In the Matter of the Complaint Against ) February 14, 1996) HALLSTONE PRODUCTS, LTD., et al. ) 120 Middlefield Road ) Scarborough Ontario ) ) at ) P. S. Docket Nos. 41/55-62 ) FR 95-167 & 168 Canada M1S5E2, etc. ) (Hallstone I) APPEARANCES FOR RESPONDENTS: Peter John Frazza, Esq. Donald P. Jacobs, Esq. 150 John F. Kennedy Parkway Short Hills, NJ 07078-0999 APPEARANCES FOR COMPLAINANT: Rodney Gould, Esq. Peter Wheeler, Esq. United States Postal Service Law Department, Room 6343 Washington, DC 20260-1147
Background
On August 3, 1995, Complainant, United States Postal Service, filed a "Petition For Orders Based Upon Breach of Consent Agreement" in which it alleged that Respondents had breached the terms of an Agreement Containing Consent Order to Cease and Desist, executed on June 6, 1995, by David C. Stuckey, individually, and as President of Guildwood Direct, Ltd., and Hallstone Products, Ltd. Complainant contends in its petition that Respondents have
resumed the activities which they agreed to discontinue. Specifically, Complainant alleges that Respondents' promotional materials, contrary to the terms of the Order to Cease and Desist, falsely represent that:
III. d) the payment required to receive the product is for costs incidental to the shipping and handling of the product;
e) a product is far more valuable than the payment required to receive it;
f) a mailing is a shipping notification rather than a solicitation for the sale of merchandise or service(s).
In the petition, Complainant sought the issuance of a temporary detention order against mail addressed to USASO, 22 N. Plains Industrial Road, Dept. 3501, Wallingford, CT. On the basis of the information and documents contained in the
petition a temporary order was issued on August 7, 1995. The Order authorized the temporary detention of the mail and granted Respondents ten days in which to respond to the petition. Respondents thereafter filed a Motion for Expeditious Resolution and a Hearing. By order of August 15, 1995, the Motion for Hearing was denied and the Motion for Expeditious Resolution was granted. On August 18, 1995, Respondents filed a reply to the breach petition, and on August 24, 1995 filed a Motion to Dismiss Hallstone Products, Ltd. from this proceeding. Subsequent filings were thereafter made by the parties. On January 11, 1996, by telephone conference call the previous request for hearing, which had been denied, was granted in conjunction with a hearing request for two other breach petitions, and a hearing was scheduled for January 16, 1996, in Washington, DC. Neither party presented the testimony of witnesses at the January 16, 1996, hearing, but instead both elected to have only oral argument.
The Solicitation
Respondents' solicitation is in the form of an insert of approximate size 8 ½ inches by 3 ½ inches enclosed in an envelope sent to the addressee. There are seven blocks on the front of the insert or card, which is entitled in large block print "U. S. APPLIANCE SHOWCASE OUTLET;" "OFFICIAL CONFIRMATION NOTICE." Block one lists a computer identification number with a merchandise code. Block two is entitled "Date of Notification Release," with a day and time underneath. Block three is entitled "Priority Responses Requested Within" and underneath "11 Days of this notification." In Block four, entitled "Reference," is a star and the words "Red Star Double Bonus." A circular stamp with the words "Approved For Immediate Release" is superimposed over blocks two and four. Block five "Goods/Description" states: "If a Red Star appears in the reference box at right [addressee], you are eligible to receive 2 (two) of the new merchandise items listed on the other side of this notification." Block 6 "Non-Transferable Recipient" contains the name and address of the recipient of the solicitation. Block 7 states "IMPORTANT Failure to respond constitutes forfeiture of all rights conveyed to recipient by this notice!"
The reverse of the Card advises the recipient that he or she is "GUARANTEED to receive up to two of the merchandise items listed below" if the official instructions at the right are followed. The "OFFICIAL INSTRUCTIONS" state:
"Sign below to authorize of up to 2 (two) merchandise items from the list at left and return this notification card along with $12.87. There are absolutely no other fees or costs of any kind, except taxes if any ..."
A box exists which the recipient may check if he or she wishes to pay "an extra $2 for priority rush handling of my merchandise."
The merchandise items listed in descending order in large print which the recipient of the solicitation may receive are:
"Maytag Dishwasher
Bristol 2000 Coffee Brewer
Sony Stereo CD Component Center
Grill Master Barbeque
Sharp Microwave Oven"
In extremely small print on the left side of the back of the card the recipient is advised that he or she is purchasing the merchandise. The merchandise offered consists of one, each, dishwasher, stereo and microwave and 10,000,000, each, coffee brewers and barbeques. "The item each respondent is entitled to purchase has been determined by his preselected i.d. number."
Finally, a "MERCHANDISE STATUS" area is contained on the back of the solicitation. Therein three blocks each have a check mark. They are designated "Packaged/Crated"; "Ready for Shipping/Motor Delivery"; and "Insured Delivery Guaranteed."
The Allegations of Breach
III. d) the payment required to receive the product is for costs incidental to the shipping and handling of the product.
Respondents' solicitation must be considered as a whole and its meaning determined in the light of the probable impact it would have on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories v. United States Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977). Even if an advertisement is worded so as not to make an express representation it may be artfully designed to mislead those responding to it. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U. S. 748 (1976). Considering Respondents' solicitation, it is concluded that the solicitation violates paragraph III. d) of the Cease and Desist Order in that it contains the false representation that the payment for the products offered is for shipping and handling costs, when in fact the payment is for purchase of the products.
