In the Matter of the Complaint Against: CARD REDEMPTION CENTER, 805 Third Avenue, Suite 190, New York, NY 10022-7513 and GIVEAWAY PROCESSING CENTER, Dept. 190, 805 3rd Avenue Building, New York, NY 10022-7513 and at S. Cobb Industrial Blvd., P. O. Box 1227, Smyrna, GA 30081-1227 and SELECT DIRECT, INC., 126 5th Avenue, Suite 8C, New York, NY 10011-5606 and DAVID SCHWARTZ, 126 5th Avenue, Suite 8C, New York, NY 10011-5606 P.S. Docket No. 30/36 06/08/89 Cohen, James A., Judicial Officer APPEARANCES FOR COMPLAINANT: Jennifer L. Yopes, Esq., Jerry Belenker, Esq., Jeffrey Kahn, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCES FOR RESPONDENTS: Robert Ullman, Esq., Bass & Ullman, 747 Third Avenue, New York, NY 10017-2873
Both Complainant and Respondents have appealed from the Initial Decision of an Administrative Law Judge which holds that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.
The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint alleging that Respondents 1/ are engaged in conducting a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. Specifically, Complainant alleges that Respondents solicit money or property through the mail by means of postcards which falsely represent:
"7. . . .
(a) the product is a prize the recipient has won in a contest or sweepstakes s/he previously entered;
(b) the postcard is a delivery notice from the Postal Service, UPS or another common carrier;
(c) recipients can obtain merchandise with the 'voucher' without spending any additional money;
(d) the 'voucher' is something other than a discount, coupon, or discount coupon;
(e) the recipient may use the 'voucher' to purchase a wide selection of nationally sold merchandise; and
(f) the product is available for only a limited time." Respondents filed an Answer denying that they make the representations alleged in the Complaint and that the representations are materially false. Respondents admitted that the exhibits attached to the Complaint are reproductions of advertisements used by Select Direct, Inc.
At a hearing 2/ before an Administrative Law Judge, both parties called one witness and introduced documentary evidence. Following the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision 3/ in which he found that: (1) Respondents' solicitations identified as CX-1 and 2 contain the representations alleged in the Complaint at paragraphs 7(a), (c), (d), (e) and (f); (2) Respondents' solicitation identified as CX-3 contains the representations alleged in paragraphs 7(e) and (f); and (3) none of Respondents' solicitations contain the representation alleged in paragraph 7(b). The Administrative Law Judge also found that the representations alleged in paragraphs 7(a), (c), (d) and (e) of the Complaint are materially false, but that the representation alleged in paragraph 7(f) is not false. On the basis of these findings, the Administrative Law Judge recommended the issuance of a Cease and Desist Order and a False Representation Order as authorized by 39 U.S.C. § 3005. Both parties filed Exceptions to the Initial Decision and Replies thereto. The parties' Exceptions have been considered and are addressed hereafter.
Complainant takes exception to the Administrative Law Judge's finding that Respondents do not represent their postcards to be delivery notices "from the Postal Service, UPS or another common carrier" (FOF 7 pertaining to Complaint P7(b)). Complainant contends that Respondents' postcards resemble Postal Service forms and that a significant number of gullible and unsophisticated persons would be likely to believe that these postcards were delivery notices from the Postal Service or another common carrier. In support of its position, Complainant refers to the word "Notice," the list of mailing methods, and the direction to sign and return the notice within fifteen days with a fee as strongly suggesting that the postcard is an official form of some kind. Complainant also suggests that the average recipient would have minimal familiarity with postal forms and would easily be deceived by the postcard.
Respondents argue that their postcards do not resemble any of the Postal Service forms introduced into evidence and that the Administrative Law Judge's finding is correct. Respondents contend that the testimony of Complainant's own expert does not support its position since he was unable to identify blank format simulations of Respondents' postcards (RX-5, 6) as being similar to any postal forms and that he had to "look at [RX-6] real hard" to find any similarity to PS Form 3849 (Tr. 37; CX-5).
