In the Matter of the Complaint Against TELEX & twx DIRECTORY TELEX & twx DIRECTORY CENTER, and DIRECTORY PROCESSING CENTER P. O. Box 4054 at Beverly Hills, CA 90213 P.S. Docket No. 13/6; 07/15/82 Duvall, William A. APPEARANCE FOR COMPLAINANT: Thomas A. Ziebarth, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260 James A. Harbin, Esq. Regional Chief Inspector 850 Cherry Avenue San Bruno, CA 94909 APPEARANCE FOR RESPONDENT: Jerry L. Newton, Esq. 415 North Camden Drive Beverly Hills, CA 90210
I. STATEMENT OF THE CASE
1. In a Complaint filed December 21, l981, the United States Postal Service, hereinafter the Complainant, charged that Telex & twx Directory, Telex & twx Directory Center and Director Processing Center, hereinafter, collectively, the Respondent, P. O. Box 4054, Beverly Hills, CA 90213, are engaged in conducting a scheme or device for obtaining money through the mails by means of false representations as proscribed by 39 U. S. Code § 3005.
2. Complainant charged that in the conduct of the alleged scheme or device, "Respondent attracts attention to it by means of direct mail solicitations variously denominated 'order forms,' 'listing verifications,' and 'renewal instructions or notices,' all of which are in the form of, and reasonably could be interpreted or construed as, bills, invoices or statements of account due, and are calculated to induce recipients to remit money or property through the mails."
3. Complainant alleged that by means of materials of the type just described, Respondent represents, directly or indirectly, in substance and effect, by affirmative statements, omissions or implication that:
"a. The recipients of the 'renewal notices' have previously authorized their listing in the TELEX and twx DIRECTORY;
"b. The amount set forth on the face of the solicitations is owing and due to Respondent;
"c. Recipients of the Order Form and Listing Verification who fail to submit a revision or cancellation are obligated to pay for their listing;
"d. The TELEX and twx DIRECTORY is a comprehensive directory of subscribers to major teletype networks; and
"e. The TELEX and twx DIRECTORY contains all necessary information to communicate with teletype subscribers.
4. The foregoing representations are alleged by Complainant to be materially false as to matters of fact.
5. Complainant further charged that the solicitation materials used by Respondent in its alleged scheme constitute matter within the purview of 39 U.S.C. § 3001(d) and fail to contain notice in the forms prescribed by that Section and by the regulations promulgated thereunder, as a result of which failure the materials are non-mailable.
6. Complainant requested the issuance of an order of the type authorized by 39 U. S. Code 3005(a)(1) and (2).
7. In its Answer to the Complaint, Respondent stated, inter alia, that since 1975 it has mailed some 1,750,000 pieces of promotional material for its TELEX & twx DIRECTORY --Independent U. S. Edition. Respondent denied other allegations in Paragraph 1 of the Complaint.
8. Respondent admitted, in reference to the second Paragraph of the Complaint, that within the past six years it had used some, but not all, of four exhibits attached to the Complaint. Respondent stated that Respondent's order forms and other promotional materials, numbered 1 through 49, are set forth in Exhibit "A" to the Answer, but such materials were not included with or attached to the Answer, or Exhibit A thereto.
9. As to the specific charges in Paragraph 3 of the Complaint, Respondent admitted or denied them as follows:
Charge a. was admitted; charges b. and c. were denied; with respect to charge d., Respondent admitted that it publishes the largest domestic, and the only comprehensive directory of subscribers to major teletype networks; with respect to charge e., Respondent admits that the Directory contains all necessary information to communicate with teletype subscribers.
10. Respondent denied that the representations attributed to it are materially false; that the materials it uses constitute matter within purview of 39 U. S. Code § 3001(d) and fail to contain the notice required by that Section and by the regulations issued pursuant to that Section; and that the mailing of matter which is non-mailable under § 3001(d) of Title 39, U. S. Code, constitutes prima facie evidence that the mailer is conducting a scheme or device of the type proscribed by 39 U. S. Code § 3005(a)(a) and (2).
11. As affirmative defenses Respondent alleged (a) that the Complaint fails to state facts sufficient to support the relief sought; (b) that Complainant is estopped to bring this action because, when requested by Respondent to do so, it failed to prescribe any changes to Exhibits 2, 3 and 4 (presumably to the Complaint) and Complainant therefore waived any objections it might have had to those materials; (c) that Complainant is estopped to bring this action under the equitable doctrine of laches; and (d) that Complainant is acting for and on behalf of Western Union, Inc. in this and related proceedings for the sole purpose of assisting Western Union in a pattern of unfair competition and restraint of trade; has been doing so since 1975; and continues to do so.
12. Respondent seeks the dismissal of the Complaint and the denial of the relief therein sought.
13. The matter came on for hearing in Los Angeles, California, on February 24, 26 and 27, l982. Counsel for both parties partici pated in the examination and cross-examination of the witnesses, and they submitted proposed findings of fact, conclusions of law and supporting arguments. Proposed findings of fact and conclusions of law submitted by the parties have been fully considered and they are adopted to the extent herein indicated. Otherwise, such proposed findings of fact and conclusion of law have been rejected because they are unsupported by, or contrary to the evidence, or because of their immateriality or irrelevance.
II. PERTINENT POSTAL LAWS AND REGULATIONS
1. The statutory bases for this action are found in sections 3001(d) and 3005(a) of Title 39, United States Code. The first of these bases provides as follows:
"(d) Matter otherwise legally acceptable in the mails which--
(1) is in the form of, and reasonably could be interpreted or construed as, a bill, invoice, or statement of account due; but
(2) constitutes , in fact, a solicitation for the order by the addressee of goods or services, or both; is nonmailable matter, shall not be carried or delivered by mail, and shall be disposed of as the Postal Service directs, unless such matter bears on its face, in conspicuous and legible type in contrast by typography, layout, or color with other printing on its face, in accordance with regulations which the Postal Service shall prescribe--
(A) the following notice: 'This is a solicitation for the order of goods or services, or both, and not a bill, invoice, or statement of account due. You are under no obligation to make any payments on account of this offer unless you accept this offer.'; or
(B) in lieu thereof, a notice to the same effect in words which the Postal Service may prescribe."
2. The second and more familiar of the statutory bases for this proceeding, in substance provides that the Postal Service may issue a mail stop order requiring the return to senders of mail addressed to, and the non-payment of money orders made out in favor of persons found to be engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representa tions, including, but not limited to, the mailing of matter which is nonmailable under 39 U. S. Code 3001(d), quoted above. Subsection (a) of section 3005 then concludes with this sentence:
"For purposes of the preceding sentence, the mailing of matter which is nonmailable under such section 3001(d) by any person shall constitute prima facie evidence that such person is engaged in conducting a scheme or device for obtaining money or property through the mail by false representations."
