In the Matter of the Complaint Against

 GOC P. O. Box 2770
 at Stuart, Florida 33494

 and

 GROUP ONE COMMUNICATIONS
 2321 Northeast Dixie Highway
 at Jensen Beach, Florida 33457

 P.S. Docket No. 12/118  

 04/09/82

 Bernstein, Edwin S.  

 APPEARANCE FOR COMPLAINANT:
 H. Richard Hefner, Esq.
 Clark C. Evans, Esq.
 Consumer Protection Division
 Law Department
 United States Postal Service
 Washington, DC 20260

 APPEARANCE FOR RESPONDENT:
 Robert L. Beals, Esq.
 Di Giulian, Spellacy & DiChiara
 Suite 1500, One Financial Plaza 
 Fort Lauderdale, FL 33394

 BEFORE: Judge Edwin S. Bernstein

Complainant alleged and Respondent denied that Respondent is conducting a scheme to obtain money through the mail by means of false representations in violation of 39 United States Code § 3005. I held a hearing in Fort Lauderdale, Florida, on February 17, 1982. Mr. Calvin L. Townsend and Mr. Gary D. Cantley testified for Complainant while Dr. Roger H. Hourie, Mr. Carl Brimm and Ms. Judith K. Groom testified for Respondent. The parties filed proposed findings of fact, proposed conclusions of law and arguments on March 15 and 16, l982. These have all been considered. To the extent indicated they have been adopted. Otherwise, they have been rejected as irrelevant or not supported by the evidence.

Respondent solicits remittances of money through the mail in connection with its sale of "Lists for Mail" distributorships. Respondent admitted this in its December 11, l981 Answers to Complainant's Requests for Admissions 3, 4, and 5. Also, Com plainant's Exhibits (CX) A through F and Postal Inspector Cantley's testimony (Tr. 40) support this finding.

Respondent's advertisements make the representations alleged in Paragraph III, subparagraphs (a) through (d) of the Complaint. The language in Respondent's advertisements that supports my findings is as follows:

(a) Purchase of the booklet "Lists By Mail" will allow immediate participation in Respondent's promotion without further substantial financial investment by the homeworker.

This representation is made by:

"Let me tell you the best part about my money-making program. You need NO equipment, NO offices, NO inventory, NO office furniture and NO huge amounts of capital to invest in displays or samples." (CX-B, Column 2, CX-B-1, Column 1)

"You can actually start making big profits within days . . . without risking large sums of capital . . . or spending money on inventory, retail space or shipping." (CX-C, p. 1, Column 1)

"I am also going to leak the highly guarded secrets that made millionaires out of men who began as small operators without a dime in their pocket." (CX-C, p. 2, Column 1)

"Yes, Mr. Kent, I accept your offer. Please send me your program. Enclosed find full payment of $10.00." (CX-B-1, Coupon)

"I have put all my secrets and an unlimited opportunity into 'LISTS BY MAIL.' It is not a book. It is not a course. It is a complete step-by-step procedure. A combination of my years of experience, methods, techniques, secrets, and most important, I will show you the opportunity of a lifetime. I will provide you with all you need to start your own business. There is no stone left unturned. I leave out nothing]" (CX-C, p. 3, Column 2)

Additionally, Respondent's omission of specific data concern ing further financial outlays implies to the reader that such expenses will be either non-existent or inconsequential compared to the initial purchase price of "Lists by Mail."

(b) The principal activities leading to sizable earnings are insertion of sales literature into envelopes followed by mailings to pros pects and processing return orders.

This representation is made by:

"Best of all, there is No direct sales . . ." (CX-B, Column 2, CX-B-1, B-2, and B-3, Column 1)

"There is absolutely no personal telephone solicitation or selling." (CX-C, p. 3, Column 1)

"You simply mail the literature and collect the money." (CX-D and D-1, pp. 3-4)

"The 2000 piece mailer program requires about 90 minutes to assemble. After that, sit back and take it easy." (CX-D and D-1, p. 4)

"The only thing you have to do is follow our simple step by step procedures." (CX-D and D-1, p. 12)

"ONLY YOU DETERMINE HOW MUCH YOU WANT. Some very ambitious distributors are able to make large profits mailing with no stress because of the amount of time that they have available, or the determination they have in store. Other individuals prefer less time, and are more comfortable with smaller mailings." (CX-D and D-1, pp. 14-15)

Pick the number of pieces you will require intelligently. Base that selection on how much you wish to make, how much time you wish to spend working as an official distributor." (CX-D and D-1, p. 15)

"All you have to do is mail the literature directly to the customer." (CX-D and D-1, p. 16)

(c) Names and addresses of sales prospects will be furnished on gummed address labels.