The emphasis contained in the solicitation as to the basis for the $12.87 charge for the merchandise items is for delivery, not purchase. The recipient is advised that a priority response is requested within 11 days of receipt of the notification; that the merchandise has been "approved for immediate release"; that you "are eligible to receive [not purchase] 2 (two) of the new merchandise items listed ...," that the addressee is a "Non-transferable Recipient"; that the merchandise status is "Packaged/Crated," "Ready for Shipping/Motor Delivery";
"Insured Delivery Guaranteed." All of the above leads to the most probable interpretation from a recipient of ordinary mind that shipping and handling, not purchase costs, comprise the $12.87 charge.
That such costs are for shipping and handling is further emphasized by the box, located under the $12.87 charge amount, which the recipient may check if he or she wishes to pay "an extra $2" [emphasis added] for priority rush handling. The close proximity of the extra charge to the $12.87 charge indicates an interrelationship between the two -- regular shipping and handling costs, and in addition a $2 priority shipping and handling cost. Thus, the representation that the payment required to receive the product is for costs incidental to the shipping and handling of the product is made.
The falsity of the representation is evident
from the solicitation itself. In the minute print on the back
of the solicitation card the recipient is advised that each individual
who responds will be purchasing one or more of the items of merchandise,
and that each respondent is entitled to make a purchase. Unless
the minute print is read, however, it appears most probable that
a person of ordinary mind would believe the $12.87 charge is for
shipping and handling costs, or at best would be confused as to
the basis for payment. Where a solicitation is ambiguous or capable
of more than one meaning, if one of those meanings is false, the
solicitation will be held to be misleading. Rhodes Pharmacal
Co. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953) It is not
difficult to select words that will not deceive.
See, U.S. v. 95 Barrels of Vinegar, 265 U.S. 438 (1924). Paragraph III. d) of the Cease and Desist Order has been breached.
III. e) a product is far more valuable than the payment required to receive it.
Complainant has presented no evidence of the value of any product in this proceeding. Thus, no evidence exists to hold that Respondents have breached paragraph III. e) of the Consent Agreement.
III. f) a mailing is a shipping notification rather than a solicitation for the sale of merchandise or service(s).
The representation described by paragraph III. f) of the Cease and Desist Order is clearly made. The recipient would immediately see the words "OFFICIAL CONFIRMATION NOTICE" in large letters at the top of the front of the solicitation and that the merchandise has been "Approved for Immediate Release," also in large letters within the circular stamp on the front. There also exists on the front a block entitled "Date of Notification Release," and one entitled "Non-Transferable Recipient," containing the recipient's name and address. The impression created by such language is not one of solicitation for merchandise, but rather one of a shipping notification, where all that was required of the recipient was to send $12.87 for shipping costs within 11 days of the notification.
As in the discussion pertaining to paragraph III. d) of the Cease and Desist Order, supra, the falsity of the representation contained in paragraph III. f) is evident from the solicitation itself. The recipient is advised in the smallest print on the back of the solicitation that the mailing is a solicitation for the sale of merchandise. Thus, the representation described in paragraph III. f) of the Consent Agreement is falsely made and the Agreement has been breached.
The Issues of Bad Faith and Consumer Complaints
Counsel for Respondents has argued that counsel for Complainant was motivated by bad faith in bringing these proceedings. In support of his argument counsel emphasizes that no consumer complaints were lodged against Respondents' solicitation.
Whether anyone actually complains or has been deceived by Respondents' solicitation is not relevant in a false representation proceeding. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939); Montgomery Ward & Co. v. F.T.C., 379 F.2d 666 (7th Cir. 1967). This principle is equally applicable in determining whether a breach of a Consent Agreement has taken place, as Respondents have agreed to discontinue certain false representations and the issue for determination is whether those representations have been resumed.
There was adequate basis in the record, based upon the language of the solicitation, for the breach proceeding to be initiated. Bad faith by Complainant has not been shown to exist.
The Inclusion of Hallstone in These Proceedings
Respondents argue that only Guildwood Direct, Ltd. should be a party to these proceedings and have filed a Motion that Hallstone Products, Ltd. be dismissed as a party. Respondents state that Guildwood is solely responsible for the mailing in issue and that Hallstone is only an outside company providing management services in contractual relationship with Guildwood. The argument has no merit. Hallstone provides extensive management services for Guildwood, including marketing, promotion, distribution, accounting, and overall administration of the business (Stuckey Deposition, December 28, 1995, p. 3, 4, 9, 14, 20, 30; Hearing Exhibit B). The relationship among the two is intertwined to a most significant degree -- to the extent that they may be said to be one. Additionally, Mr. David C. Stuckey signed the Agreement Containing Consent Order to Cease and Desist in these proceedings, as an individual and as president for both Guildwood Direct, Ltd., and Hallstone Products, Ltd. Hallstone is properly named as a Respondent in these proceedings and the motion is denied.
Conclusion
Respondents are found to be in breach of the
terms of an Agreement Containing Consent Order to Cease and Desist
(executed on June 6, 1995) as to paragraphs III. d) and f). The
remaining allegation of breach is dismissed. An Order under 39
U.S.C. §3005 is being issued contemporaneously with this
Decision.
James D. Finn, Jr. Acting Judicial Officer