further, while there is no proof that SST has engaged in any other false representation scheme or that it will commit future violations of the Postal Service statute, the fact that SST previously falsely represented a health care product and continues to be in the business of producing infomercials establishes that there is a likelihood SST will commit future violations (I.D., Findings of Fact (FOF) ¶ ¶ 16, 23 & 50-51). Moreover, SST and not Complainant, bears a heavy burden to establish that there is no danger of recurrent violation. See Finderhood, Inc., at 17 (P.S.D. Mar. 20, 1992); Professional Opportunity Magazine, Inc., at 6 (P.S.D. Sept. 14, 1990), and cases cited therein. Absent a showing of a change in circumstances which would make a resumption of the practice impractical or impossible, SST has not satisfied this burden/ Id. See also United States v. Concentrated Phosphate Export Ass'n., Inc., 393 U.S. 199, 203-04 (1968); United States v. Oregon State Medical Soc'y, 343 U.S. 326, 333-34 (1952).
We are also not persuaded that greater specificity in the terms of the cease and desist order is required because of the possible imposition of civil penalties under 39 U.S.C. § 3012. The order's provisions need only be as specifjc as the circumstances permit. See Colgate-Palmolive Co., 380 U.S. at 392-93; American Home Products Corp., 695 F.2d at 704-05. In this proceeding, the proposed provisions of the cease and desist order clearly place SST on notice of the false representations they are prevented from making and SST should have no difficulty applying those provisions to their future commercials. As has often been held, "[i]t is not difficult to chopse statements, designs, and devices which will not deceive."10/ United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924); Finderhood, Inc., at 8 (P.S.D. July 24, 1992). See also Paul, Marbin & Co., Inc., P.S. Docket No. 28/190 at 13-14 (P.S.D. Oct. 20, 1989); Card Redemption Center, P.S. Docket No. 30/37 at 10 (P.S.D. July 27, 1989).
Accordingly, it is determined that the proposed provisions of the cease and desist order are reasonably calculated to prevent false representations similar to those previously made or likely to be made. Thus, the proposed cease and desist osder does not infringe on SST's First Amendment rights, is not so vague as to be in violation of the Due Process Clause, and is a reasonable implementation of the Postal false representation statute. SST's exceptions on appeal are therefore denied.
II. EXCEPTIONS OF RESPONDENTS TWP
TWP has listed a number of findings of fact and conclusions of law to which they except, and have consolidated their arguments to address their primary concerns on appeal. The findings and conclusions have been reviewed on appeal and are found to be fully supported by a preponderance of the evidence presented and the applicable case law. See Great American Giveaway, P.S. Docket No. 36/102 at 3 (P.S.D. Feb. 5, 1993); Finderhood, Inc., at 4 (P.S.D. Mar. 20, 1992); Northeast Enterprises, P.S. Docket No. 7/4 at 3 (P.S.D. April 13, 1979). TWP's arguments on appeal are hereafter addressed.
A. "Respondents Have Established that the Subject Product (Oncor) is a Properly Formulated, Lawful Over-the-Counter Homeopathic Drug."
D. "The Administrative Law Judge Erroneously Failed to Recognize the Status of Homeopathy Under Federal Law."
TWP's primary contention is that the Administrative Law Judge erred in concluding that Oncor is not an effective treatment for impotence or loss of sexual desire. TWP contends that in arriving at this conclusion, the Administrative Law Judge improperly failed to recognize that the use of homeopathic drugs is officially recognized under federal law11/ and avena sativa, the active ingredient jn Oncor, is indicated in authoritative homeopathic treatises and reference materials12/ for the treatment of impotence and similar conditions. In addition, TWP claims the Administrative Law Judge ignored uncontroverted evidence that Oncor strictly complies with federal guidelines for marketing homeopathic drugs.
Complainant in response contends that neither avena sativa's listing in authoritative homeopathic references, or Oncor's compliance with federal marketing regulations, establishes that the representations pertaining to Oncor's effectiveness and safety ase true. Complainant also contends that such listings and compliance are immaterial since the weight of the uncontroverted expert medical testimony establishes that Oncor is ineffective and unsafe for its intended purpose.
