Independent Directory Corp.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF INDEPENDENT DIRECTORY CORP. ET AL.

COMPLAINT, FINDINGS, AND ORDER, WITH SUPPORTING AND DISSENTING OPI NIONS IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Doolcet 54BG. Oompla·int, Feb. 26, 1948 '-Decision, J1tly 19, 1950 'lhe .Commission was created by the Congress to protect lhe right of consumerswho rarely have the immediate services of lawyers, accountants, economistl!, and other experts-to an honest and fair mnrl<et place, li!"Jd it is the Commission's obligation to protect not only the dlsceming public against deceptive advertising, bnt also to protect the casual or negligible or ignorant, and to make certain, insofar as its authority extends, that that day, long past, when the consumer was required to submit to the dictum that "the buyer must beware," shall not return.

There can be no quibbling or hair splitting on the part of a Government agency such as the Commission, in the carrying out of its duties and responsibilities within Its sphere of authority for the protection of fair competition and the public interest, and if good will can be restored to its rightful place in a free economy, as being the greatest asset any business can have, or should have, then there is no justification for tolerating contract forms and other methods which may well deceive the least literate of consumers. Those who make use of artfully designed contracts, with their plethora of deceitful fine print, must assume the burden of proof that the fine print is not in fact a well designed and unlawful trap for the unwary, and the fact that deceit or other forms of misrepresentation may take place within the technical confines of a written instrument does not strip the act of its true chnmcter, whether it be honest or dishonest, it being, in essence, still a matter of intent and conscience, with logical moral and legal consequences, regardless of legal hair splitting. Whe1·e two corpomtions, the principal offices of which were located in New York City and Chicago, respectively, and the two lncHviduals wbo were directors and officers of both and managed their operation as a family affair, engaged in the publication of directories of manufacturers, wholesalers, jobbers, distl·ibutors and business services, which classified them under commercial headings as to {Jroduct or service, listing address and telephone number, paid for o1· free, at respondents' option, and carrying advertisements paid for by the advertisers, and which, publishecl by one or the other of said corporations for numerous eastern, southern, and midwestern states, and variously captioned as Classified Telephone Directory, Interstate Industrial Register, Manufacturers' Business and Industrial Buyers' Guide, Industrial Classified ~'telephone Directory and Classified Industrial Register, were distributed without cbnrge to the advertisers and lis tees, and their prospective purchasers;

'Amended.

14 FEDE:R:AL TRADE COMMISSION DECISIONS Syllabus 47F.T. C.

In soliciting contracts for paid advertisemcuts or listings br mail (as distinguished from personal contact by salesmen), through sending prop9sed mail order contract forms accompanied by return envelopes but no duplicate for the recipient's retention, to prospects, including those who hall carried unique or distinctive advertisemeuts in their local telephone directories for many years and in some cases In no other publication, who had never had any dealing with r respondents or any Association with their corporate name, and who had been queried, in a number of instflnces, by unidentified salcslUen as to whether they wishecl to renew their telephone directory advertising or listing, and informed that a contract therefor would silortly come in tile mailr asled In the blank space provided by their said coutruct forms, immediately above the place for the pt·aspect's signnlnre and following a printed authorizalion to insCL-t representations simiiat• thereto in the next issue l)f the directory In question, the prospect's advertisement clipped from his local telephone clirectot·y ot· other pnblicution; With the result that prospects who received such forms by mail, signed and retum eu them in the belief that they were reuewiug their own prior advertisements or listings in their local telephone directories or other publications, and some thereby bought and paid for advertising space for which they bad no use and which they did not desire; and ContlnuNl said practice for a number of years after becoming aware of the rrsults thereof, as above indicated, aud insisted upon payment in those cases in which such adver tisers claimed theit· signing was the result of a mistake, upon learning, as was usually the case, upon the receipt of their bills mouths latet·, just before the publlcnlion of the directory and too late fot· cnncellation, that they were dealing with sald corporations; and, while cauccling contracts in those relatively few cases where the directory bud not been set up in type and in which such a complaint was made, sueu to enfot·ce payment in the others :

