In the Matter of the Complaint Against GREAT LAKES YELLOW PAGES, INC., a Wisconsin corporation, and MARC NELSON, individually and as agent of the corporation, 815 W. Fond du Lac and 759 W. Medford at Milwaukee, WI 53218-2918 P.S. Docket No. 25/79 June 29, 1987 Edwin S. Bernstein Administrative Law Judge APPEARANCES FOR COMPLAINANT: H. Richard Hefner, Esq. Thomas P. Kuczwara, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENTS: Thomas R. Fahl, Esq. Flanagan, Sendik & Fahl 11707 West North Avenue Milwaukee, WI 53226-2198 BEFORE: Judge Edwin S. Bernstein
Complainant alleged and Respondents denied that Respondents are mailing solicitations in the guise of bills or invoices in violation of 39 U.S. Code 3001(d) and that Respondents are engaged in a scheme to obtain money through the mail by false representations in violation of 39 U. S. Code 3005.
The Complaint alleged that Respondents' solicitations falsely represent that:
(a) The addressee has previously authorized a business listing in Respondents' telephone directory;
(b) The amount set forth on the face of the solicitation is due and owed to Respondents;
(c) Respondents are a part of or affiliated with the telephone company servicing the recipient's area;
(d) Respondents are the publishers of the business to business phone directory or "yellow pages" customarily supplied to business telephone subscribers in the recipient's area;
(e) The area of distribution of Respondents' directory will encompass all business telephone subscribers in the "region"'
(f) Publication and distribution of Respondents' directory will take place in accordance with time frames customary to the authorized "yellow pages" industry publication and distribution standards.
A hearing was held in Milwaukee, Wisconsin. Lynda L. Price, Josephine Kasprzak, Ronald E. Keller, Paul A. Scipione, Ph.D. and Willie C. Reynolds testified for Complainant. Lee Alan Roloff and Marc Charles Nelson testified for Respondents. The parties filed proposed findings of fact, proposed conclusions of law, initial briefs and reply briefs. 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.
Respondent Great Lakes Yellow Pages, Inc. solicits remittances of money through the mail in connection with its sale of advertising space and listings in telephone directories that it prepares. Respondents admitted this in Paragraphs 4 and 5 of their Answer and various exhibits and testimony also substantiate this finding (CX-1(a), 1(b), 1(c); Tr. 14-15, 108).
39 U. S. Code 3001(d) provides:
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 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.
In implementation of that statute, Domestic Mail Manual (DMM) 123.4 sets forth the following requirements for solicitations in the form of invoices:
.41 Solicitations in the Guise of Bills, Invoices, or Statements of Account (39 U.S.C. 3001(d); 39 U.S.C. 3005) . 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 of 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 face 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 of disclaimer required by this section must be displayed either:
(1) Diagonally on the center of line drawn from the vertex of the lower left corner to the vertex of the upper right corner as in the following example; or
[example omitted]
(2) Overprinting each portion of the solicitation which reasonably could be considered to specify a monetary amount due and payable by the recipient.
c. The notice or disclaimer must stand conspicuously apart on the page. It must not be preceded, followed, or surrounded by words, symbols, or other matter that reduces its conspicuousness or that introduces, modifies, qualifies, or explains the prescribed text, such as "Legal notice required by law."
d. The notice or disclaimer must not, by folding or any other device, be rendered unintelligible or less prominent than any other information on the face of the solicitation.
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 face of the solicita- tion. For the purposes of this section the term "color" includes black.
h. Any solicitation which states that it has been approved by the Postal Service or by the Postmaster General or that it conforms to any postal law or regulation is nonmailable.
I find that Respondents' solicitation (CX-1a) is in the form of, and could reasonably be construed as a bill, invoice, or statement of account due. Paul A. Scipione, Ph.D., testified concerning this issue. Dr. Scipione is a professor of Marketing at Montclair State College in New Jersey who has a private practice in consumer psychology. He was previously a vice president and group director of Response Analysis Corporation, a market research firm located in Princeton, New Jersey. Before that, Dr. Scipione was Manager of Copy Research at Young and Rubicam Advertising Agency. He is a consumer psychologist who has conducted numerous studies of the effects of advertising, at least 25 to 30 of which relate to direct mail campaigns. Many of these studies evaluate the likely impact of direct mail advertisements on typical consumers (Tr. 61-68).
Dr. Scipione has co-authored several texts and more than 25 professional papers and is active in professional associations (CX-7). He has conducted studies of the effect upon consumers of bills and he has conducted marketing studies for AT&T, NYNEX, Southern Bell and Bell Atlantic (Tr. 64).
I found Dr. Scipione to be highly qualified by experience, training, and skills to analyze Respondents' solicitation and testify about the various telephone companies. I found him to be truthful and reliable.
