In the Matter of the Complaint Against

 MIDDLE-CLASS AMERICAN, INC.
 1736 Gilsinn Ave.
 P.O. Drawer AK
 at Fenton, Missouri 63026-2004

 P.S. Docket No. 16/65;  

 06/30/83

 Bernstein, Edwin S.  

 APPEARANCE FOR COMPLAINANT:
 Thomas A. Ziebarth, Esq.
 Consumer Protection Division
 Law Department
 United States Postal Service
 Washington, D.C. 20260-1100

 APPEARANCE FOR RESPONDENT:
 Claude Hanks, Esq.
 725 Old Ballas Road 
 Foreway Building
 Creve Coeur, Missouri 63141-7013

 BEFORE: Judge Edwin S. Bernstein

Complainant alleged and Respondent denied that Respondent was engaged in conducting a scheme for obtaining money through the mails by false representations and by a lottery in violation of 39 U.S.C. § 3005.

A hearing was held in Washington, D.C., on May 18, 1983. Postal Inspector Thomas J. Kellen testified for Complainant while Randal D. Lytle and Kenneth R. Redman testified for Respondent. Both parties filed proposed findings of fact, proposed conclusions of law, and memoranda. All of these have been considered. To the extent indicated, they have been adopted. Otherwise, they have been rejected as irrelevant or not supported by the evidence.

The parties stipulated and I find that Respondent uses and has used the mails in connection with the distribution of its publications that are at issue in this proceeding (Tr. 2).

Respondent publishes a newsletter twice each month at a subscription price of $200 a year. The newsletter discusses taxes, economics, the middle east, investments, and other subjects considered of interest to middle-class Americans (CX-7, CX-8). Respondent permits subscribers to become sales representatives and receive commissions equal to 25 percent of their direct sales. In addition, subscribers, if they elect to sell subscriptions, receive override commissions on sales made by their customers and their customers' customers through four levels or "generations."

Complainant contends that this override commission plan constitutes a lottery in violation of 39 U.S.C. § 3005. The necessary elements of a lottery are the furnishing of a consideration, the offering of a prize, and the distribution of a prize by chance. Horner v. United States, 147 U.S. 449 (1893); Brooklyn Daily Eagle v. Voorhies, 181 F. 579 (E.D.N.Y. 1910). Respondent concedes the element of consideration (Proposed Findings, Page 8). However, Respondent contends that, since commissions are determined by the number of subscriptions actually sold, there is no element of chance.

Arrangements involving override commissions have been held to be lotteries. Public Clearing House v. Coyne, 194 U.S. 497 (1904). Zebelman v. United States, 339 F.2d 484 (10th Cir. 1964); Tenpen Sales Corporation, P.O.D. Docket No. 2/35 (May 10, 1961); Collegedale Diversified Enterprises, Inc., P.S. Docket No. 14/29 (Initial Decision December 10, 1982). In Zebelman, the Court held that when one receives payments for a second step participant, "the procuring of this buyer is dependent, at least in part, upon chance..." P. 486.

Similarly, in Tenpen Sales, where commissions were paid within seven levels, the Judicial Officer found the plan to be a lottery. Quoting from Public Clearing House, the Judicial Officer stressed that since "the profits depend principally upon the exertions of others, ones whom he, the salesman, has no control and with whom he has no connection ... the amount realized is determinable by chance." P. 5.

Respondent argues as to the element of prize, "chance is a condition precedent" contending "if it were by ... chance ... it might be impressed with the character of prize" (Proposed Findings, P. 9). The cases cited also hold the offering of something of value such as an override payment constitutes a prize. Typical is Tenpen Sales, which adopts the definition for "prize" as "anything of value offered as an inducement to participate in the scheme" P. 4.

I, therefore, find that Respondent's sales plan constitutes a lottery in violation of 39 U.S.C. § 3005. In view of this finding, it is unnecessary to decide the false representation issues. Therefore, an order in the form attached should be issued against Respondent.