In the Matter of the Complaint Against CHARLES WAGNER, d/b/a THE AMERICAN WAY 240 E. Lake St., Suite 104 at Addison, IL 60101-2823 P.S. Docket No. 24/10; 10/28/86 APPEARANCES FOR COMPLAINANT: H. Richard Hefner, Esq. Steven B. Caver, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENT: Charles W. Wagner 14 N. Church, Suite A Addison, IL 60101-3841
On August 22, l986, Complainant filed a Petition alleging that Respondent has breached the terms of an Agreement Containing Consent Order to Cease and Desist (hereafter the Agreement) executed on May 6, l986. Complainant contends that Charles Wagner, doing business as Charles Associates, has resumed making false representations and promoting his lottery activities which, in the Agreement, he agreed to discontinue. Complainant seeks the issuance of an order against Charles Associates at P. O. Box 370, Medinah, IL 60157-0370.
On August 26, 1986, an interim detention order as provided for in paragraph 7 of the Agreement was issued against Respondent. The interim detention order granted Respondent a period of ten days to file a reply to the Petition. Respondent filed a reply in which he requested additional time to supplement his reply. The additional time requested by Respondent was granted, but no supplemental materials were thereafter filed.
By the terms of the Agreement, Respondent agreed to discontinue representing, either directly or indirectly, in substance and effect, that:
"(a) Each person who elects to participate in Respondent's program will earn substantial sums of money (i.e., $40,960.00).
* * * * *
(c) The only expense involved is the initial $20.00 investment to start in the program."
Respondent also agreed not to use the mail to conduct a lottery (Pet. Exhs. A & B).
Subsequent to the execution of the Agreement, Respondent mailed out materials inviting recipients to participate in a multi-level marketing program for "Old Secrets of Priceless Value," which are primarily the use of herbs or home remedies to correct such conditions as baldness, fevers, and obesity. A participant in the marketing program receives commissions from sales of the Secrets made directly by him and from sales made by purchaser-distributors solicited by him, as well as subsequent purchaser-distributors in his chain through five levels (Pet. Exh. C).
The materials represent that the Secrets are being marketed "at a total cost of $20.00 with 75% of the income being paid out in commissions to the participants." They also state "...you have the opportunity for a tremendous potential income as a participant with this program." (Id.).
The solicitations present examples showing gross revenues, ranging from $6,372.00 to $543,210.00, which can be earned through the recruitment of purchaser-distributors. With respect to these income examples, the solicitations state: "These are only examples of what can be done in the program...These figures are merely to show you what can be done if you put forth the effort. So DON'T STOP UNTIL YOU HAVE THE NUMBER OF PEOPLE YOU WANT. Keep working at it until you reach your goal. Some will mail these out by the THOUSANDS] They are the REAL WINNERS and will be rewarded very handsomely." (emphasis in original) (Id.).
Complainant alleges in the Petition that Respondent has breached the terms of the Agreement by continuing to make two of the representations which he agreed to discontinue. The truth or falsity of such representations, if made, is not in issue. Raymond Milo, P.S. Docket No. 12/168 (P.S.D. Dec. 31, l98l), and cases cited therein; see also, Hampartzoon Bazarian, P.S. Docket No. 20/103 (P.S.D March 17, 1986).
The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds.
Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959). It is the net impression which the advertisement is likely to make upon purchasers to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it the false representation statute is applicable. G. J. Howard v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958). See also, Virginia State Board of Pharmacy v. Virginia Citizens Council, 425 U.S. 748 (1976).
Applying these principles to Respondent's advertising of this multi-level marketing program, it is concluded that Respondent has resumed making representations he agreed to discontinue. The essence of the representation alleged in paragraph 3(a) of the Complaint is that the amount of money earned under the program is substantial. Respondent argues that his new brochure does not promise any specific earnings, but merely gives examples of what can be done under the program. Nonetheless, the overall impression created by the advertising continues to be that participants will realize substantial income under the program. The new materials also repeat the language challenged in Complaint paragraph 3(c), that the only expense involved is the $20.00 initial investment.
The elements of a "lottery" are prize, chance and consideration. Brooklyn Daily Eagle v. Voorhies, 181 F. 579, 581
(E.D.N.Y. 1910); Middle-Class American, Inc., P.S. Docket No. 16/65 (P.S.D. March 26, 1984); Collegedale Diversified Enterprises, Inc., P.S. Docket No. 14/29 (P.S.D. Oct. 25, 1983); Tenpen Sales Corp., P.O.D. Docket No. 2/35 (D.D. May 10, 1961). Participants in Respondent's program furnish a consideration of $20.00 for the chance to win prizes in the form of commissions. The amount of commissions that a participant will receive is dependent upon chance, because a participant's success depends upon the efforts of future distributors over whom he has little or no control.
Respondent argues that the program does not violate any regulations, because individuals may purchase the Secrets without participating in the marketing program. For the purchasers who elect to participate in the program, however, the program constitutes an illegal lottery, despite the receipt of a product in addition to the chance to win prizes. See, F.C.C. v. American Broadcasting Co., Inc., 347 U.S. 284, 290 n.8 (1954); Horner v. United States, 147 U.S. 449 (1893); Zebelman v. United States, 339 F.2d 484 (10th Cir. 1964); Tenpen Sales Corp., supra; Collegedale Diversified Enterprises, Inc., supra. Thus, Respondent is using the mail to conduct a lottery enterprise.
Respondent has breached the terms of the Agreement. Accordingly, pursuant to the terms of that Agreement, an order under 39 U.S.C. § 3005 is being issued with this Decision.
James A. Cohen Judicial Officer