3. Regulations authorized by § 3001(d) are published at § 123.41 of the Domestic Mail Manual. This section, insofar as here pertin ent, prescribes as follows:
"Any otherwise mailable matter which reasonably could be considered a bill, invoice, or statement of account due, but is in fact a solicitation for an order, is nonmailable unless it conforms to .41a through .41h below. A nonconforming solicitation constitutes prima facie evidence of violation 39 U.S.C. § 3005."
"a. The solicitation must bear on its face the disclaimer prescribed by 39 U.S.C. 3001(d)(2) (A) or, alternatively, the notice: THIS IS NOT A BILL. tHIS IS A SOLICITATION, YOU ARE UNDER NO OBLIGATION TO PAY UNLESS YOU ACCEPT THIS OFFER. The statutory disclaimer or the alternative notice must be displayed in conspicuous boldface capital letters of a color prominently contrasting (see .41g below) with the background against which it appears, including all other print on the fact of the solicitation and at least as large, bold and conspicuous as any other print on the face of the solicitation but not smaller than 30-point type.
b. The notice or disclaimer required by this section must be displayed either:
(1) On the center of the diagonal described by a straight line drawn from the vertex of the lower left corner to the vertex of the upper right corner; or
(2) Overprinting each portion of the solicitation which reasonably could be considered to specify a monetary amount due and payable by the recipient.
* * *
e. If a solicitation consists of more than one page, the notice or disclaimer required by this section must be displayed on the face of each page at a location permitted by .41b.
f. Regardless of the number of pages comprising the solicitation, if any page is designed to be separated into portions (e.g., by tearing along a perforated line), the notice or disclaimer required by this section must be displayed in its entirety on the face of each portion that might reasonably be considered a bill, invoice, or statement of account due.
g. For purposes of this section, the phrase 'color prominently contrasting' excludes any color, or any intensity of an otherwise included color, which does not permit legible manual, mechanical, electronic, and photographic reproduction, and which is not at least as vivid as any other color on the fact of the solicitation. For the purposes of this section the term 'color' includes black.
* * *"
III. MATERIALS USED BY RESPONDENT
1. Some of the mailing pieces (reduced in size) used by Respon dent in the conduct of its business are reproduced here, identified with Respondent's exhibit numbers, although when available, Com plainant's designation of each such exhibit is also stated. In each case in which a mailing piece seeks the remittance of money, it is accompanied in the transmittal t the prospective original or renewal subscriber by a postage paid envelope, pre-addressed to Respon dent. 1/ RX 3B1 (CX 8b, obverse)
RX 3B2 (CX 8b, reverse)
RX 3C1 (CX 9b, obverse
RX 3C2 (CX 9b, reverse)
RX 7C, obverse (CX 19, obverse)
RX 7C, reverse (CX 19, reverse)
RX 3A1 (CX 7b, obverse)
RX 3A2 (CX 7b, reverse)
RX 7A, obverse (CX 3, obverse)
RX 7A, reverse (CX 3, reverse)
2. Two other of Respondent's mailings are significant - the first of which, CX lc and RX 3A3 and 5, are examples, are captioned in large red lettering 'WARNING TO ACCOUNTS PAYABLE." This warning advises of, and gives illustration of "fraudulent and unsolicited invoices" being distributed by certain other companies. The obvious suggestion is that Respondent does not engage in these practices employed by the other companies. On the reverse of this exhibit Respondent advises that it is not affiliated with network and equipment suppliers - that its only product is the directory, which Respondent regards as "indispensable." CX 1c was received in the mail by '"James Collision & Assocs., 6950 Hayvenhurst, Van Nuys, CA 91406."
3. The second of the significant other mailings is typified by CX 2 and RX 3D2 and 4. These are identified on their faces as invoices and both seek the remittances of $120.00. CX 2 was sent to the same addressee, Collison and Associates, to whom CX 1c was sent.
IV. THE SURVEY AND CERTAIN EXHIBITS NOT COVERED BY THE SURVEY
A. EXHIBITS IN THE SURVEY
1. One of the witnesses for Respondent was Dr. Burton A. Marcus, a professor in the Department of Marketing, School of Business, University of Southern California. In addition to teaching, Dr. Marcus has worked in private industry, he belongs to professional associations, and he has published books and articles in the marketing field. He does consulting in marketing and he is former President, and present Director, of the National Research Center, an organization that performs primarily market oriented research for other organizations. (Tr. 413-115)
2. At Respondent's request, Dr. Marcus supervised a study, a poll, to determine what individuals thought of, and how they responded to, certain pieces of Respondent's mailing material, which will be discussed shortly hereafter. Interviewees were screened in order to limit the persons polled to individuals who were (a) employed and (b) employed in positions in which they would normally receive and open incoming business mail.
The first thing the interviewees did was to look at each form as a mailing piece by Respondent. Next they were told to assume that they had received each such form in the office as they receive any other piece of mail or literature in the normal course of their duties. The interviewers were told that when the individuals had finished looking at the material, the interviewer should ask the following questions about each separate piece of mail. (1) What is it; (2) What do you do with it; and (3) Will a bill for the amount due follow this. The results are stated below with respect to each exhibit identified below, all of which are reproduced in Section III, supra.