The record does not support TWP's contention that the Administrative Law Judge failed to recognize the status and use of homeopathic medicine or consider Respondents' evidence concerning either avena sativa's listing in homeopathic reference materials or Oncor's alleged compliance with homeopathic regulations. To the contrary, the Administrative Law Judge did consider the evidence introduced by TWP (I.D., FOF ¶ ¶ 25-31), but concluded that despite such evidence, the testimony of Complainant's medical experts, Dr. Crothers, a homeopathic physician, and Dr. Stanisic, a urologist, established that the main ingredient in Oncor, avena sativa, is not recognized as a safe or effective remedy for impotence or related conditions (I.D., FOF ¶ ¶ 14-17, 19-24, 42 & 44 & COL ¶ 4). Tince the doctors' opinions are in accordance with the informed medical consensus among reputable urologists and homeopathic practitioners, a prima facie case was presented establishing the falsity of the representations concerning the safety and efficacy of Oncor (I.D., COL ¶ ¶ 2-4). See also The Robertson-Taylor, Co, P.S. Docket Nos. 16/98, et al. at 27 (P.S.D. Mar. 31, 1986); Cosvetic Labs., P.S. Docket Np. 8/160 at 14 (P.S.D. July 22, 1982), aff'd, (P.S.D. Dec. 22, 1981); National Mktg. Co., P.S. Docket No. 7/46 at 8 (P.S.D. May 23, 1980).
The record further supports the Administrative Law Judge's conclusion that the contrary expert medical testimony offered by Respondents was not persuasive (I.D., COL ¶ 4). Despite Dr. Chapman's testimony that Oncor is effective in treating impotence, the Administrative!Law Judge properly refused to rely on his opinion since it was based on an informal study of Oncor which Dr. Chapman admitted was confusing, required more research, was never finalized in a written report, and was based on indiscriminate and unrecorded dosages of Oncor13/ (I.D., FOF ¶ ¶ 28-31 & COL See also Magnolia Lab, P.S. Docket No. 10/123 at 6 & 8 (P.S.D. Feb. 11, 1982); Modern Age Products, Inc., P.S. Docket No. 5/102 at 4 (P.S.D. June 29, 1977); Peak Labs., P.S. Docket No. 3/124 at 12-13 (P.S.D. April 9, 1975). While TWP's other medical expert, Dr. Reed, testified that avena sativa is indicated in homeopathic texts for the treatment of impotence, he failed to express any opinion as to Oncor(s efficacy in treating such problems (I.D., COL ¶ 4). Therefore, the Administrative Law Judge did not err in concluding that his testimony was equally unpersuasive.
Finally, contrary to TWP's contentions, the Administrative Law Judge did consider their evidence that Oncor complies with the guidelines of the Homeopathic Pharmacopeia of the United States (HPUS), a compilation of standards for source, composition, and preparation of homeopathic drugs (I.D., FOF ¶ 27). Howevfr, as the Administrative Law Judge noted, and as the Federal Drug Administration's Policy Guide No. 7132.15 states, a product's compliance with the requirements of HPUS does not establish that the product is safe and effective for its intended use (I.D., FOF ¶ 21; RX-6, p. 3).
For the reasons stated above, the Administrative Law Judge properly considered, and rejected as unpersuasive, Respondents' evidence that Oncor is safe and effective in treating impotence and loss of sexual desire.
B. "The Administrative Law Judge Erroneously Concluded that the Oncor Product May Not Be Sold Over-the-Counter."
TWP contends that the Administrative Law Judge erroneously accepted Dr. Crothers' testimony that Oncor should be administered only under the direction of a supervising homeopathic physician. By accepting this testimony, TWP contends that the Administrative Law Judge has in effect treated Oncor as a prescription drug, thereby ignoring Dr. Crothers' admission and the uncontroverted testimony of Tariq Kuraishy, TWP's pharmaceutical consultant, that avena sativa is obtainable over-the-counter. In addition, TWP claims that the Administrative Law Judge failed to consider Mr. Kuraishy's testimony that homeopathic drugs are commonly used for self-diagnosis or self-medication.