Dr. Scipione prepared a four-page litigation report (CX-8) in which he assessed Respondents' solicitation. He testified that elements of Respondents' solicitation which create a significant potential for a business person receiving it to perceive it as an invoice, bill, or statement of account are:
1. The price ($85.00) is highlighted as it appears in the box which also contains the listing (Tr. 74).
2. The form is perforated so that the bottom portion can be detached and returned with payment (Tr. 74).
3. The statement immediately beneath the perforation, "PLEASE RETURN BOTTOM PORTION WITH PAYMENT" (Tr. 74).
4. The statement immediately above the perforation "*Your payment must be received within 10 DAYS [bold print], in order to guarantee its publication*" (Tr. 74).
5. No enclosure advertising the product accompanied the solicitation (Tr. 74-75).
6. The single-page solicitation contains no sales information and is perfunctory and stark in appearance (Tr. 75-76).
7. The solicitation is enclosed in a window envelope which contributes to its being perceived as a bill (Tr. 79).
8. The solicitation contains little information about what is being offered (Tr. 83-84).
9. The line above "YELLOW PAGES DIRECTORY", reads, "Please enclose check for the amount of $85.00 payable to:" and the line below contains the language, "Payment by the applicant..." (CX-8, par 3)
I agree with Dr. Scipione that, because of these elements, Respondents' solicitation is in the form of and could reasonably be construed as an invoice. This conclusion is also substantiated by the testimonies of Josephine Kasprzak and Ronald C. Keller.
Ms. Kasprzak, vice-president and secretary of the L & R Crane & Hoist Corp. of Milwaukee, testified that she approves for payment bills received in the mail by the corporation. She received Respondents' solicitation (CX-3) and interpreted it as an invoice for the corporation's advertising in the Ameritech Yellow Pages, a publication in which her firm has advertised for 19 years (Tr. 38-40). Ms. Kasprzak directed her office staff to issue a check, which she signed (CX-4).
Mr. Keller, president of Becker & Keller, Inc. of Milwaukee, also testified that he also approved Respondents' solicitation for payment (CX-5). He, too, concluded that it was an invoice (Tr. 48).
Both Ms. Kasprzak and Mr. Keller have two person clerical staffs. This places additional pressure on them because their busy schedules do not allow for lengthy, detailed review of solicitations (Tr. 42, 49). Both stated that Yellow Page advertising is very important to their businesses because each of their firms advertises only through this medium.
Since Respondents' solicitation is in the form of and reasonably could be interpreted or construed as a bill, invoice or statement of account due and the solicitation does not contain a disclaimer as is required by 39 U.S.C. 3001(d) and DMM 123.4, in accordance with these provisions, Respondents' solicitation is nonmailable.
(a) The addressee has previously authorized a business listing in Respondents' telephone directory.
(b) The amount set forth on the face of the solicitation is due and owed to Respondents.
Based upon the elements of Respondents' solicitation previously discussed, I also find that the solicitation makes these represen- tations.
I do not agree with Respondents' argument that there is no misrepresentation because if people such as Ms. Kasprzak and Mr. Keller took more time to read the solicitations, including the fine print on its reverse side, they would not be mislead. Because of the solicitation's invoice format, the low price involved, and the fact that it is sent to busy business people such as Ms. Kasprzak and Mr. Keller, as Ms. Kasprzak and Mr. Keller testified, recipients tend to routinely pay the amounts listed after but a casual examination. As Dr. Scipione testified, many other business people would also tend to hastily examine the mailing. These are the people whom this statute was designed to protect and must protect.
(c) Respondents are a part of or affiliated with the telephone company servicing the recipient's area.
(d) Respondents are the publishers of the business to business phone directory or "yellow pages" customarily supplied to business telephone subscribers in the recipient's area.
All of Complainant's witnesses testified that the solicitation makes these representations.
Ms. Price, the manager of the Financial and Solicitations Divisions of the Better Business Bureau of Greater Milwaukee, testified that although the familiar black on yellow "fingers doing the walking" logo is not copyrighted, does not belong to any telephone company, and any company is free to use it (Tr. 18), the business community associates the logo with the telephone direc- tories published by local telephone companies (Tr. 26-27).
Ms. Kasprzak testified that she associated "...the Yellow Pages in Milwaukee..." with, "The little fingers" or the yellow pages distributed by the telephone company Ameritech (Tr. 37-28). She thought Respondents' solicitation was for her "...regular yellow telephone book" published by Ameritech (Tr. 40).