Tleld, 'that such acts and practices, under lbe cit•cntltstnnces set for th, were to the actual and potential prrjudice and injury of the public, and constituted unfair and deceptive acts and practices in commerce. In . the aforesaid proceeding, while the contract forms e¥entnally omitted the words "telephone" and "clirectory," and set forth along with advertising mtes and other matter, and in legible type, that the attached copy appeared in another publication and that the contract was not a renewal or proof, but was nn authorization to publish said matter in respondent's directory-from the covers of which said words were also ultimately removed-and contained the names, The Independent Directory, and The Independent Directory Corporation, and stated that tlle latter was not connected with any telephone compaoy-statements and disclaimers which, if carefully read by D the pt·aspect, probably precluded any mistake as to the Identity of the respondent publishers or the publication in which the advertisement at- sa tached to the form "10uld appear-their practice of attaching to their said la forms advertisements from other publlcatious nevertheless did actually thl deceive many of the prospects to whom the forms were sent; and it was the m. ~~ Commission's opinion in view of all tll<' circnmstnnces above Jnclicated, that th salu practice in t.hat respect canied the definite potentiality of deceiving l'INDEPENDENT DIRECTORY CORP. ET AL. 15 '.C. 13 Complaint tin- othet·s in similar fashion, regardless of such cautions, disclaimers, and sed explanations, and that the appropriated advertisements might so anest a pli- prospect's eye, and so insulate him with such familiarity and certainty that ~ad even a cursory examination of the form appeared useless and time wasting ; L'CC- anrl that, therefore, such statements, explnnations and <llsclalmers di<l not lad clfcctil'ely t·emove the likelihood of <leccption. !01'- Wbilc a nnmbcr of the infli>iduuls anti firms that signed said mail order conlld- tracts under the circumstances set out wet·e engaged In businesses which one were local, cithct· by nature or by choice, and did not lmowlngly advertise uld in any publication of intet·state circulation, there was no substantial evidence in the rcconl to sustain the allegations made in the complaint that :ely most of respondents' nd>erlis<>rs did only a local business or a business au- conttnccl to au urea much less than that covered by respondents' publication, Qf or that the majot·ity of respondents' advertisements were of little or no value lli s to local advertisers.

The Commission was also of the further opinion, as respects the charge in the tnd complaint that respondents' salesmen sccm·ed adl'ertlsing contracts from ad- prospects by representing directly ot· by implication that such advertisers ub- wct·e merely renewing their advertisements fot· another year in the publicaich tion f1·om Which respondents had taken the advertisements displayed by the salesmen, that the rcconl contained no substantial evidence to sustain said the charge, it appearing, among other things, that it was the salesmen's pracose tice, following agreement with the prospect, to sign the contract along with f a the prospect and return the smne to respondents, and that thereafter a teir llnplicale wns immetliately returned lo the prospect by registered mail, ate together with n statement of the cost. tile 1ad Before M1•. W ebster Ballin.r;er anclllh. Franlc Hier, trial examiners. to !lfr. De Witt '1'. Puolcett for the Commission. Hays, St. John, Abmharn & Schulman and Mr. Jacob Steinfeld, of to New York City, for respondents. ted AJI!ENDED COJIIPLAINT the ing Pursuant to the provisions of the F ederal Trade Commission Act red and by virtue of the authority vested in it by said act, the Federal but ·om Trade Commission, having reason to believe that Independent Direcon- tory Corp., an Illinois corporation, I independent Directory Corp., a :ec- New York corporation, New J ersey Directory Corp., a corporation, toy William OJeck Advertising Corp., a corporation, and "'\Villiam Oleck, by David Oleck, and Maury Oleck, individually and as officers of afore- the at- said corporations, hereinafter referred to as respondents, have vioaid lated the provisions of said act, and it appearing to the Commission Lily that lt proceeding by it in respect thereof would be in the public the interest, hereby issues its amended complaint, stating its charges m hat that respect as follows: ing (}1067()- 53--[i FEDE:R:AL TRADE CO'MMIISS'ION DECI'SIOIN"S16 Complaint 47F.T. C. 13 P ARAORAPli 1. Respondent, Independent Directory Corp., of illinois, is an lllinois corporation with its principal office at 608 South Dearborn Street, Chicago, Ill.

Respondent, Independent Directory Corp., of New York, is a New York corporation with its principal office at 152 West Forty-second Street, New York, N.Y.

Respondents New Jersey Directory Corp. and William Oleck Advertising Corp. are New York corporations with offi.ces at 152 West Forty-second Street, New York, N.Y.

Respondents William Oleck, David Oleck, and Maury Oleck, are officers of the aforesaid corporations and have their principal offices at the above-stated New York address.

In performing the acts and practices hereinafter complained of, the aforesaid corporations have been under the management, control and direction of the above-named individual respondents. P AR. 2. The aforesaid respondents are now and for several years last past have been engaged in publishing a Classified Telephone Directory and Buyers' Guide. The publication contains a free classified listing of manufacturing, industrial, and other business concerns with their addresses and telephone numbers, and also paid advertisements of such concerns.

