In the Matter of the Complaint Against ) July 20, 1989
)
YELLOW PAGE CONSUMER GUIDE )
P. O. Box 439 )
Monroe, OH 45050-0439 )
)
YELLOW PAGE CONSUMER GUIDE )
P. O. Box 14194 )
Fairfield, OH 450-0194 )
)
and )
)
ENDLESS IDEAS, INC., )
EDGAR J. KELLEY, JR., and )
WILLIAM COCHRAN, SR. )
780 Nilles Road )
Fairfield, OH 45014-3644 ) P.S. Docket No. 34/1
Mason, Randolph D., Administrative Law Judge
APPEARANCES FOR COMPLAINANT:
Jerry Belenker, Esq., Timothy J. Mahoney, Esq.,
Consumer Protection Division, Law Department,
United States Postal Service, Washington, DC 20260-1144
APPEARANCE FOR RESPONDENTS:
Charles Richard Cole, Esq.,
600 Symmes Road, Hamilton, Ohio 45015
This proceeding was initiated on April 3, 1989, when the Postal Service filed a Complaint alleging that Respondents Yellow Page Consumer Guide, ACO, Inc., Edgar J. Kelley, Jr., and William Cochran, Sr., are engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005. The parties have stipulated that Endless Ideas, Inc., may be named a Respondent in this action in place of ACO, Inc. (Joint Stip. P6). The Complaint is amended to reflect the substitution of that Respondent and the caption has been changed accordingly. The Complaint is dismissed insofar as it relates to ACO, Inc.
The Complaint, as amended, describes Respondents' mailing ("Yellow Page Consumer Guide Renewal Verification" form) and alleges in paragraph 7 that Respondents falsely represent, directly or indirectly, in substance and effect, whether by affirmative statement, implication or omission, that:
(a) The addressee of such a form owes to Yellow Page Consumer Guide the amount of money specified on the form on some account based on a valid agreement;
(b) The addressee of such a form has agreed to the publication in Yellow Page Consumer Guide of the listing or advertisement to which the form refers;
(c) Such a form concerns its addressee's listing or advertisement in a "yellow pages" directory which is distributed generally to all telephone subscribers in the geographic vicinity of where the addressee is located;
(d) The publisher or producer of Yellow Page Consumer Guide has published or produced a "yellow pages" directory before in which the addressee of such a form has caused a listing or advertisement to be published;
(e) Such a form concerns its addressee's renewal of a prior listing as set forth in subparagraph (d).
Complainant also alleges that the above form is in fact a solicitation which could reasonably be construed to be a bill, invoice or statement of account. Complainant further alleges that the form is nonmailable under 39 U.S.C. § 3001(d) and Domestic Mail Manual § 123.41.
In the Answer, Respondents deny that they have made the above false representations or that they have otherwise violated the statute or regulations.
The parties waived their right to an oral evidentiary hearing and submitted the case to the Administrative Law Judge for decision based upon certain "Joint Stipulations," with attached exhibits, filed May 26, 1989. On June 12, 1989, both parties filed Proposed Findings of Fact and Conclusions of Law which have been duly considered. Complainant inadvertently failed to include two paragraphs, and those have also been considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. The following findings of fact and conclusions of law are based on the entire record, including the exhibits, joint stipulations, pleadings, and arguments:
1. The corporate entity which conducts the activities alleged in the Complaint is Respondent Endless Ideas, Inc., an Ohio corporation located at 780 Nilles Road, Fairfield, Ohio 45014 (Stip. 1, 4). Respondents seek remittances through the mail in connection with these activities at P.O. Box 439, Monroe, Ohio 45050 and P.O. Box 14194, Fairfield, Ohio 45014-0194.
2. The shareholders of Respondent Endless Ideas, Inc., are Respondents Edgar J. Kelley, Jr. (President) and William A. Cochran, Sr. (Vice President, Secretary, and Treasurer) (Stip. 3).
3. ACO, Inc. ceased business as of December 11, 1987. ACO, Inc., was originally named as a Respondent, but the Complaint has been amended to substitute Respondent Endless Ideas, Inc. (Stip. 5, 6).
4. Respondents describe their promotion as a two-step process. They first send a letter addressed to "Dear Business Person" (Stip. 8, Attachment 2) to persons throughout the United States whose names appear on commercially procured mailing lists (Stip. 9). The letter transmits a plastic binder which may be placed on a telephone directory. The binder contains the name, address, and telephone numbers of the addressee and other persons (Stip. 8, Attachment 3).