This representation is made by:

"All you have to do is mail the literature directly to the customer. Take the gummed address labels that will be sent to you, prepare and affix them to the envelopes; stamp the envelopes and take the stamped envelopes to the nearest mail receptacle. Then you sit back and wait for the returns to begin mounting." (CX-D and D-1, p. 16)

We will supply you with the source of names. These are guaranteed mailing list users." (CX-D and D-1, p. 20)

"When your materials arrive, begin to place them in the mail. The sooner you distribute to the public, the sooner you will make your share of the money that comes from your pledge." (CX-D and D-1, p. 21)

'All the information you need is provided by Group One Communications." (CX-D and D-1, p. 12)

". . .we will supply you with everything you will need to begin cashing in on some of this easy money." (CX-D and D-1, p. 13)

"We acquaint you with buying prospects." (CX-D and D-1, p. 16)

Mr. Townsend, a GOC distributor, testified that he expected that the gummed address labels would contain names and addresses of prospects. (Tr. 16-17) He based this conclusion on the represen tation in "Lists by Mail" that it only takes 90 minutes to assemble 1 2,000 piece mail campaign (Tr. 16-18). Additionally, Carl Brimm, Respondent's owner, admitted that GOC received complaints from other distributors who thought that they would receive names of sales prospects from GOC (Tr. 167).

(d) Respondent's mailing lists are widely marketable at the advertised price.

This representation is made by:

"Our lists are up-to-date, accurate and profitable to employ." (CX-D and D-1, p. 10)

"Each year thousands of businesses and sales oriented individuals use Group One Communications generated mailing lists." (CX-D and D-1, p. 10)

"Mailing lists available from Group One Communications are moving at a lightning fast rate because the consumers make profits by using these lists." (CX-D and D-1, pp. 12-13)

"The success that we have obtained with this method in the past years demonstrated to us that we will procure similar success on future promotions. What this means to you, as an official distributor, you will obtain large profits from the rental of each list." (CX-D and D-1, p. 16)

"Many currently throughout this nation are making thousands of dollars using these money making tools." (CX-D and D-1, p. 19)

"We offer high quality mailing lists through our distributors." (CX-D and D-1, p. 22)

III. The Truth or Falsity of The Representations

I further find that all of these representations are materially false for the following reasons:

(a) Purchase of the booklet "Lists By Mail" will allow immediate participation in Respondent's promotion without further substantial financial investment by the homeworker.

As indicated by Respondent's advertisements, interested parties were required to send in varying amounts of $10, $20 and $25 to receive "Lists By Mail" (CX-B-1, B-2, B-3), although in some cases "Lists By Mail: was sent without charge (Tr. 13, 39). However, in order to proceed in the program, individuals who obtained "Lists By Mail" were required to invest minimum sums of either $69.00 or $99.75 and could invest as much as $882.20 for an initial order of supplies. (Order forms at last pages of CX--d and D-1).

(b) The principal activities leading to sizable earnings are insertion of sales literature into envelopes followed by mailings to prospects and proceeding return orders.

This allegation refers to two representations:

1. sizable earnings can be made in Respondent's program.

2. the principal work will be insertion of sales literature into envelopes and processing return orders.

The evidence shows that the sizable earnings representation is false. Mr. Townsend testified that he followed the instructions specifically and failed to make a single sale (Tr. 21-22). Inspector Cantley's testimony with respect to his examination of Respondent's business records, along with his summary charts (CX-H and I), revealed that the vast majority of GOC distributors actually lost money. On December 18, l981, Respondent had a total of 696 distributors (Tr. 42) and, of that total, only 128 made any sales at all (Tr. 48-49). The remaining 568 GOC distributors never made a single sale. The calculations on CX-1 reflect that even if none of these 568 distributors purchased any postage, the minimum total loss to these distributors was $40,896.00

Mr. Norman Wade was the most successful distributor. On December 18, l981, his maximum gross receipts, without deducting any expenses for postage and supplies, would have been $851.50 (Tr. 53-54). After deducting minimum expenses, it can hardly be con cluded that even the most successful GOC distributor had sizable earnings. Respondent's own expert witness, Roger Lourie, also conceded that the average GOC distributor would sustain a net loss in participating in GOC's program (Tr. 123-127).