Respondents cause their said publication to be transported through the United States mails, and otherwise, from the points of publication thereof, or from one or more of the above-stated addresses, to the subscribers to or purchasers of said publication at their respective res ponepoints of location in various States of the United States, including said ad States other than the States of Illinois and New York, and in the pay th~District of Columbia. Respondents maintain and during all the time sue for mentioned herein have maintained a course of trade in said publica- insttLDCE tions in commerce between and among various States of the United not stab States. PAR. f PAn. 3. Respondents' method in securing names, addresses, and tele- in New · phone numbers for use in their said publications, and also the classified circulatl advertisements to be inserted therein, is to clip advertisements from ents' ad various local telephone and other directories and to paste or other- an area wise attach said advertisements to their own contracts O\' order forms. Hence, t Said contracts are then mailed to the persons or firms whose advertise- value to ments are attached thereto with a request that if any corrections are PAR. € to be made or additional listings desired, to make the necessary nota- spondcnt tion on said c<mtracts and return the documents to the respondents. implicati In some instances respondents' salesmen present the aforesaid docu- soliciting ments to the advertisers in person and secure the advertisers' signa- such .firm INDEPENDENT DIRECTORY CORP. ET AL. 17 13 Complaint tures thereon by representing, by implication or otherwise, that the advertisers are merely renewing their advertisements for another year in the same publication from which the attached advertisement was clipped. In many instances advertising space is sold to persons and firms located in States other than the State in which respondents' offices are located and from which said publication is shipped to subscribers thereof.

Pan. 4. As a rule, the advertisement attached to the respondents' contract is clipped from the telephone directory of the locality in which the advertisers' business is located. Each such advertiser recognizes the advertisements submitted to him as being one previously placed by him with the local telephone or other directory. Without scrutinizing the proffered contract closely and ascertaining that it is not a renewal of an advertisement in the local directory, but is a new contract for an advertisement to be inserted in respondents' directory, lhe advertiser signs respondents' contract. Said contract features in large print the words "telephone directory" and the explanation as to what the contract really is appears in much smaller and less conspicuous type, not in immediate conjunction or connection with, but on the contrary substantially removed from, tho words "telephone directory." It is usually weeks or months before said advertiser receives a bill or request from respondents for payment for tho aforesaid advertisement that such advertiser is apprised of the true facts in the case. If the advertiser raises any question about the matter, respondents furnish him with a photostat copy of the contract which said advertiser has signed. I£ the advertiser then fails or refuses to pay the bill, respondents threaten to sue and in some instances do sue for collection of the amount specified in Lhc contract. In some instances the amount of the bill or charge for the advertisement is not stated in the contract at the time it is signed by the advertiser.· P AR. 5. Respondents' said Directory and Buyers' Guide is published in New York, Chicago, and Los Angeles, and each publication thereof circulates over wide areas, usually in many States. Most of respondents' advertisers do only a local business or a business confined to an area much less than that covered by respondents' publication. Hence, the majority of respondents' advertisements are of little or no value to the local advertisers using them.

PAn. 6. By and through the aforesaid acts and practices, the respondents falsely represent and have represented directly and by implication, to business firms and individuals that respondents are soliciting advertising space from, and giving telephone listings to, such firms and individuals, to be placed in the telephone directory used 18 FEDE:RAL TRADE COMMISSION DECTSICXNS Fiudlogs 47F. T. C.

in the community in which such firms are doing business, when such is not the fact.

PAR. 7. As a result of the aforesaid deceptive acts and practices on the part of respondents and the false and misleading sta.tements and representations employed by them in connection 'with the use of said acts and practjces, and ill many instances as a result of suits for collection or threats of such suits, many firms have bought and paid for and are now buying and paying ior advertising space in respondents' aforesaid publication, such purchases having been made and now being made ill the erroneous nnd mistaken belief that space in their local telephone directory was or is being purchased. PAR. 8. The aforesaid acts, practices, and methods of respondents as alleged herein are all to the prejudice and injury of the public and constitute unfah· and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. REPORT, FINmNos AS TO THE FACTS, AND Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Tr::tde Commission on March 11, 1D47, issued and subsequently served upon the respondents named in the caption hereof, except th~ respondent Independent Directory Corp., a New York corporation, its complaint in this proceeding, charging said respondents with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of tha.t act. The respondents named in said complaint filed their separate answers thereto on Mn.rch 31, 1947. Certain testimony and other evidence in support of and in opposition to the allegations of the complaint were thereafter introduced before a trial examiner of the Commission theretofore designated by it, and such testimony and other evidence were duly recorded and filed in the office of the Commission.