The Administrative Law Judge found that Respondents' postcards (CX-1, 2) are similar in appearance to PS Form 3849 (CX-5). However, he concluded that the alleged representation was not made because of the prominence of the words "AWARD" and "Awarded Item" on the solicitations and because the postcards require the recipient to send money to an address which was "obviously not a post office" (I.D. at 5).
As the Administrative Law Judge states in his Conclusions of Law, it is the overall impression of Respondents' postcards which creates a false representation. Borg-Johnson Elec., Inc. v. Christenberry, 169 F. Supp. 746, 750 (S.D.N.Y. 1959). The ordinary recipient of Respondents' original postcards, CX-1 and 2, would most probably perceive them to be notices from the Postal Service. See Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948). Respondents' postcards (CX-1, 2) contain a section identical in substance and form to the detachable column of the postal delivery notice (CX-5). Like the Postal Service forms identified as CX-5, 6, and 7, CX-1 and 2 have a place for the recipient's signature. Respondents' postcards also contain a list of check boxes for the type of mail service, as does the delivery notice (CX-5). Although CX-1 and 2 are made from a bond of paper much heavier than that of the postal delivery notice, CX-6 and 7 demonstrate the Postal Service's use of such paper in a size and shape similar to CX-1 and 2.
The representation that the postcards (CX-1, 2) are delivery notices from the Postal Service is false since the postcards are not Postal Service delivery notices. Furthermore, the representation is material in that it would tend to induce the recipient to remit the two dollar delivery fee. See Lynch v. Blount, 330 F. Supp. 689, 693 (S.D.N.Y. 1971), aff'd. 404 U.S. 1007 (1972); Richard W. Verret, P.S. Docket No. 20/18 at 5-6 (P.S.D. Dec. 31, 1986).
Respondents' revised solicitation (CX-3) does not make the alleged representation. The format and content of CX-3 differs from the Postal Service forms and no evidence has been presented with respect to the forms of other common carriers. The ordinary recipient would not be likely to perceive CX-3 to be a delivery notice from the Postal Service, UPS or another common carrier.
For the reasons stated, Complainant's exception is sustained regarding CX-1 and 2 but denied with respect to CX-3.
Complainant takes exception to the Administrative Law Judge's finding of fact that Respondents' revised postcard (CX-3) does not represent that the product is a prize the recipient has won in a contest or sweepstakes s/he previously entered (FOF 6 pertaining to Complaint P7(a)). Complainant first contends that the Administrative Law Judge improperly analyzed CX-3 by comparing it with CX-1 and 2 rather than determining the overall impression of CX-3. Complainant contends that the overall impression conveyed by CX-3 is that the product is a prize. Specifically, Complainant cites the requirements for verification, validation, authorization, and signature; the limitation of the period for claiming the product; and the fee to cover delivery costs, as opposed to paying for the voucher, as factors indicating that the postcard is a notice of award. Complainant also relies on the format of the postcard as portraying a prize notification. Respondents argue that the Administrative Law Judge properly analyzed the solicitation and correctly concluded that it does not convey the impression to the ordinary recipient that s/he has won a prize.
As Complainant points out, the determination of the existence of a representation should be based on the content and format of the individual solicitation and not simply on a comparison of the solicitations in evidence. Nonetheless, Respondents' revised postcard (CX-3) does not represent that the product is a prize the recipient has won in a contest or sweepstakes. The postcard does not contain either explicit or implicit reference to an award or prize nor is there any other indication which would lead the ordinary recipient to believe that the product is a prize s/he has won in a contest or sweepstakes in which s/he previously entered. Accordingly, Complainant's second exception is denied.