3. RX 3B1 & 2 (CX 8b, both sides)
One hundred (100) persons were interviewed in reference to this exhibit, thus the numbers given also indicate the percentages of the group represented. In answer to the first question put to them, 12 persons identified the piece as a bill; five (5) said they would pay it, while 15 said that no bill would follow the receipt of this notice because the notice, itself, constituted a bill. (RX 20)
Page 1 of RX 20 relates to RX 3B1 and, specifically, to the half of the card which has no red print on it. This is the portion of the card on which the negative option appears. The negative option appears on RX 3C1 and on RX 7C, in addition to RX 3B1. Page 1 of RX 20 reflects the fact that of the persons interviewed, all of whom were chosen because their duties include the handling of such incoming mail, 12 per cent identified RX 3B1 as a bill in response to the survey question "what is it'? But when asked whether a bill would follow it, 15 per cent said "No, this a bill." These responses significantly weaken the effect of the comment of Dr. Marcus when he said that the person of ordinary mind probably would regard this exhibit as an order form. (Tr. 426) His coment ignores, and reflects adversely upon the judgment of persons selected under his supervision to participate in this survey precisely because of their familiarity with this general type of incoming mail. He added that it is probably likely that any group of people in check-writing positions with businesses would probably construe this exhibit in the same way and in the same proportions as did the persons interviewed in the survey. (Tr. 446)
4. RX 3C1 & 2 (CX 9b, both sides)
Three out of 100 persons interviewed said this exhibit is a bill; 2 said it was a reminder to pay a bill. As to what to do with it, 11 said it should be sent to Accounts Payable or to the boss; 2 said it was a reminder of an overdue bill and 9 said to pay it. (RX 20)
The results of page 2 of RX 20 as it relates specifically to RX 3C show that only 3 per cent initially identified it as a bill. Only 3 per cent said they would pay on the basis of RX 3C, but 11 per cent said that the document should be sent to Accounts Payable or to the boss. It is, therefore, reasonable to believe that the people constituting this 11 per cent must have had some idea that the exhibit called for or might represent a demand for payment. This last possiblity is considerably strengthened by the fact that, when asked whether a bill would follow the receipt of this notice, 9 per cent answered by saying "No, pay this." (Tr. 426-427) The fact that 9 per cent of the persons interviewed would pay on the receipt of this exhibit does not surprise Dr. Marcus even though it is stated on the face of the document that "a separate bill for our annual listing ($120.00) will follow." (Tr. 446)
5. RX 7C (CX 19)
This was the piece in which the feature given most attention at the hearing was the "negative option," in which Respondent said, in substance, to the addressee "if I don't hear from you by a certain date, that means to me that you want to buy my directory, and I'll be sending you a bill before long. Only 50 people were polled with respect to this exhibit. Two (2) people, or 4 per cent of the group interviewed, identified this card as a bill; 14 per cent said they would send it to Accounts Payable; 2 per cent said they would pay it; and 4 per cent said that no bill for the amount due would follow this notice, so they would pay on the basis of the account as presented in RX 7C. (RX 20)
Dr. Marcus said that this survey shows that the person of ordinary mind would believe that RX 7C is an order form and not a bill. (Tr. 429) This exhibit contains the negative option type of approach that is considered in RX 3B1 and RX 3C1, and it produced some of the same confusion in the minds of the interviewees that was produced by RX 3B1. For example, while only 4 per cent of them identified RX 7C directly as a "bill", 2 per cent said to pay it, while 14 per cent said "send it to accounts payable." Unless it is some type of statement of account due, there would be no point in sending the exhibit to accounts payable. Finally, a total of 16 per cent of the interviewees said no bill would follow the receipt of RX 7C because (1) the bill already had been paid or (2) the bill should be paid on the basis of RX 7C. Dr. Marcus's interpreta- tion of the comments of the interviewees is, again, contrary to the comments, themselves.
6. RX 3A1 & 2 (CX 7b, both sides)
There were 27 people whose views were obtained with respect to this exhibit. No one in this group said specifically that he/she thought the form was a bill. Oddly enough, however, when asked what one should do with it, 7 per cent said to send it with a check. Even more notable, and perhaps indicating more clearly how this exhibit was regarded, when asked whether a bill for the amount due would follow their receipt of this exhibit, 22 per cent of the people interviewed said they would not later receive a bill because they would pay on the basis of this exhibit. (RX 21; Tr. 431)
Dr. Marcus gave it as his opinion that the person of ordinary mind would believe RX 3A1 to be an order form. He added that "under no condition" would such a person believe this document to be a bill, invoice or statement of account. (Tr. 432) Dr. Marcus simply ignores the fact that 22 per cent of the people polled said this exhibit would not be followed by a bill because they would pay on the basis of the exhibit. (RX 21) It previously has been pointed out that RX 7A and RX 3A1 are practically identical. It follows that the impression created by one of these exhibits would be the same as that created by the other.
In general, Dr. Marcus impaired his credibility and weakened his testimony by his refusal to accept the statements and judgment of significant numbers of persons, chosen under criteria he estab lished, concerning the meaning, impact and the impression created by Respondent's solicitation materials.
B. CERTAIN EXHIBITS NOT INCLUDED IN THE SURVEY
RX 3D2 and 3D4 were not among the exhibits included in the survey. These two exhibits carry the notification that they are invoices and there is no perceptible or rational basis to believe that they are anything other than what they are stated to be. Those people who failed t respond to RX 3A, B, and C by becoming new subscribers (Tr. 570) were regarded by Respondent as having, by their silence, consented to being billed (par. 38, post, pp. 39-40), and RX 3D2 was mailed to them. Similarly, persons who had not responded to RX 7A, B, and C were regarded as having indicated a desire to continue or resume their subscriptions, and RX 3D4 was sent to them. Insofar as these categories of persons were concerned, the invoice sent to them could only be regarded as the last in a long line (4 mailings - from May to November, l981) of solicitations. Since none of them had ordered the directory, however, they obviously did not owe for it, so that the sending of a bill to them would make no sense whatsoever in the normal course of business conduct. The only logical purpose to assign for the sending of RX 3D2 and 4 to these persons was to make one last ditch effort t solicit their renewal subscriptions or to persuade them to make their initial purchase of the directory. In these circum stances, RX 3D2 and 4 are obviously solicitations disguised as invoices.
V. THE WITNESSES
1. The first witness for Complainant was James W. Collison, who is a photographer in business for himself in Van Nuys, California.
Mr. Collison received through the mails from Respondent on June 22, l981, the following exhibits: CX 1a - an envelope containing CX 1b (ident., except for name and address, to RX 3A1, above) and CX 1c (described in the penult. par. in Sec. III, above, as the "Warning to Accounts Payable"); and CX 1d, a metered return envelope addressed to Respondent. In November 1981, Mr. Collison received through the mail from Respondent CX 2 (RX 3D2), the invoice for $120.00 described in the last paragraph in Section III, above. Mr. Collison believed CX 1b and CX 2 were invoices. (Tr. 11) Although he had not previously seen it, Mr. Collison said he would also regard RX 3B1 as a bill because of the "negative option," previously described.