As to the principal work issue, Calvin Townsend, a GOC dis tributor who testified for Complainant, stated that it was neces sary for him to devote substantial time and effort in a library to obtain classified advertisements for names and addresses of prospects (Tr. 32-35). I found Mr. Townsend to be a reasonably bright and extremely dedicated and ambitious individual, as indicated by his testimony (Tr. 23-25). I, therefore, find that his record in compiling prospects would be reasonably typical of the efforts required by the average GOC distributor. Additionally,

Mr. Lourie testified that GOC distributors should expect to spend considerable hours in connection with the mailings required under the program (Tr. 127).

The foregoing demonstrates that the principal work to be done by GOC distributors is finding an assembling prospect names to compile their own mailing list rather than, as represented, inserting literature into envelopes and processing return orders.

(c) Names and addresses of sales prospects will be furnished on gummed address labels.

CX-F, the kit of supplies and instructions sold to distributors, indicates that the gummed address labels are blank, and further describes the recommended method of obtaining prospect names.

(d) Respondent's mailing lists are widely marketable at the advertised price.

Respondent's mailing lists are sold at prices which range from $60 per thousand for one thousand names to lower prices for larger quantities (CX-F-2). Mr. Lourie testified that $60 per one thousand names is within the industry range. Mr. Lourie defined "nixie" as an industry term for a name on a mailing list that has an incorrect address. On cross-examination, Mr. Lourie stated that he had not examined GOC's lists and had no information as to their nixie rate or to their degree of freshness (Tr. 114-115). It is clear that if these lists were below average in freshness or in nixie rate, they would be worth less than their advertised price. Therefore, Mr. Lourie was in no position to evaluate these lists.

Other evidence indicates that these lists were not widely marketable at their advertised prices. Mr. Townsend testified that he mailed sales literature to 259 prospects without making a single sale (Tr. 21-22). Although Mr. Lourie testified that Mr. Townsend operated during a slow time of the year (Tr. 98) his results were nevertheless far below expectations. Moreover, Inspector Cantley's testimony regarding GOC business records and his charts based on these records, indicated that the vast majority of distributors similarly had great difficulty in selling the GOC mailing list. Additionally, on cross-examination, Mr. Brimm admitted that he had received some distributor complaints regarding the staleness of GOC's mailing lists (Tr. 165).

1. Since Respondent has sought remittances of money through the mail, the jurisdictional requirement of 39 U.S.C. § 3005 has been fulfilled.

2. The representations made by an advertisement are considered to be those that the purchaser to whom it was directed, presumed to be of ordinary intelligence, would understand from viewing the advertisement as a whole. Donaldson v. Read Magazine, Inc., 333 U.S. 178, 188 (1948); G. J. Howard Co. v. Cassidy, 162 F. Supp. 568, 572 (E.D.N.Y. l958). What has been omitted and what may be reasonably implied from the advertisement are considered in assessing its meaning. 333 U.S. at 188; Spiegal, Inc. v. F.T.C., 411 F.2d 481, 483 (7th Circ. l969).

3. The average person reading Respondent's advertisements would interpret them substantially as characterized in Paragraph III, sub paragraphs (a) through (d) of the Complaint.

4. The representations specified in Paragraph III, subpara graphs (a) through (d) of the Complaint are materially false.

5. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, 587 F.2d 1149, 1168 (D.C. Cir. l978); S.E.C. v. National Student Marketing, 457 F. Supp. 682, 701 n. 43 (D.C. l978); Wilmont Products, P.S. Docket No. 6/46 at 7 (l979). Respondent did not produce evidence that overcame Complainant's evidence.

6. The fact that former illegal practices have been discon tinued does not make moot a pending case involving those practices. U. S. v. W. T. Grant Co., 345 U.S. 629, 632 (l953); Hampton v. Mow Sun Wong, 426 U.S. 88, 98 (1976).

Therefore, I conclude that Respondent is engaged in conducting a scheme for obtaining money through the mail by false representat tions in violation of 39 U.S.C. § 3005 and that a False Representation Order, substantially in the form attached, should be issued against Respondent.