Mr. Keller stated that what he understood to be "the Yellow Pages" was, "The Yellow Pages which we're all familiar with, the Ameritech" (Tr. 47). Not until he spoke with one of Complainant's attorneys shortly before the December 4 hearing did Mr. Keller realize he had not paid for Ameritech's Yellow Pages (Tr. 48). He stated that he was mislead by the large, bold lettering of "TELEPHONE DIRECTORY" and "BUSINESS TO BUSINESS" as well as "...the little fingers up in the left-hand corner..." (Tr. 49).
Dr. Scipione stated: ...I would say that it's just not just a matter of the amount of information that you present, but it's also the form, the weight that you give the different information that's provided...it's not just the total amount of verbiage, you know, or pictorial material that's presented. What kinds of information are in bolden or enlarged, what kinds are presented in small print or on a second page or on the back side of a page (Tr. 85).
In explaining how he confused Respondents' solicitation for a "manu- facturing and industrial" directory with Ameritech's business to business directory, Mr. Keller illustrated this theory. He stated, "It's just one of those things where the bold print sort of did the selling" (Tr.54)
Another element of the solicitation which caused Mr. Keller to confuse its source was that the listing for his business which appeared in on the solicitation was "...almost identical to the one that is in the Ameritech Yellow Pages...So there was no question at that time that this was for Ameritech's Yellow Pages Directory" (Tr. 49).
Dr. Scipione concluded that business persons would perceive that Respondents' mailing originated from their local telephone company (Tr. 76-77) and would perceive the directory to be customarily supplied to all business telephone subscribers in the area (Tr. 79-80). He summarized the elements of Respondents' mailing which create these two perceptions as:
1. The black on yellow walking fingers logo on the solicitation, mailing envelope, and payment envelope (Tr. 76, 78-79).
2. The language:
a. TELEPHONE DIRECTORY
b. BUSINESS TO BUSINESS
c. YELLOW PAGES DIRECTORY
d. BUSINESS YELLOW PAGES
e. EXPANDED MARKET COVERAGE
f. MANUFACTURING & INDUSTRIAL
3. The limited use of color in the solicitation which focuses perception on the misleading logo (Tr. 91).
4. The small printing of the company name, Great Lakes Yellow Pages on the solicitation and the omission of the company name from the address of the payment envelope and return address on the window envelope (Tr. 99-100).
Although paragraph 4 in the reverse of the solicitation contains a disclaimer, "...and is not connected with your local telephone company," as Dr. Scipione testified, a disclaimer must be noticeable to have an impact (Tr. 92). In fact, despite his training and expertise, Dr. Scipione himself at first failed to notice the disclaimer (Tr. 81).
(e) The area of distribution of Respon- dents' directory will encompass all business telephone subscribers in the "region".
This representation is implied and flows from representations (c) and (d). The ordinary reader, believing that Respondents' Yellow Pages Directory is being published by the local telephone company in the region would also conclude that the directory would be distributed to all business subscribers in the region. This perception is reinforced by the large print in the solicitation "Due to Expanded Market Coverage. . ." See : Mid-Am Marketing, Inc. , P. S. Docket No. 24/12 (PSD January 5, l987 at 10).
(f) Publication and distribution of Respondents' directory will take place in accordance with time frames customary to the authorized "yellow pages" industry publication and distribution standards.
This similarly flows from representations (c) and (d) and is further supported by the language in the solicitation in bold type "Due to Expanded Market Coverage and Limited Time " [emphasis added] as well as the conspicuous language "your payment must be received within 10 days, in order to guarantee its publication." Both of these statements represent that Respondents intend to proceed reasonably rapidly to publish the directory.
I find that the representations alleged in subparagraphs 6(a) through 6(e) of the Complaint are false. It is clear and without question that representations 6(a) through 6(d) are false. As to 6(e), unlike the telephone companies' yellow pages which receive wide distribution, Respondents' directory was designed to receive an extremely limited distribution. Thus, Respondent Marc Charles Nelson testified that Respondents intended to mail the directory only to paid advertisers, embassies, governmental and corporate purchasing agencies, and between 50 and 100 libraries (Tr. 165-166).
However Complainant has failed to prove that the representation alleged in subparagraph 6(f) is false. Complainant's evidence shows that Respondents mailed solicitations in August 1986 (Tr. 14, CX 2-6) and that as of the date of the hearing in early December 1986, the directory had not been published. However, Complainant has not shown that Respondents' failure to distribute their directory within that time period "is not in accordance with time frames customary to the authorized yellow pages industry publication and distribution standards." Moreover, Mr. Nelson testified that this proceeding has delayed the publication of Respondents' directory, a statement that makes sense (Tr. 16). The Complaint in this case was filed on September 3, 1986.