2. James M. Jordan, FAcilities and Purchasing Manager for Jerry Mann, Inc., Vernon, CA, was Complainant's next witness. Mr. Jordan received a renewal notice through the mail from the Respondent. (CX 3, RX 7A) This exhibit is very similar to RX 3A, the order form sent to previous non-subscribers, one of which Mr. Jordan received also. (CX 4) Mr. Jordan believed that both of these exhibits were invoices because there is on each of them in white lettering in a red box the words "Please pay this amount" and the box points to the figure $120.00. (Tr. 42) In addition, on the back of the form the addressee is told to "Return this computer card with your remit tance. Make check payable to: "(Respondent), and on the face of the card the addressee is also told to "Return this form with payment before July 3, l981 to assure continued and complete listing in forthcoming edition." (Tr. 49, 50) Mr. Jordan advised Respon- dent by mail that he had not ordered, and did not need or want the directory. (CX 5)
3. The third witness called by Complainant was Julius Y. Kochman, Bethpage, New York, who represents Telex in the United States and Canada, for Jaeger & Waldmann of Germany. The directory published by the company he represents consists of eight volumes listing all telex subscribers, worldwide, alphabetically by country, classified by products and services and by numerical and alphabetical answer-back codes. A separate volume contains, in classified form, all the hotels, airlines, shipping lines, and other concerns related to tourism. Four supplements are issued to subscribers each year to update the annual edition. Including the supplements, the 1981 edition contains a listing of more than a million telex terminals. (Tr. 53, 54)
4. Mr. Kochman stated that he believed Exhibits CX 7B (RX 3A1) and CX 10b (RX 3D4) are invoices, for basically the same reasons that others expressed the same relief. (Tr. 66, 71-72) Although as President of Universal Media Company of Bethpage, NY, Mr. Kochman received all of the Respondent's mailing material comprising CX 7 through CX 10, the name of his company does not appear in the TELEX & twx DIRECTORY. (Tr. 66) These exhibits include all of Respon dent's Exhibit 3 except subexhibits 3D1 and 2.
5. The Jaeger & Waldmann Directory (JWD) differs from Respon dent's directory in these, among other, additional ways: (a) the JWD has approximately 173,000 United States subscriber listings "give or take a few thousand," and Respondent's directory has about 155,000 United States subscriber listings, "give or take a few thousand" (Tr. 62); (b) in Respondent's directory there are listings of Western Union, Telex and twx subscribers and also a number of telex numbers of various United States international carriers, but, contrary to the practice in JWD, there is no identification in Respondent's directory of which carrier belongs to which number. Therefore, if the book is used within the United States, the international telex numbers are of very little value, because the Western Union telex subscriber cannot reach any of the international numbers. There is no connection. Neither can the international numbers in the United States reach any of the domestic subscribers. (Tr. 60); (c) the JWD Directory does, and Respondent's directory does not, list in the alphabetical part the full address of the company, a fact which may or may not be important to whoever uses the Directory. JWD has, for instance, customers who buy that Directory just to get the information about addresses to use them for mailing purposes (Tr. 62); and (d) the JWD has a classified section and Respondent's directory does not; (e) JWD has an answer back section, while Respondent's directory does not (Tr. 81-82); and (f) JWD is the only company that produces a quarterly supplement. (Tr. 54, 88)
6. Ms. Frances Poff, Manager of Western Union Directory (WUD) compilation, located in St. Louis, MO., was Complianant's next witness. The 1981 WUD has about 144,000 companies listed, some companies having multiple listings which bring the total number of listings to 154,000. (Tr. 169) The company asserts that, when published each issue is approximately 92 per cent correct. (Tr. 171) The WUD is issued free of charge to subscribers to the Western Union Telex services, the company receiving its income from user charges based on hourly usage of Telex equipment. The 1981 WUD set January 24, l981, as its cut-off date for submission of information by subscribers. It was issued to subscribers at some time between the end of January and the first of May 1981.
7. The witness stated that during the course of the average year, changes are made in about the following frequencies for the following reasons: 23,000 new installations; 15,000 disconnects; 2,000 number changes; 5,000 answer-back code changes; and 9,000 address changes, for any average annual total of about 54,000 changes. (Tr. 169) On the other hand, the witness testified that there are approximately 1,500 updates or revisions a day. (Tr. 208) These two figures (54,000 per year/1,500 per day) are simply incompatible, 2/ and no conclusion can be drawn from this portion of the witness's testimony. The precise data as to the number of changes made in the WUD per year or per week is not material, however, to the outcome of this proceeding. This witness compared for accuracy the information given in the 1981 WUD and Respondent's 1981 Beverly Hills directory for 100 names chosen at random by the witness. (CX 12 a and b.) These exhibits were offered only to show that in the 100 randomly selected instances, where there were dis crepancies Western Union's information was correct and Respondent's data were erroneous. (Tr. 185, lines 1-6, incl.) The two direc tories were published at about the same time of the year in l981. Thus, if proper care had been exercised in gathering and publish ing the data, the directories should be much the same at the time of publication. Western Union, in its directory, advises its sub scribers of its Information Center which will supply current information about addresses and numbers that change during the course of the year. (Tr. 177) One of the duties performed by Ms. Poff is to keep a current, up-to-date information system at all times. (Tr. 167)
8. Postal Inspector Alice N. Elberson, Eugene, Oregon, is a graduate of Renssalaer Polytechnic Institute, with a Bachelor of Science degree in Mathematics. In December of 1977 she received a Master of Science degree from the same institution in Operations Research and Statistics. She has taken both basic and advanced courses in probability and statistics, applied and theoretical. Concentrated areas of her study include distribution theory, sampling methods, regression, analysis of variants, estimation, hypothesis testing, decision theory and non-parametric methods. She became a distribution clerk, then a Carrier with the Postal Service, and in 1980 she became a Postal Inspector. Part of her time as an Inspector is devoted to the investigation of possible violations of Postal Law, but she has spent more than 50 per cent of her time in the area of audit. She has also devoted time to the analysis of means to improve the service by studying the large system as a whole. (Tr. 127-128)
9. In connection with her assignment Ms. Elberson was requested to provide a supportable statistical opinion as t the accuracy or inaccuracy and the completeness or incompleteness of Respondent's directory. In preparing for and in the course of performing her analysis, she independently picked a random sampling (168) of the listings in the WUD, 71 were not listed in Respondent's directory and 15 were listed incorrectly. Stated another way, 51.19 per cent of the listings in the 1981 WUD were either not carried or they were inaccurate as they appeared in the 1981 TELEX & twx Directory, Independent U. S. Edition. Of the 170 entries from Respondent's directory, 55 or approximately 32.35 per cent were either inaccurate or disconnected numbers. (Tr. 136-140)
10. The foregoing data are predicated upon the assumptions (a) that at the time of its publication the WUD was 92 per cent accurate, as stated without contradiction by the witness Poff, and (b) that the data base is corrected in the manner and with the frequency stated by the same witness. The error rate, however, had nothing to do with Inspector Elberson's statistical analysis or opinion. (Tr. 133) Based on the testimony of Ms. Poff the assumptions stated above are reasonable, and because of the qualifications, manner, and demeanor of, and the method followed by Ms. Elberson, the results of her study are accepted as valid. (Tr. 136-141; CX 13a and b.)
11. Postal Inspector Michael Crevelli, Burbank, California, Complainant's last witness assisted Inspector Elberson in the preparation of CX 13a and b. They went to the offices of Western Union in St. Louis, Missouri, and prepared the tabulation of the comparison of the entries in Respondent's directory with those in WUD. All of the information on CX 13a was written by one of the Inspectors. On CX 13b, the entries in red ink are the only ones made by someone other than the Inspectors, and those entries were made by Western Union personnel. (Tr. 343-344) These entries served to explain to the Inspectors why problems had arisen in checking the listing, such as a wrong dial number, a non-existent dial number, disconnected, and the like.