5. The first sentence of the letter states: "This complimentary copy of the Yellow Page Consumer Guide's telephone directory binder is being provided to you as a gift." After describing the benefits of the binder, the reader is advised on page two of the letter that "you will be given the opportunity to renew your listing on future editions." The final paragraph reads as follows:
"If you do not wish to participate in thre future editions of the Yellow Page Consumer Guide's telephone directory binder, simply disregard the renewal verification form that will be sent to you for your approval."
6. The letter is signed by "Jay Kelley, President, Yellow Page Consumer Guide", but contains no address or other means of contacting Respondents.
7. About 60 days after the "Dear Business Person" letter is mailed, Respondents cause a "Yellow Page Consumer Guide Renewal Verification" to be sent to the same addressees (Stip. 10, Attachment 4). As discussed below, this second mailing appears to be an invoice, bill, or statement of account due for a previously ordered renewal of the addressee's listing in the Yellow Pages telephone directory distributed to all telephone subscribers. It contains the "Walking Fingers" logo, and states that $117 is due for a "Renewal." It also states: "If you have renewed, please disregard this notice." The ordinary addressee would not relate this renewal verification to the first letter transmitting the plastic telephone binder. Neither the Renewal Verification nor the "Dear Business Person" letter is sent in response to any request from the addressee (Stip. 8).
8. Respondents' mailings make representations (a) through (e) of P7 of the Complaint. These representations are materially false. The language of the mailings contributing to each representation, when read in context, is discussed below after each quoted representation:
"(a) The addressee of such a [Renewal Verification] form owes to Yellow Page Consumer Guide the amount of money specified on the form on some account based on a valid agreement."
The Renewal Verification is clearly in the format and appearance of a bill, invoice, or statement of account due. It contains no language to indicate that the sender is soliciting business rather than rendering a bill for a listing previously ordered by the addressee.
The mailing simply states the addressee's listing classification and specific "listing code" number, contains a tear-off sheet with "Amount Enclosed", and an "Amount" due of $117 for a "Renewal". The reader is instructed to "MAKE CHECKS PAYABLE TO: Yellow Page Consumer Guide."
In addition, the phrase "If you have renewed, please disregard this notice" suggests that the Renewal Verification may have been preceded by a prior request for payment, thereby reinforcing the impression that the recipient is being billed for a debt, rather than being solicited for business.
Contrary to Respondents' contention, many ordinary recipients of the Renewal Verification would not realize that it is a follow-up to the previous letter transmitting the plastic telephone directory binder. Accordingly, it would not appear to the ordinary reader to be a solicitation for the binder. Although the first letter refers to a "renewal verification form" which would be subsequently mailed, many ordinary readers either would not have read this language at the end of the letter or would have forgotten it by the time they received the second mailing. Likewise, the use of the words "Yellow Page Consumer Guide" at the end of the first letter, and the subsequent use of those words in the second mailing, would not alert many ordinary readers to a relationship between the two letters. Many readers of the second letter would perceive the mailing to be from the Yellow Page telephone directory serving all telephone subscribers. Also, although not essential to the decision herein, the two letters might be read by different people at the addressee's office, i.e., the letter with the complimentary binder might be routed to someone other than the person who pays small bills.
"(b) The addressee of such a [Renewal Verification] form has agreed to the publication in Yellow Page Consumer Guide of the listing or advertisement to which the form refers."
The use of the term "Renewal Verification" implies to many readers that the addressee has previously agreed to renew his listing in the Yellow Page Consumer Guide, and that the letter seeks to verify this agreement and seek payment for the renewal. In fact, the addressee has not had any contact with the Respondents since he received the plastic directory binder. Accordingly, a recipient cannot have renewed anything, and there is nothing for the Respondents to verify.
"(c) Such a form concerns its addressee's listing or advertisement in a 'yellow pages' directory which is distributed generally to all telephone subscribers in the geographic vicinity of where the addressee is located."
The use of the "Walking Fingers" logo and the words "Yellow Page" are generally associated by the public with the Yellow Page telephone directory published by the telephone company. Accordingly, Respondents also implicitly represent that the listing would appear in a yellow pages directory which is distributed to all telephone subscribers in the geographic vicinity in which the addressee is located.
"(d) The publisher or producer of Yellow Page Consumer Guide has published or produced a 'yellow pages' directory before in which the addressee of such a form has caused a listing or advertisement to be published."
Respondent's second mailing seeks $117 for the "Renewal" of the addressee's listing. Also, the document is called a "Renewal Verification" and states "If you have renewed, please disregard this notice." This language indicates that the addressee previously caused a listing to be published in the publisher's prior edition of the directory.
Again, no mention is made of the plastic binder, and many ordinary readers of this mailing would not consider this to be a request for a "renewal" of the listing appearing on the binder.