Complainant in response claims that the Administrative Law Judge properly accepted Dr. Crothers' testimony since he is a well-qualified homeopathic expert and a credible witness. Complainant further contends that Oncor's status as either an over-the-counter or prescription drug has no bearing on the issue of whether TWP makes the false representations alleged in the Complaint.
As Complainant contends, the Administrative Law Judge found Dr. Crothers, a homeopathic physician and past president of the American Institute of Homeopathy, to be a credible witness, well-qualified as an expert in homeopathic medidine (I.D., FOF ¶ 18). Nothing in the evidentiary record or Respondents' brief on appeal establishes that Dr. Crothers' testimony was not credible, or that the Administrative Law Judge's reliance on his testimony was otherwise improper. See Hanratty v. DOT, 819 F.2d 286, 288 (Fed. Cir. 1987); Carosella v. USPS, 816 F.2d 638, 641-42 (Fed. Cir. 1987); Equisystems California, Inc., P.S. Docket No. 33/115 at 6 (P.S.D. July 11, 1991). Moreover, Dr. Crothers' testimony that Oncor may be unsafe and therefore, should be administered under the direction of a supervising homeopathic physician, was corroborated by the testimony of Dr. Stanisic who also stated that Oncor could potentially be dangerous to patients suffering from impotence or related conditions (I.D., FOF ¶ ¶ 15-16).
In addition, contrary to TWP's contentions, the Administrative Law Judge did acknowledge that homeopathic drugs are typically sold over-the-counter for self-limiting conditions, but determined, based on the reliable uncontroverted expert testimony, that Oncor should be used with medical supervision since impotence and sexual dysfunction are potentially dangerous and chronic conditions, rather than self-limiting conditions (I.D., FOF ¶ ¶ 14-15 & 22-23). Whether this finding in effect treats Oncor as a prescription drug is immaterial to the allegations of the Complaint and the ultimate conclusion in the Initial Decision that Respondents falsemy represent that Oncor is effective in treating impotence and loss of sexual desire.14/
C. "The Administrative Law Judge Erroneously Relied Upon the Testimony of Thomas A. Stanisic, M.D."
TWP claims that the Administrative Law Judge erroneously relied on the testimony of Dr. Stanisic in concluding that Oncor is ineffective in the treatment of impotence. According to TWP, no weight should be given to Dr. Stanisic's testimony since he admitted having no experience with homeopathic medicine and did not investigate the product or research the homeopathic literature.
Despite TWP's contention, the Administrative Law Judge found Dr. Stanisic, a practicing physician and professor of surgery and urology, to be a credible witness well-qualified to testify on the uraditional medical remedies for treating male dysfunction and impotence (I.D., FOF ¶ ¶ 13-14). Based on Dr. Stanisic's qualifications, it was proper for the Administrative Law Judge to rely on his testimony that Oncor's active ingredient, avena sativa, is not recognized in the field of urology as a remedy for impotence (I.D., FOF ¶ 14).
Moreover, even though Dr. Stanisic had no experience with homeopathic medicine, made no study of Oncor, and conducted no research of homeopathic literatuse, he was qualified based on his knowledge and experience in the field of urology to testify on the traditionally recognized methods of treating impotence. Therefore, it was not necessary that Dr. Stanisic read homeopathic literature on avena sativa or personally test the product in order to testify to the consensus of informed medical opinion in his field of expertise. See The Robertson-Taylor, Co., P.S. Docket Nos. 16/98 et al. at 27 (P.S.D. Mar. 31, 1986); Baba Distributing, P.S. Docket Nos. 16/144-145 at 4-5 (P.S.D. June 28, 1984); Athena Products, Ltd, P.S. Docket No. 7/99 at 18-22 (P.S.D. June 26, 1981); Hauser, Inc., P.S. Docket No. 7/77 at 7-8 (P.S.D. May 9, 1980). Accordingly, TWP has not presented any persuasive argument on appeal, nor does the evidence in the record establish that Dr. Stanisic was not a qualified medical expert, that his testimony was not credible or that the Administrative Law Judge's reliance on his testimony along with the other evidence in the record was otherwise improper. See Hanratty, 819 F.2d at 288; Carosella, 816 F.2d at 641-42; Equisystems, at 6 (P.S.D. July 10, 1991).