12. The original sample of names from Respondent's Beverly Hills directory was 204 names. Thirty-four (34) of these names were disregarded because they were listings from places such as Hawaii, Virgin Islands and Puerto Rico, and some of them were listings of other companies such as ITT and RCA. Such listings as those mentioned are not purported to be accurate as they appear in the WUD. The elimination of these listings reduced the total sample used to 170, as stated. (Tr. 345) Inspector Crevelli's testimony was in all respects in accord with, and corroborative of that of Inspector Elberson, and their testimony is entitled to full credibility and weight.
13. Postal Inspector Larry B. Johnson, testified that in the year 1981 he had received about 4,000 complaints with respect to Respondent and some of its activities. Most of the complaints centered on unauthorized billings, and those notices used by Respondent, described and depicted above (pp. 8, 10 and 11) which contain the "negative option" form of order. (Tr. 241-264)
14. On cross-examination Respondent sought to show that most of the letters of complaint were from subscribers to the Western Union Telex/twx system; that the inspector discussed this case with no carrier other than Western Union; that the complaints came in greater volume after the issuance of the WUD with its warning on page 2 that its subscribers should beware of fraudulent billing for directory advertising (RX-2); that when, in August of 1981, Respondent abandoned the use of the red arrow demand for payment and adopted RX 3B1 as the vehicle by which it would seek orders, the target of the complaints changed from "invoices" to "negative options"; and that when in October-November, l981, Respondent's mailing pieces were RX 3C and 3D to complaints again were directed at "invoices", which, in fact, is what RX 3C and 3D are labeled. It was agreed that the vast majority, perhaps as many as 95 per cent, of the persons who complained about Respondent's activities were and are Western Union Telex/TWX subscribers/ All of the foregoing facts, circumstances and assumptions, Respondent intimated would form the foundation of its Fourth Affirmative Defense. (Tr. 265-319)
15. In response t Respondent's questions, Inspector Johnson stated that the complaint letters in respect to RX 3A were two, or a combination of two, namely: (a) that the exhibit was regarded as an unauthorized invoice; and (b) that it purports to be a billing from Western Union. (Tr. 323) The chief complaint about RX 3B was the negative option aspect of it, but there were others who regarded that exhibit as a further effort to extract money for services not ordered or rendered. (Tr. 326) complaints with respect to RX 3C were substantially the same as those relating to RX 3B; and everyone recognized the invoices, which are parts of RX 3D, as an invoice. (Tr. 324-329)
16. The reactions of addressees to the mailing pieces relating to renewals were as follows:
RX 7A - it constituted an invoice for service neither ordered nor received; most of the writers of such letters did not believe they had been in the directory before.
RX 7B - substantially the same as for RX 7A.
RX 7C addressees did not like the negative option features; they feared someone might pay it through error. (Tr. 329-331.)
17. The first witness called by Respondent was Charles R. Abbott, President of Wayne Systems, Inc., a computer service bureau located in Torrance, California. This business specializes in list maintenance for various types of marketing activities in which large numbers of computerized lists are beneficial for political action, for donors to religious or health organizations, as well as magazine circulation, and they also build lists for general purpose mailing, catalogs and public release-type lists. Since 1980, Wayne Systems (Wayne) maintains the list of entries for Respondent's directory. (Tr. 367-368, 370)
18. In preparation of the 1981 issue of Respondent's directory, Wayne took several directories and "captured the data" (Tr. 372), which I interpret to mean "copied the contents" in whole or in part. The directories included a listing of radio and TV stations, a portion of a directory that had some banks in it, a manufacturers' directory, an export and an import directory, an international teletype directory, Western Union's Directory, Western Union Inter national's Directory, RCA and possibly others. In addition, there was a computer file of prior subscribers to Respondent's directory. The captured data included, also, the TELEX or TWX number of the business, and, if they were available, the answer back code and the address. (Tr. 372-373)
19. After the information had been captured, there was per formed what was called "netting out" the file in cases in which there were two or more listings of the same subscriber. In such cases the common denominator was the teletype number. Those listings were brought together and the one that had the most information about the person or concern listed was taken. The end result was that from all of this activity, a file was as complete as it could be made with that data and with any other source materials that were available. Updating was an ongoing activity, and it was accomplished by "capturing" data from additional directories and by utilizing the results of mailings, for such items as address changes and undeliverables. This information was given to Respondent who corrected them to the extent possible and returned them to Wayne for use in subsequent mailings. (Tr. 373-375) Mr. Abbott said that effort is made to have an updated and correct mailing list for persons who are earlier subscribers and for those who have not previously subscribed or who have declined to subscribe.
20. Mr. Abbott confirmed the dates and numbers of mailings set forth under the various pieces on RX 3 and RX 7 (Tr. 381-385) and he indicated the status of the responses to the mailings as reflected in the files as of December 14, l981. (RX 18; Tr. 387-388)
21. On cross-examination Mr. Abbott said that since January or February of 1981, Wayne has completely recaptured the Jaeger & Waldmann and the Western Union directories. (Tr. 396) In addition to the foregoing two directories, his company used the RCA and the Western Union International directories to update Respondent's 1981 directory. (Tr. 398)
22. Dr. Marcus, under whose direction the survey was conducted (last par., p. 14, supra), said that the average mind would believe RX 3A1 is an order form and that "under no condition" would the person of ordinary mind believe this document to be a bill. (Tr. 432)
When asked what impact the words "please pay this amount" and a red arrow pointing to a stated amount of money would have, Dr. Marcus replied with the following remarks which are subject to various interpretations:
"Well, if you consider a form you get from places like the magazines which say, pay this, if you check it off and send it in. If you consider those a bill, when they are a form like that, then that is a bill, but certainly not if you don't classify that and define that as a bill. If you --I mean, many times I will get some solicitation and I will send it off and it will say, bill me now or send it in, and I will check it and I will send a check, because maybe they will say I will save a couple of cents by doing that or a dollar or two by sending it along with it so they don't have to bill me. It wasn't a bill when I got it, but I guess you can call it a bill if I sent the check with it. I don't know what the definition of that would be." (Tr. 432-433)
Dr. Marcus did say that if he had received RX 3A1, it could not "be a bill when I hadn't agreed to something." He said it was an order form but he did say: "that is me, though. That opinion was mine, not them." (Tr. 433) The fact that Respondent received 1,712 orders from a mailing of 116,966 copies of RX 3A1 was said to be further support for the opinion that the person of ordinary mind interprets that exhibit as an order form. The basis for this opinion was not disclosed.