Mr. Nelson's testimony that Mr. Willie Reynolds, a post office clerk signed his name on a corner of the solicitation does not constitute approval of the solicitation. Mr. Reynolds denied that he intended to approve the solicitation and that he had any authority to give such approval (Tr. 139-144, 172; RX-4). I find that he did not intend to approve the solicitation, that he did not approve it, and that he had no authority to authorize Respondents to mail the solicitation.
1. Postal Service False Representation Orders do not violate the First Amendment of the Constitution. Donaldson v. Read Magazine, Inc. , 333 U. S. 178 (1948); Lynch v. Blount , 330 F. Supp. 689 (S.D.N.Y. l971); Hollywood House International, Inc. v. Klassen , 508 F.2d 1276 (9th Cir. l974); and United States Postal Service v. Beamish , 466 F.2d 804 (3d Cir. l972). In the latter case, the Court held "Advertisers possess no constitutional right to disseminate false or misleading materials. Therefore, Congress has the power to prohibit such deceptions through appropriate legislation" p. 807. See also : Bolger v. Young's Drug Products Corp. , 463 U.S. 60 (1983).
2. An advertisement must be considered as a whole and its meaning will be determined in the light of its probable effect on persons of ordinary minds. Donaldson v. Read Magazine, Inc. , supra ; Vibra-Brush Corp. v. Schaffer , 152 F. Supp. 461 (S.D.N.Y. l957), rev'd on the other grounds , 256 F.2d 681 (2d Cir. l958).
3. Express misrepresentations are not required. It is the net impression that the advertisement as a whole is likely to make upon individuals to whom it is directed that is important. Even if a solicitation is so worded as to not make an express representation, but is artfully designed to mislead those responding to it, the false representation statute is applicable. See also , Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council , 425 U. S. 748 (1976), quoting United States v. 95 Barrels of Vinegar , 265 U. S. 438, 443 (1924): "It is not difficult to choose state- ments, designs, and devices which will not deceive." In Vibra-Brush Corp. v. Schaffer , supra , the Court stated:
It is not each separate word or a clause here and there of an advertisement which determines its force, but the totality of its contents and the impression of the entire advertisement upon the general populace. p. 465.
4. Similarly, in American Image Corp. v. United States Postal Service , 370 F. Supp. 964 (S.D.N.Y. 1974) the Court held, "The cases are clear that such advertisements are to be viewed not with a lawyer's eye to 'fine spun distinctions' but with an eye to their overall effect on the average reader."
5. Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co., Inc. v. Federal Trade Commission , 208 F.2d 382, 387 (7th Cir. l953); Ralph J. Galiano , P.S. Docket No. 19/15 (P.S.D. May 2, l985); Bruce Roberts Co. , P.O.D. Docket No. 3/78, (I.D. August 17, l971); Moneymakers, et al. , P.S. Docket No. 16/1, (I.D. June 20, l983).
6. As stated in Mid-Am Marketing, Inc ., supra , January 5, 1987 "Inconspicuous disclaimers or fine print qualifications of broad claims are not sufficient to dispel the effect of a false represen- tation." [citing other cases]
7. Applying the foregoing standards, the average person who reads Respondents' advertisements would interpret them substantially as characterized in the Complaint.
8. As expressed in Chaachou v. American Central Insurance Co. , 241 F.2d 889, 893 (5th Cir. l957), a representation is material if it would ". . . cause the [other party] to do other than that which would have been done had the truth been told." Applying the Chaachou test, Respondents' representations are material because they have the effect of inducing individuals to remit money through the mail to purchase classified advertising listings from Respondents.
9. The representations in subparagraphs 6(a) through (e) of the Complaint are false, however the representation in 6(f) has not been proven false
10. Respondents' solicitation violates 39 U.S.C. 3001(d) and DMM 123.41.
11. Even if an astute person might recognize that Respondents' mailing pieces are solicitations and not invoices, this does not detract from their tendency to "deceive the ignorant, gullible and less experienced." Gottlieb v. Schaffer , 141 F. Supp. 7, 16 (S.D.N.Y. 1956). The false representation statute was intended to protect such persons as well. Donaldson v. Read Magazine, Inc. , supra .
12. The fact that Respondents have modified their solicita- tion does not deprive the Postal Service of jurisdiction. United States v. W. T. Grant Co. , 345 U. S. 629, 632 (1953) instructs that "voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot .... A controversy may remain to be settled in such circumstances ... The defendant is free to return to his old ways. This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion" [Citations to other cases omitted].
13. Therefore, Respondents are violating 39 U.S.C. 3001(d) and are engaged in the conduct of a scheme for obtaining money or property through the mail by means of materially false representa- tions in violation of 39 U.S.C. 3005. Accordingly, a False Representation Order and a Cease and Desist Order in the forms attached should be issued against Respondents.