In the Matter of the Complaint Against AMERICAN CONSUMER Caroline Road at Philadelphia, PA 19176 and AMERICAN VALUE STS PLAN 416A Fox Pavilion at Jenkintown, PA 19046 and STS PLAN 416A Fox Pavilion at Jenkintown, PA 19046 and UNITED GIFTS STS PLAN 205 East 42nd Street at New York, NY 10017 and UNITED GIFTS STS PLAN 741 Main Street at Stamford, CT 06904 and AMERICAN CONSUMER 1050 Street Road at Southampton, PA 18966 P.S. Docket No. 5/5; 10/19/76 Lussier, Edward F. APPEARANCES FOR COMPLAINANT: Janice B. Adams, Esq. Law Department United States Postal Service Washington, DC 20260 APPEARANCES FOR RESPONDENT: Charles B. Chernofsky, Esq. Weiss, Rothfarb, Kaminsky & Slade New York, New York
The Consumer Protection Office, Law Department United States Postal Service, hereinafter referred to as Complainant, has filed a petition alleging breach of a Consent Agreement entered into on June 10, 1976, by the Respondent identified in the above caption to this proceeding. In accordance with paragraph 3(b) of that agreement a mail detention order affecting the two mailing points in issue here */ was issued by the undersigned on September 24, 1976, pending resolution of the issue of the alleged breach.
Respondent has filed a Reply to the Petition with attached affidavit and supporting brief. By cover letter it has also requested an expedited decision in the matter. Complainant has filed a rebuttal brief and in the present posture of the case it is ready for decision on the record.
There are two advertisements attached to the petition, one appearing in The Star on September 14, 1976 and one, a catalogue advertisement received by the Postal Inspection Service on September 14, 1976. The latter advertisement is identical to the advertisements attached to the original complaint. The Star advertisement differs from the previous advertisement in that it contains references to a book.
The Consent Agreement sets forth its basic purpose in the first paragraphs as follows:
"For and in consideration of the General Counsel's offer to suspend further proceedings under the postal false representation and lottery statute, Title 39, U.S. Code § 3005, concerning certain promotional activities and representations described in a Complaint dated May 18, 1976 issued by the Assistant General Counsel, Consumer Protection Office (which is incorporated herein and made a part hereof by references), the undersigned owner or principal officer of the above captioned enterprise agrees and consents as follows:
1. (a) This agreement is for settlement purposes and does not constitute an admission by the undersigned of the violation of Title 39, U.S. Code § 3005.
(b) The use of the aforementioned promotional activities and representations for obtaining money or property through the mails for the named product or service has been and will be permanently discontinued and abandoned and will not hereafter be resumed, directly or indirectly, under any other name(s) and address(es), or through any corporate or other device."
Respondent's first contention in reply to the petition relates to the catalog advertisement and maintains in substance that its continued use was agreed to by the parties. It relies upon a stipulation executed in late May 1976 for the purpose of obtaining the voluntary dismissal of injunction proceedings brought by the Government under 39 United States Code § 3007. The stipulation deals with certain undertakings promised by Respondent pending completion of the administrative proceedings or August 20, 1976 whichever was earlier.
The Stipulation quite clearly was an interim arrangement. In it Respondent agreed, for a period of time to "place no advertisements in newspapers, Sunday supplements, magazines or other periodicals", to honor all refund requests and to post a $25,000 bond or a bank guarantee to insure these promises. It was also stipulated that a May 30, 1976 advertisement in Family Weekly and an August 1976 advertisement in Brides would not be deemed a violation for purposes of the stipulation.
Since the stipulation mentions Respondent's agreement not to advertise in "newspapers, Sunday supplements, magazines or other periodicals" Respondent argues it was permitted to continue advertising through its existing catalogue. Respondent contends that the refund provision in the stipulation supports this viewpoint. Respondent also points to a refund provision found in the later Consent Agreement which reads as follows:
"2. (a) The undersigned agrees to return the full purchase price in accordance with the following policy which will be inserted with each order on a separate 8-1/2" x 11" sheet of paper in print no smaller than that of this agreement:
If you are not completely satisfied with your purchase, return it within ten days of receipt and your full purchase price will be refunded within fourteen days. Please do not forget to include your name and address.
(b) It will not be a violation of this Consent Agreement if isolated cases of non-refund are revealed unless the undersigned, within seven days, fails to correct and make such refund when such cases are called to its attention."
The immediately preceding paragraph of the Consent Agreement made one exception to its coverage by stating:
"(c) The advertisement placed for the STS Plan in the August 1976 issue of 'Bride's Magazine' shall not be deemed a violation of this consent agreement."