23. RX 8 consists of a large group of letters from persons, most, if not all of whom express displeasure at the receipt of some of Respondent's mail material. Dr. Marcus extracted from this group 83 that were from names he could identify, 77 of which were listed in the WUD. A later search at the Western Union Information Center produced another 4 names that were Western Union Subscribers. He stated that the probability that a drawing of 83 names with "all but one" being a subscriber to Western Union is highly unlikely or unusual. The warning of fraudulent billings found on page 2 of the l981 WUD was said to contribute to this statistical aberration. (Tr. 436-437)
24. Mailings of the following exhibits were made in the numbers indicated, and orders were received in the numbers shown:
RX No. No. Mailed Date Orders Rc'd %
3A 116,696 May 30, l981 1,712 1.46
3B 113,581 August 17, l981 0 0
3C 95,807 September 16, 1981 0 0
7C 18,443 November 11, 1981 0 0
Dr. Marcus testified that the foregoing data indicate to him that the general public interprets each of the four mailing pieces not as a bill but as an order form. (Tr. 437-439) No basis is stated for ascribing the refusal of people to subscribe to Respondent's publication to that reason in preference to any of a number of other possible reasons, such as, for example, simple lack of desire for the publication.
25. On cross-examination Dr. Marcus said that the reactions of the persons whose views were obtained by the survey might reason ably be extrapolated across the population who would normally receive, on behalf of businesses, letters and solicitations of the type exemplified by Respondent's mailings. There are those among the interviewees who regarded RX 3A1 as an advertisement, some who thought it a bill, and others who categorized it otherwise. These results were, and are, to be expected. (Tr. 441-442)
26. Postal Inspector Wayne Collier was called by Respondent to testify. Inspector Collier is assigned to the Burbank, California branch of the Los Angeles Postal Inspection Service office. He is the Fraud Team Leader supervision four other inspectors in the investigation of various types of fraud cases, but concentrating on what is known as false billing cases. One of the members of his team is Inspector L. B. Johnson, a witness whose testimony as been summarized. Inspector Collier became familiar with Respondent in 1975 when he received some complaints dealing with Directory Processing Center and one of its trade styles, which resulted in an interview of Mr. Raymond Milo, the operator, in July, 1975. (Tr. 461-462)
27. Inspector Collier has been the person by whom, primarily, such complaints have been received on behalf of the Postal Service 1975. Complaints originate and are received from various sources, such as: manufacturer associations alert their members in various parts of the country; Better Business Bureaus issue alerts; individual companies complain to different enforcement agencies, such as the Federal Trade Commission, all of which forward the complaints to the Postal Service Special Investigations Division in Washington. (Tr. 46-47)
28. The complaints which Inspector Collier received in relation to the Respondent are generally characterized as false billing complaints. Since 1975, when he became involved with complaints about Respondent's activities, he has received in excess of 8,000 of them, but no count of them was started until about 1977 or 1978. For the year 1981 there was a total of 3,771 complaints and for the preceding five or five and one-half years there was a total of approximately 5,000 complaints. In another proceeding, Inspector Collier stated that of the entire 8,000 or so complaints, approxi mately 80% relate to the writers' beliefs that someone was attempt ing to pose as Western Union, and the remaining 20% were complaints of false billing by the Respondent, without any reference to Western Union. While some of the 8,000 complaints say that the writer is in receipt of a bill and some say that the writer is in receipt of an order form, most of them say that the writer almost paid it, or they thought they owed it, or they thought it was from Western Union, or that the enclosed mailing was like others the writer had been complaining about for years, and the writer wanted something done about it. (Tr. 466-471)
29. Inspector Collier spoke with a representative of the Respondent in 1975 and 1977 and Inspector Johnson spoke with Respon dent's attorney in 1981 and these are the only personal contacts between Respondent and the Postal Service of which Inspector Collier was aware. He did speak with a Western Union representative in 1975, and ain later 1977 or early 1978, he interviewed a Michael Borsella, an attorney for Western Union. Mr. Borsella may have said that he was going to have the Postal Service do something, but, so far as the witness knows, the Postal Service is not doing anything in this case at the request of Mr. Borsella. (Tr. 474-476)
30. Among the 8,000 complaints mentioned earlier there were some very isolated complaints from RCA, but none was recalled as being from ITT or any other telex company. Some complaints had attached to them the warning that appeared on page 2 of the l981 WUD. That warning was entitled "Beware of Fraudulent Billing" for Directories." Other complaints arose because some of the pieces received were from Respondent whereas the writers were subscribers of Western Union. Some persons said they had contacted Western Union and were told to send their complaint to a proper party. A number of complaints came to Inspector Collier because the "page 2" warning advised persons to send complaints to the Special Investi gations Division, U. S. Postal Service, by which Division the complaints were forwarded to Inspector Collier. The witness recalled no complaint about the quality of Respondent's directory or the lack of instructions in it. (Tr. 476-479)
31. The mailing pieces in the RX 3 series which brought forth the most vehement protests were, first, RX 3D (the forms designated "Invoice No. "), next, RX 3B and C (because of the negative options), and RX 3A (the order form, believed by so many to be be an invoice). (Tr. 518) RX 3A and RX 7A are no longer used by Respondent. There may be more than one complaint from one company and the number of companies from which complaints have been received is unknown. (Tr. 521)
32. Respondent's last witness was Raymond Milo, President of Respondent since 1977. Mr. Milo has a Bachelor's Degree in Mechanical Engineering with a minor in Mathematics from the University of Illinois, and he has pursued some graduate studies but has not completed his work for a Master's Degree. After his education was completed he went to work for the Aerospace Division of McDonald-Douglas in Santa Monica, California, and shortly thereafter was assigned to work as a liaison man in NASA at various test sites in the United States. He entered the directory publish ing business in l975, in which business he was engaged in l981 under the name TELEX and twx DIRECTORY CENTER. (Tr. 528-529)
33. Mr. Milo defined Respondent's directory as "a compendium of the telex numbers of all various telecommunication networks that are operating in the United States and possessions." It contains information by which a person can communicate with another telex or twx subscriber, specifically, the telex number, which is used for communication, and the answer-back, which is the combination of letters occasionally used to verify before a message is sent. (Tr. 538)
34. RX 8A and B are groups of complaints by representatives of businesses who object to the receipt of order forms used by Respon dent, including one which is identical to RX 3A1, except for the name and address of the individual company. The objections are to the effect that, among other things, (a) the companies are being billed for something they had not ordered; (b) the mailing pieces given the impression that they originated from Western Union; and (c) the documents resemble invoices or statements of amounts due. Not all letters state all of these bases for the complaints.