E. "The Complainant has Failed to Show that the Taylor-Wright Respondents Have Violated 39 USC 3005."
TWP contends that no evidence was presented which supports the Administrative Law Judge's conclusion that they were engaged in a joint enterprise with SST to market Oncor (I.D., COL ¶ 7), and therefore, are engaged in a scheme in violation of 39 U.S.C. § 3005. According to TWP, the agreement between them and SST mentions no joint venture, but rather provides that SST is responsible for, and owner of, the commercial. TWP contends that under such an arrangement, only SSU was responsible for the false representations in the commercial, and therefore, SST was the only entity involved in a scheme to obtain money by means of false representations in violation § 3005. TWP in addition claims that no evidence was presented which establishes their use of the United States mail in violation of 39 U.S.C. § 3005. TWP again suggests that only SST violated § 3005 since it alone controlled the post office box used in connection with the sale of Oncor and entered into a stipulation with Complainant admitting it used the mail for distributing Oncor.
In opposing this exception, Complainant asserts that Respondents TWP were involved in a joint venture with SST since they not only shared responsibility for developing different aspects of the commercial, but were also responsible for manufacturing and packaging the product, and received a substantial portion of the proceeds from the sale of the product. Complainant contends that whatever uhis arrangement is called, TWP's involvement in the promotion was sufficient for them to be considered to be engaged in a false representation scheme. Complainant also asserts that SST's control of the post office box and stipulated use of the mail is immaterial in determining whether TWP used the mail in violation of 39 U.S.C. § 3005. Complainant argues that Respondents TWP used the mail in violation of § 3005 when they received a portion of the funds sent through the mail for the purchase of Oncor.
Despite their contentions to the contrary, it is clear that TWP is engaged in a "scheme" for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. A scheme, for the purposes of 39 U.S.C. § 3005, is a plan or program involving false representations whereby remittances are sought through the mail. See International Term Papers, Inc., 477 F.2d at 1280; Equisystems, at 7 (P.S.D. July 10, 1991); National Mktg. Co., P.S. Docket No. 7/46 at 4 (P.S.D. May 23, 1980). TWP, together with SST, played a significant role in the formation and execution of the false representation scheme promoting the sale of the product Oncor. See United Savers of America, Inc., at 4 (P.S.D. June 7, 1991); W.G. Charles Co., at 12 & 43-44 (P.S.D. Sept. 30, 1985); The Nat'l Gold Mint, P.S. Docket No. 22/165 at 25 (P.S.D. May 1, 1987). TWP was responsible for manufacturing, assembling, packaging and labeling the product, as well as providing two professional endorsements and at least ten customer testimonials on the efficacy of Oncor for use in the commercial (I.D., FOF ¶ ¶ 6, 10, 37-41, 47-48 & 52-53; Tr. 131 & 255-58). TWP in addition received from SST a percentage of the proceeds from the sale of Oncor (I.D., FOF ¶ 11). Based on these facts, TWP played an active and significant role in the scheme to advertise and sell Oncor, by means of the program-length commercial containing false representations. Therefore, the Administrative Law Judge's conclusion that Respondents TWP were engaged in a scheme for the purpose of 39 U.S.C. § 3005 is correct.
In addition, TWP's contention that they did not use the United States mail in violation of 39 U.S.C. § 3005 is without merit. The mailing of remittances and credit card billings for the purchase of Oncor is sufficient to establish the use of the mail by both SST and TWP. Cf. Canadian Express Club, P.S. Docket No. 28/52 at 12-14 (P.S.D. Dec. 23, 1991). The fact that TWP did not control the post office box where the orders and remittances were delivered is not significant. TWP's receipt of a portion of the revenues, received through the mail for the sale of the product, establishes that they are obtaining money "through the mail" by means of materially false representations in violation of 39 U.S.C. § 3005. See International Term Papers, Inc., 477 F.2d at 1279.