Complainant next takes exception to the Administrative Law Judge's finding that Respondents' revised postcard (CX-3) does not represent that recipients can obtain merchandise with the "voucher" without spending any additional money (FOF 8 pertaining to Complaint P7(c)). Complainant contends that language in the revised postcard continues to convey the impression that the vouchers alone can be used to purchase merchandise. Complainant points to such language as "notice of solicitation," "vouchers refundable if not used," and the name "Card Redemption Center" to support its view. Respondents argue that the revised postcard clearly indicates that the vouchers are good toward the purchase of merchandise and that the postcard cannot be construed to mean that no additional payment is necessary.
The Administrative Law Judge found that the alleged representation was not made in CX-3 due to revisions from CX-1 and 2. He identified several elements of CX-3 which he found to rebut the allegation. Among these factors were the identification of CX-3 as a notice of solicitation, the lack of any references to an award, the words "significant discounts," the notice of a refund for unused vouchers, and the name Card Redemption Center.
Respondents' revised postcard makes it clear that the recipient would have to pay additional money to purchase the merchandise. As Respondents point out, the item description section states that the vouchers are "good toward [the] purchase" of merchandise. In addition, the solicitation states that "[p]roduct costs beyond [the] voucher amount are borne by [the] user" (CX-3). These statements, taken together, make it probable that the ordinary recipient would not understand the postcard as representing that merchandise can be obtained without an additional expenditure. Therefore, Complainant's third exception is denied.
Complainant takes its final exception to the Administrative Law Judge's finding that Respondents' revised postcard (CX-3) does not represent that it is something other than a discount, coupon, or discount coupon (FOF 9 pertaining to Complaint P7(d)). Based on the discussion in connection with Exception 3, it is concluded that Respondents' revised postcard does not contain this representation. Accordingly, Complainant's fourth exception is denied.
Respondents take exception to the Administrative Law Judge's finding that Respondents falsely represent that the recipient may use the "voucher" referred to in the revised postcard (CX-3) to purchase a wide selection of nationally sold merchandise (FOF 10 pertaining to Complaint P7(e)). Respondents contend that two furs, a luggage collection, and seventeen items of jewelry constitute a wide selection of merchandise. Complainant argues that the phrase "nationally sold merchandise" indicates a selection far greater and of more variety than that provided. The Administrative Law Judge found that the reference to nationally sold merchandise implies an availability of goods more extensive than that offered by Respondents. Therefore, he concluded that the representation is false (I.D. at 7-8).
Respondents' premise is based on a comparison of CX-3 with CX-1 and 2. By increasing the number of items from two in CX-1 and 2, which they admit is not a wide selection, to twenty in CX-3, Respondents' position is that they offer a wide selection of merchandise (Resp. Reply at 18-19). While Respondents have increased the number of items available they, nevertheless, do not offer a wide selection of nationally sold merchandise. The phrase "nationally sold merchandise" and the reference to HSS or Carriage House product sheets implies that the recipient will have a more extensive selection of merchandise than is actually offered. As Complainant points out in its Reply to Respondents' Exception, the ordinary consumer would expect that s/he could use the vouchers toward the purchase of a larger number and variety of merchandise than is offered by Respondents. Thus, the Administrative Law Judge did not err in concluding that Respondents' revised postcard falsely represents the merchandise available. Accordingly, Respondents' exception is denied.
After consideration of the entire record, it is concluded that Respondents' postcards identified as CX-1 and 2 make the representations alleged in the Complaint at paragraphs 7(a), (b), (c), (d) and (e) and that those representations are materially false. It is further concluded that Respondents' revised solicitation, CX-3, makes the materially false representation alleged in paragraph 7(e) of the Complaint. The Orders authorized by 39 U.S.C. § 3005 are issued with this decision.
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1/ Complainant's motion to amend its Complaint by
including Card Redemption Center, 805 Third Avenue,
Suite 190, New York, New York 10022 as a Respondent was granted at
the hearing (Transcript (Tr.) 8).
2/ The hearings in P.S. Docket Nos. 30/35, 30/36, and 30/37 were consolidated in one
proceeding.