35. Mr. Milo identified RX 26 as a photograph of a filing cabinet with two drawers pulled open and showing what appear to be numerous files in each drawer. Attached to the photograph are what purport to be, and were identified by Mr. Milo to be, copies of order forms for Respondent's directory from various businesses.
Of the approximately 12 businesses who complained of Respondent's solicitation material and whose complaints comprised RX 8A and B, only 2, Refinery Associates and Aircraft Instrument & Radio Company had submitted a renewal or an order form for the 1981 directory published by Respondent. The other orders were dated from October 1, l976, through January 28, l978. The majority of the companies represented in RX 26, therefore, had no current renewal or initial orders for the 1981 edition on file with Respondent. The fact that Respondent assumes it has an order from a company until it receives positive information to the contrary does not mean that all the companies contacted by Respondent operate on the same basis. Furthermore, there is no indication whether the older executed renewal or initial orders were executed on the basis of full and accurate information or whether they renewed on the basis of inaccurate beliefs induced, as here in some cases, by the solici tation pieces.
36. CX 19 through 24 are examples of complaints received in which the writers of the letters protest the receipt of "renewal" forms for material and services their companies have not ordered. These letters protest the use of the negative option and one of them (CX 22) refers to RX 7B as an invoice. (Tr. 253-257)
37. RX 27 was identified by Mr. Milo as a photograph of a cabinet in which most of the signed order cards are kept. With the photograph are what were said to be xerox copies of six such cards, (in fact, the six cards originated from only five companies) each of which cards is signed with a person's name and shows a title such as manager, president, and so forth. Each card purports to be from one of the companies from whom the protests in CX 19 through 24 were received. It is noted that one order card is for a listing in the 1981 edition of the Respondent's directory; one order is dated August 28, l976, the remaining three have dates in 1977, and each of the last four is an order for only the "forthcoming new and indepen dent" edition of Respondent's directory. There is no order for con tinued entry in or renewal of subsequent editions. Of the five names on the order cards, one is typed and four are handwritten: a title, such as president, follows only three names, and there is no authentication for any of the names, signatures, or titles. (Tr. 541-542) Again, the inducement, or the belief in the minds of the signers of the cards, is nowhere to be discovered.
38. Out of the mailings made RX 3A, B and C, there remained a number of people who indicated affirmatively the desire to be billed, or whose earlier mailings had not been returned as undeliverable, or who, under the terms of the negative option, were assumed by Respondent to have assented to being billed. (Tr. 570) Approximately 21,500 renewal notices (RX 7A) were mailed on May 30, l981, although only about 7,000 persons had subscribed to the previous year's directory. (Tr. 572) The 21,500 figure results from the fact that Respondent does not remove a name from the list of subscribers until he has positive instructions to do so from the person or concern involved. RX 7B, the renewal reminder form was sent to about 20,000 persons. (Tr. 574) Mr. Milo stated that the reduction from 21,500 to 20,000 resulted from the receipt of instructions to discontinue from those approximately 1500 persons constituting the amount of the decrease. (Tr. 575) RX 7C was sent to those 18,000 persons who did not respond to RX 7B, all of whom had been at some time subscribers to Respondent's directory. (Tr. 575) All persons who neither (a) took a new subscription nor (b) renewed a former subscription, but who did not instruct Respondent to remove their names from Respondent's records, totaled 87,562. To all of these persons or businesses, an invoice - either RX 3D2 or 4, as appropriate - was sent.
39. Mr. Milo stated that he does not claim that Respondent's directory carries the totality of the entries contained in all of the other directories published. (Tr. 580)
40. After the hearing the Declaration of David Schulman, was received as RX 28. In his Declaration, Mr. Schulman states that for the past several years he has been employed by Records, Ltd., a wholesale distributor of phonographic records, with its office located at 2818 West Pico Boulevard, Los Angeles, California. He is the manager of this establishment.
41. In 1981, Records, Ltd., subscribed to and received the 1981 Telex & twx Directory --Independent U. S. Edition.
42. In February of 1982, he was contacted by Raymond Milo, who identified himself as the owner of the Respondent. Mr. Schulman has no personal or professional relationship with Mr. Milo. Mr. Milo asked Mr. Schulman if he would be willing to testify at a hearing in Los Angeles, and Mr. Schulman agreed to do so.
43. Shortly thereafter, Mr. Milo's attorney, Mr. Newton, showed Mr. Schulman the obverse sides of RX 7A and B and the "signature" side of RX 7C, and asked him if he had ever seen them before. Mr. Schulman advised Mr. Newton that he had, that they had been sent to Records, Ltd., during 1981. Mr. Newton asked what Mr. Schulman thought the exhibits were at the time they were received and Mr. Schulman told him that they were renewal forms for the direc tory. Records, Ltd., did not renew its subscription, since it was felt, as a cost-cutting measure, the 1981 directory would be adequate for another year.
44. Mr. Newton asked whether or not Mr. Schulman thought any of the cited exhibits were bills or invoices, and the answer was in the negative. Mr. Newton asked what Mr. Schulman thought of the direc tory, and was told that it is used daily in the business of Records, Ltd.
The evidence adduced in this proceeding leads to and supports the findings of fact now stated.
1. Respondent is a California Corporation, duly incorporated as Directory Processing Center, Inc. in September of 1977. Its President and sole shareholder in Raymond Milo. After incorpora tion, Respondent filed for and began using the ficitious business name of Telex & twx Directory Center.
2. Since 1977, Respondent has published the "TELEX & twx Directory --Independent U. S. Edition". The directory is sold via direct mail solicitations to subscribers of various telex networks, including subscribers to Western Union, Western Union, Interna tional, RCA, ITT and others. Some of the solicitations utilized by Respondent in 1981 for the 1982 directory are attached to the Com plaint as Exhibits 1 through 4.
3. Certain of the mailing pieces employed by Respondent in the conduct of its business are in the form of, and reasonably could be, and have been, interpreted or construed as bills, invoices, or statements of account due, but they constitute, in fact, solicita tions for the addressees' renewal or initial orders of the directory sold by Respondent.
This finding is addressed specifically to Respondent's Exhibits 3A1 and 7A; 3/ 3B1, 3C1 and 2, and 7C; 4/ 7B; and 3D2 and 3D4. There are three bases for this finding and they are: (1) the com position, language and appearance of the documents, themselves;
(2) the testimony of the witnesses Collison (Tr. 10-11 re RX 3A (CX 1b) and RX 3D4 (CX-2)); Jordan (Tr. 42 re RX 3A (CX 4) and RX 7] (CX 3)); Kochman (Tr. 66 re RX 3A1 (CX 7b), RX 7C and RX 3D4 (CX 10b)); and (3) the survey, or poll, which was conducted under the super vision of Dr. Marcus at the request of Respondent. (RX 20, supra, pp. 14-19)
4. Respondent makes the representations set forth in paragraph 3 of the Complaint.
a. Respondent admits that it represents that the recipients of the renewal notices have previously authorized their listing in Telex and twx Directory. (Answer § 3.a.)
b. Respondent represents that the amount set forth on the fact of the solicitations is owing and due to Respondent.