Conclusion
After consideration of the entire record and the arguments of both sets of Respondents on appeal, it is concluded that all Respondents are engaged in a scheme for obtaining money through the mail by means of materially false representations in violation of 49 U.S.C. § 3005. Accordingly, Respondents' appeals are denied and the orders authorized by 39 U.S.C. § 3005 are issued herewith.
James A. Cohen
Judicial Officer
CEASE AND DESIST ORDER NO. CD-3601 March 12, 1993
RE: SERGIO & SPIEGEL TELEVISION FOR
ONCOR, INC., C/O OLIVER MESERVY;
ONCOR; TAYLOR-WRIGHT PHARMACALS, INC.;
WILLIAM SERGIO; PETER SPIEGEL; ROBERT T.
McILVENNA; and WINNIE O. McILVENNA
P. S. Docket No. 37/105
I. Authority and Scope:
This Order is issued pursuant to 39 U.S.C. § 3005(a)(3) and extends to any materials that seek the remittances of money or property through the mail.
II.Persons Covered:
This Order binds Sergio and Spiegel Television for Oncor, Inc., Taylor-Wright Pharmacals, Inc., William Sergio, Peter Tpiegel, Robert T. McIlvenna, Winnie O. McIlvenna, and anyone who would be bound by an injunction issued against them pursuant to Federal Rule of Civil Procedure 65.
III.Conduct Prohibited:
The persons identified in Paragraph II are ordered to cease and desist immediately from falsely representing that:
l. a commercial is something other than a commercial (e.g., a program);
2. a product is recommended by impartial experts;
3. a product will cure or aid in the treatment of impotency;
4. a product will cure or aid in the treatment of lack of sexual desire;
5. a product is safe to use as directed;
6. a product is endorsed by someone who has no reason to be biased in favor of the product.
"Representing" means stating orally or in writing, directly or indirectly, in substance and effect, whether by affirmative statements, implications, or omissions.
James A. Cohen
Judicial Officer
1/ The 30-minute television commercial which is the subject of this proceeding advertises a product called Oncor which is represented to increase a man's sexual desires and to be a cure for impotence. The commercial is in the format of a talk show with a celebrity host, a panel represented to consist of medical experts and a satisfied user, and a television audience many of whom give testimonials during the course of the commercial (Exhibits (Exhs.) CX-3 & -4).
2/ Subsequent to the hearing, Paragraphs 8(d) and (m) were modified and Paragraphs 8(f)-(j) and (l) were deleted from the Complaint by agreement of the parties.
3/ See Hearing Before the House Comm. on Small Business Subcomm. on Exports, Tourism, And Special Problems, 101st Cong., 1st Sess., 245-276, § II, (1989) (testimony of William MaCleod, Director of FTC Bureau of Consumer Protection) (hereinafter Testimony of MaCleod) ("Even if a program-length advertisement contains disclosures . . . its format may be so suggestive of actual programming as to mislead reasonable consumers").
4/ Paragraph III, subparagraphs 1, 2 & 6 of the proposed cease and desist order provide:
"III. Conduct Prohibited:
The persons identified in Paragraph II are ordered to cease and desist immediately from falsely representing that:
1. a commercial is something other than a commercial (e.g., a program);
2. a product is recommended by impartial experts;
* * *
6. a product is endorsed by someone who has no reason to be biased in favor of the product."
5/ See, e.g., American Genealogies, Inc. v. USPS, 717 F. Supp. 895, 898-99 (D.D.C. 1989); Finderhood, Inc., at 21-24 (P.S.D. Mar. 20, 1992); Paul W. Schuette, P.S. Docket No. 29/117 at 5-6 (P.S.D. Mar. 16, 1989); Leo Daboub, P.S. Docket No. 19/185 at 25-26 (P.S.D. July 10, 1986). Cease and desist orders may be fashioned to restrain not only proven violations but other similar or related future acts. See FTC v. Colgate-Palmolive Co., 380 U.S. 374, 395 (1965); FTC v. Mandel Bros., Inc., 359 U.S. 385, 392-93 (1959); Jay Norris, Inc. v. FTC, 598 F.2d 1244, 1250 (2d Cir. 1979), cert. denied, 444 U.S. 980 (1979).