Respondent's understanding that it could continue use of the objectional catalogue advertisements until their natural expiration is certainly not expressed in the Consent Agreement which was entered into after the stipulation in the § 3007 court proceeding. Nor does the affidavit of Respondent's counsel contain facts to show that such understanding was discussed, or reached, with the Postal Service counsel prior to execution of the Consent Agreement. The Reply of the Complainant denies any such understanding regarding continued use of the catalogue.
The refund provision of the Consent Agreement, most reasonably interpreted, applies to orders received in response to advertisements considered objectionable. However, to extend this to mean that the objectionable advertisements could continue to be issued is contradictory to the language in paragraph 1 of the Agreement that the "use of the aforementioned promotional activities and representations***has been and will be permanently discontinued**." Since this Consent Agreement post dated the stipulation which was the basis for dismissing the interim court proceedings, it supersedes any contrary understanding which may have existed for the period while the administrative proceedings were pending. 1/ To reach the conclusion Respondent would attach to the Consent Agreement requires rewriting its terms, a result not justified on this record. This I conclude that the continued mailing of the catalogue advertisement which is identical to that complained of in the original complaint in these proceedings constitutes a breach of the Consent Agreement.
"7. This Consent Agreement shall be deemed a final determination of the administrative proceedings as contemplated in the stipulation and order entered in the civil action commenced by the U. S. Postal Service against the undersigned."
The Respondent's use of the new advertisement, as reflected in the Star exhibit, presents a different question since Respondent's contention here is that it differs materially from the promotional material which Respondent agreed to refrain from using and is protected by the First Amendment to the United States Constitution. In effect it contends that since the new advertisement refers to the promotor of the Slim through Sleep Plan as the "author" and twice mentions it as a "book" that it is an entirely new ball game.
However, at the outset it must be recognized that by signing the Consent Agreement Respondent bound itself not to make the factual claims which are contained in the advertisement. In so doing it avoided the possibility that the administrative hearing might have concluded the claims to be in fact false, as the complaint alleged, with the resultant issuance, and inconvenience of, a mail stop order. In so doing Respondent relinquished the right to later contest and establish the efficacy of these claims. See American Image Corporation v. USPS, 370 Fed. Supp. 964 (S.D. N.Y. 1974), affirmed 504 F.2d 1397 (2nd CCA 1974). 2/
The only issue still alive is whether Respondent, by virtue of the Star advertisement attached to the Petition, is engaged in the promotional activities and representations described in the original complaint which it agreed to discontinue. Parker Publishing Co., P.O.D. Docket No. 3/80, relied upon so heavily by Respondent did not involve a breach of Consent Agreement. 3/
Respondent's new advertisement while conveying the information that a "book" is involved is essentially selling the Plan, rather than the book, with the identical representations the agreement prohibits. There is no allegation or indication that the Consent Agreement was not freely and openly entered into. Each party gave up something in electing to go that route rather than to continue with the administrative proceeding.
Respondent would render the Consent Agreement virtually meaningless by interpreting it to permit continuation of the objectionable advertising until its existing stock of catalogues runs out, subject only to its living up to its refund offer, and to further permit continuation of selling the Plan by adding information that the Plan is contained in a "book". All this in an advertisement otherwise very lengthy and quite explicit in highlighting the weight loss results obtainable through use of the Plan. Although the original advertisement does not mention the fact that what was being sold was to be found in printed matter, or in a "book", its references to "method" and "program" and "plan" should leave little doubt in the ordinary reader's mind that what would be received would consist of printed material explaining the "plan" or "program" or "method". Thus I conclude that the revised advertisement is so substantially similar to that which Respondent, by the terms of the Consent Agreement, agreed to discontinue that it constitutes a breach of the terms of that Agreement.
Respondent's citations to cases dealing with the First Amendment protection are all distinguishable from the fact situation out of which the present Petition arises. Having found a breach of the Consent Agreement a mail stop order is being issued pursuant to the agreement of the parties found in paragraph 3(a) thereof.4/
* STS PLAN, 416A Fox Pavilion, Jenkintown, PA 19046; AMERICAN CONSUMER,
1050 Street Road, Southampton, PA 18966.
1/ As indicated in the terms of the Consent Agreement the administrative proceedings were terminated in return for Respondent's execution of that Agreement. Paragraph 7 provided:
2/ In this respect Respondent's request that if its constitutional argument fails the hearing be reopened to present evidence on the truth of its advertising claims regarding the Slim through Sleep Plan must be denied.