On RX 3A1, 7A and 7B there are rectangular boxes enclosing, in white lettering on red background, the message 'PLEASE PAY THIS AMOUNT". The right side of the box is pointed to the right to another enclosed space in which, on RX 7B, the amount "R120.00" has been inserted. This same amount appears on CX 1b, which was sent to the witness Collison, and on CX 3, which was sent to Jerry Mann, Inc., about which exhibit Mr. Jordan testified.
Also on RX 3D2 and 3D4, there are pointers indicating that the addressees are requested "Please Pay This Amount," which in each exhibit is shown to be "$120.00."
If one is requested to remit a stated amount to a named party, the person so requested receives the impression that the writer believes the addressee is indebted in the stated amount. When such notices go to business offices, the tendency of the person opening such mail normally will be to assume that someone acting for the business authorized the purchase of the goods or service represented by the bill.
c. Respondent represents that recipients of the Order Form and Listing Verification (RX 3B1) who fail to submit a revision or cancellation are obligated to pay for their listing.
After being instructed to "report any changes" in the information contained in the listing as appearing on this form, the addressee is told:
"If your revision or cancellation is not received by September 30, this listing order form will automatically be processed as is. After the correction deadline expires you will receive a separate bill ($120.00) for 1982 complete annual listing."
The survey revealed that 12 per cent of the people who examined this form immediately identified it as a bill, 5 per cent of those polled said they would pay it, and 15 per cent said that no bill would arrive later because this form is itself a bill. To the extent indicated, these numbers of people (who were chosen to parti cipate in the poll because of the duties of their occupations) regard this form as a bill for a listing for which they had, or would have, an obligation to pay. Respondent's Exhibits 3C1 and 7C also carry the negative option indicating that there is no great effort by Respondent to dispel the idea that the failure to act creates an obligation on the part of those to whom these notices are sent.
d. Respondent represents that the TELEX and twx Directory is a comprehensive directory of subscribers to major teletype networks.
On RX 3B2 and 7C, there are examples and a warning to addressees about foreign entrepreneurs who, it is suggested, are less than scrupulous and who send unsolicited invoices to telex subscribers. These examples and notices are followed by a reassuring message which, in pertinent part, is:
"The people who produce the TELEX & twx DIRECTORY believe you deserve to have most complete and up-to-date publication possible. The 1982 edition will provide listings for more than 158,500 subscribers to major teletype networks in the U.S., including Western Union, W.U.I., R.C.A., I.T.T., and T.R.T. ***"
e. Respondent represents that the TELEX and twx DIRECTORY contains all necessary information to communicate with teletype subscribers.
The language quoted immediately above from RX 3B2 and 7C provides adequate basis to support the charge that Respondent makes this representation.
5. The representations found to have been made by Respondent are material representations because they are of the type that cause people (a) to want to be listed in Respondent's directory and (b) to be willing to pay the demanded price for such directory.
6. The representations herein found to have been made by Respondent are false. The support in this record for this finding with respect to each charge is cited as follows:
Charge a. 1. Testimony of Inspector Johnson about the reactions of recipients of RX 7A - see paragraph 16, p. 29, supra.
2. Mr. Milo's statement that 21,500 renewal notices were mailed in May 1981, although there were only 7,000 subscriptions to the previous year's directory - paragraph 38, pp. 39-40, supra.
Charge b. It previously has been found that certain of Respondent's mailing pieces reasonably may be, and, in fact, are by reasonable people, believed to be invoices. (F.F. 3, supra, p. 42) Yet, these documents are used by Respondent as "order forms," knowing that no goods or services have been ordered by, or furnished to the addressees of such documents.
Charge c. There is no provision of law by which an obligation to pay arises out of an unsolicited offer to furnish goods or services.
Charges d. and e. Testimony of Mr. Kochman, paragraph 5, p. 22, supra. Testimony of Inspectors Elberson and Crevelli, paragraphs 9-12, incl., pp. 26-27, supra.
1. In the conduct of its business, Respondent utilizes materials that are nonmailable matter within the meaning of § 3001(d) of Title 39, United States Code, and that matter should be disposed of as the regulations of the Postal Service direct.
2. That some number less than a majority of the persons interviewed in the poll were unable to determine that some of Respondent's mailing pieces were solicitations presented in the guise of invoices or statements of account is no bar to this pro ceeding. In Farley v. Heininger, 105 F.2d 79, 70 App. D.C. 200, cert. den. 308 U.S. 587 (1939), it was held that the fact that a scheme of misrepresentation goes undetected, or even that it succeeds, does not preclude its suppression by denial to it of the use of the mail.
3. Respondent's mailing materials, namely, RX 3A1, 7A, 3B1, 3C1, 7C, 3D2 and 3D4, are solicitations in the guise of invoices which do not bear on the face of them, by typography, layout or color, the notice required by either 39 U. S. Code § 3001(d) or by Section 123.4 of the Domestic Mail Manual.
4. Respondent is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false, material representations within the meaning of 3005 of Title 39, United States Code.
5. Assuming, without agreeing, that Respondent, by discon tinuing the use of certain of its mailing pieces, no longer makes certain misrepresentations which are the subjects of this proceeding, that fact is no bar to this proceeding. United States v. W. T. Grant Co, 345 U. S. 629, at 632 (1953); Warner Lambert Co. v. F.T.C., 562 F.2d 749 (D.C. Cir.), cert. den. 435 U.S. 950 (1978).
Respondent's affirmative defenses are (1) without merit (2) unsupported by or contrary to the evidence (3) without statutory or factual foundations; or (4) some or all of the foregoing.
An order of the type authorized by 39 United States Code § 3005, substantially in the form attached, should issue against the names appearing in the caption of this decision.
1/ Many of Respondent's mailing pieces are multi-colored in red, blue and black. Although a poor substitute, effort has been made to convey the impression received by the addressees by indicating red with "(R)" and blue with "(B)" in or near the areas or print so colored. Print not so designated is either white or black, and areas not so designated are white.
2/ On the one hand, 54,000 changes per year, as opposed, on the other hand, to 378,000 changes per year, computed on the basis of 1,500 changes per day for 252 days (365 days less 113 Saturdays, Sundays and holidays).
3/ These two exhibits are identical except for the captions on the obverse sides.
4/ The negative option appears on each of these exhibits.