6/ See, e.g., Peak Laboratories, Inc. v. USPS, 556 F.2d 1387 (5th Cir. 1977); Farley v. Heininger, 105 F.2d 79 (D.C. Cir.), cert. denied, 308 U.S. 587 (1939); American Image Corp. v. USPS, 370 F. Supp. 964 (S.D.N.Y.), aff'd, 503 F.2d 1397 (2d Cir. 1974); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986); Kingsbridge Media & Mktg., Inc., P.S. Docket No. 20/17 (P.S.D. June 13, 1986).
7/ It is well established that the Administrative Law Judge and the Judicial Officer may determine, without assistance of lay or expert testimony, whether the representations are made, their effect on the ordinary viewer and their materiality. See Vibra-Brush v. Schaffer, 152 F. Supp. 461, 468-69 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958); Finderhood, Inc., at 13 (P.S.D. Mar. 20, 1992); Health Care Products, Inc., P.S. Docket No. 28/90 at 16 (P.S.D. Mar. 3, 1989), aff'd on recon., (P.S.D. June 27, 1990).
8/ See In Re R.M.J., 455 U.S. 191, 203 (1982); Jay Norris, Inc., 598 F.2d at 1251-52 (2d Cir. 1974); Bristol-Myers Co. v. FTC, 738 F.2d 554, 562 (2d Cir. 1984), cert. denied, 469 U.S. 1189 (1985); USPS v. Athena Products, Ltd, 654 F.2d 362, 366-67 (5th Cir. 1981), cert. denied, 456 U.S. 915 (1982); Health Care Products, Inc., at 23 (P.S.D. Mar. 3, 1989).
9/ See, e.g., Twin Star Production Inc., F.T.C. Docket No. C-3307 (Oct. 2, 1990) (parties ordered to cease and desist from representing that any commercial is an independent program and not a paid advertisement, and from failing to disclose a material connection between a product's endorser and its marketer); Money Money Money, Inc., F.T.C. Docket No. C-3308 (Oct. 2, 1990) (parties ordered to cease and desist from representing that anycommercial is an independent program and not a paid advertisement); JS & A Group Inc., F.T.C. Docket No. C-3248 (Feb. 24, 1988) (parties ordered to cease and desist misrepresenting that an advertisement is an independent consumer or news program and oot a paid advertisement).
10/ There are clearly some types of program-length advertisements that have formats which are not deceptive, such as "home shopping" type programs. See Testimony of MaCleod, supra at § II.
11/ Citing U.S. Food, Drug and Cosmetic Bct, 21 U.S.C. § § 321, 351-352 & 501 ( § § 321 & 351-52 refer to the Homeopathic Pharmacopeia of the United States or official compendium for homeopathic drugs; § 501 has been repealed); Federal Controlled Substances Act, 21 U.S.C. § 801; U.S. Food and Drug Administration Compliance Policy Guide No. 7132.15 (Exh. RX-6) (listing conditions for marketing homeopathic drugs).
12/ See The Homeopathic Pharmacopeia of the United States (Exh. RX-2); Pocket Manual of Homeopathic Materia Media (Exh. RX-3); A Dictionary of Practical Materia Medica (Exh. RX-4); Compendium of Homeotherapeutics (Exh. RX-5).
13/ Dr. Chapman's testimony was stricken from the record because Respondents had not complied with the Administrative Law Judge's prehearing Order (I.D., at 4). The Administrative Law Judge nevertheless considered the testimony (I.D., FOF ¶ ¶ 28-31), but found that it would not change his ultimate conclusion (I.D., at 4; COL ¶ 4). TWP's objection to the Administrative Law Judge's consideration of Dr. Chapman's testimony is without merit since the testimony was presented by Respondents TWP in support of their position.
14/ Similarly, Mr. Kuraishy's testimony as to Oncor's status as an over-the-counter drug is immaterial to this conclusion.