"(e) Such a [Renewal Verification] form concerns its addressee's renewal of a prior listing as set forth in subparagraph (d)."
As previously stated, the "Renewal Verification" form gives the impression that the addressee has previously agreed to renew its listing in the Yellow Pages telephone directory, and that Respondents are merely verifying that renewal and seeking payment. Thus the form implies that it is concerned with renewal of the prior listing discussed under (d) above.
9. Respondents' Renewal Verification form is in the form of, and reasonably could be interpreted or contrued as, a bill, invoice, or statement of account due. However, it constitutes, in fact, a solicitation for the order by the addressee of a listing in the Yellow Page Consumer Guide plastic directory binder. The form does not contain any notice or disclaimer as required by 39 U.S.C. § 3001(d).
1. (a) Respondents' mailings must be considered as a whole and the meaning is to be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U.S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). Express misrepresentations are not required. It is the net impression which the advertisement is likely to make upon individuals 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 Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); see also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976).
(b) 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. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985 at p. 9). It is not difficult to select words which will not deceive. See, United States v. 95 Barrels of Vinegar, 265 U.S. 438 (1924).
(c) An inconspicuous disclaimer is not sufficient to dispel the effect of false representations. Leo Daboub, supra; Gottlieb v. Schaffer, supra.
(d) The Administrative Law Judge can determine whether the representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980); The Robertson-Taylor Company, P.S. Docket Nos. 16/98-102, 16/120-121, (P.S.D. March 31, 1986 at page 29); Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958).
2. Applying the foregoing standards, I find that Respondents' mailings make the representations alleged in PP7(a)-(e) of the Complaint, as amended. The language contained in the mailings, when read in context, which directly or impliedly makes these representations is set forth in the findings of fact.
3. As set forth in the findings of fact, the representations set forth in paragraph 7 of the Complaint are materially false.
4. The representations made by Respondents are material because they have a tendency to persuade readers to order and pay for Respondents' product.
5. A solicitation is "nonmailable" if it "is in the form of, and reasonably could be interpreted or construed as, a bill, invoice, or statement of account due" unless it contains the disclaimer prescribed by the statute or the Domestic Mail Manual. n1 The determination of mailability is to be based on the totality of the solicitation and the impression created in the minds of those to whom it is directed. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958). This does not mean that the trier of fact is limited to the interpretation which a majority of recipients would place on a solicitation. Rather, the trusting are to be protected as well as the wary. Donaldson v. Read Magazine, Inc., supra, at 189; Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); IHS Department of Unclaimed Funds and Benefits, P.S. Docket No. 22/155 (P.S.D. Sept. 22, 1986); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986).
n1 The statute requires the following prominent and conspicuous 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." 39 U.S.C. § 3001(d)(2)(A). The regulations provide the following alternative: "THIS IS NOT A BILL. THIS IS A SOLICITATION, YOU ARE UNDER NO OBLIGATION TO PAY UNLESS YOU ACCEPT THIS OFFER." DMM § 123.41(a). Respondents' mailing does not contain either notice.
6. The best evidence that a mailing appears to be an invoice is the mailing itself. Telex & twx Directory, P.S. Docket No. 13/6 (P.S.D. April 1, 1983). As set forth in the findings of fact under representation (a), Respondents' "Renewal Verification" form would appear to many ordinary readers to be a bill for renewal of the addressee's listing in the yellow pages telephone directory. Accordingly, since the mailing fails to contain the disclaimer required by either the statute or regulations, it is nonmailable and constitutes prima facie evidence that Respondents are engaged in a scheme or device to obtain money through the mail by means of false representations. 39 U.S.C. § 3001(d) and 3005(a).
7. Respondents contend that relatively few complaints have been filed against the solicitation in issue. The parties have stipulated that about 25 mailings have taken place since the establishment of Endless Ideas, Inc., but there is no evidence of the number of complaints filed. The Postal Inspector's affidavit is not in evidence. In any event, whether anyone actually complains or has been deceived by Respondents' advertisements is irrelevant on the issue of false representations. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939). Often, customers do not ever realize that they have been deceived. It is the likelihood of deception or the advertisement's capacity to deceive which must be judged. Montgomery Ward & Co. v. FTC, 379 F.2d 666 (7th Cir. 1967); Mid-Am Marketing, Inc., P.S. Docket No. 24/12 (P.S.D. on Recon., May 7, 1987).
8. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978).
9. Respondents are engaged in the conduct of a scheme for obtaining remittances of money through the mail by means of materially false representations (a) through (e) in violation of 39 U.S.C. § 3005.
10. The attached False Representation Order and Cease and Desist Order should be issued.