Acting upon a motion filed December D, 1D47, by counsel in support of the complaint and assented to by the counsel for the respondents, 'the Commission, by order dated F ebruary 25, 1948, directed that the complaint be amended to include as a party respondent the Independent Directory Corp., a Nev York corporation, and on February ·26, 1948, it issued and thereafter served upon the respondents, including said Independent Directory Corp., a New York corporation, its amended complaint, charging said respondents with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of the aforesaid act. The Commission, in its order of February 25, 1948, further directed that the testimony and other evidence ind·EPENDENT DIRECTORY CORP. ET AL. 19 r. c. 13 Findings theretofore introduced be adopted and treated as having been takenuch under said amended complaint. After the filing of the respondents' answers to said amended complaint, further testimony and other evi-1 on dence were introduced before the original trial examiner and a sub-mel stitute tria,l exruniner of the Commission designated by the Com-taicl mission's order of April 29, 1949, and such testimony and otherfor evidence were duly recorded and filed in the office of the Commission.aid Thereafter, this proceeding regularly came on for final hearingnclbefore the Commission upon the amended complaint, the respondents'.ow answers thereto, the testimm1y and other evidence, the trial examiner'stetr recommended decision and exceptions thereto, and briefs and total argument of counsel; and the Commission, having duly considerednts the matter and having entered its orders disposing of the exceptionsmel to the recommended decision of the trial examiner, and being nowlln fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion clra.wn therefrom .

.ct; FINDINGS AS TO THE F.Acts lh- PARAGU.APH 1. Respondent Independent Directory Corp., of Illinois, of, is a corporation organized in 1935 under the laws of the State of Il- 1rk linois, having its principal office located at 608 South Dearborn Street, tclin the city of Chicago, State of Illinois. m- P .AR. 2. Respondent Independent Directory Corp., of New York, 1ts is a corporation organized in 1939 tmcler the laws of the State of New ·ch York, having its principal office located at 152 West Forty-second in Street, in the city of New York, State of New York. ·o- CT- P .AR. 3. Respondent New Jersey Directory Corp. is a corporation ' b organized under the laws of the State of New York. From the date eel of its incorporation in November 1924 until sometime between 1936 and 1940 this corporation published classified telephone directories >rt for various areas in New Jersey, but bas not engaged in publication ts, he! since that time. It maintains offices at 152 West Forty-second Street, in the city of New York, State of New York, from which it manages letwo pieces of property in the Borough of Brooklyn, State of New York, ry and at which it employs ft·om one to a dozen employees at different cllts times who engage in compiling, circularizing, checking, and addressing ,u· for the general public, and also, when needed, for respondents inde- 0- pendent directory corporations. At times it mails out order or conu- tract forms for the independent directory corporations and clips adce vertisements from other directories for them, but it does not take 20 FE DE:R'AL 'IRADE COMlviiSS'fON DECISIONS Findings 47F.T. C: 13 orders for listings or other advertising in the directories published by PA the independent directory corporations. It has no other connection aren 'with, and performs no other functions for, the other respondents ing herein. and PAn. 4. Respondent William Oleck Advertising Corp. was incorpo- uct o rated under the laws of the State of New York in 1921, was solely a vertiE ne,vspaper advertising agency, and was not connected in any way direc with the publications of the other respondents in this proceeding. It Inte~ was dissolved December 15, 1944. trial Par. 5. Respondent 'William Oleck has been and is the president and Clas a director of each of the corporate respondents. a.n a PAR. 6. Respondent Maury Oleck has been and is the secretary and cate treasurer and a director in each of the corporate respondents. The PAR. 7. Respondent David Oleck is assistant secretary of Inde- at I pendent Directory Corp., of New York, and assistant treasurer of Independent Directory Corp., of Illinois. He is not a director in any of the corporate respondents.

PAR. 8. Respondents William Oleck and Maury Oleck are brothers, and they, together with Blanche Oleck, constitute the board of directors of Independent Directory Corp., of New York, and Independent Directory Corp., of Illinois, and New Jersey Directory Corp. These corporations are operated as a family affair, and the management, control, and direction thereof are by the respondents William Oleck and Maury Oleck. Respondent David Oleck exercises no control over Vir their policies or management. None of the individual respondents p have, since 1941, published or distributed any directories individually. pub PAn. 9. Respondent William Oleck began the publishing and dis- fror tribution of directories in 1921 with William Oleck's Green Book for Chi Hudson County, N. J . This consisted of listings and advertisements cha: of the names, addresses, and telephone numbers of various business, loca commercial, and professional persons and concerns in that area, to- of ( gether with some listings and advertisements from the New York and metropolitan area. The advertisements and some of the listings were a no paid for and the distribution of the books was free to all industrial be~ and professional telephone subscribers in the area. This was thefirst such book issued in that area and was issued after a survey thereof. wJ PAR. 10. Thereafter books of similar character were published and tim distributed by William Oleck and various corporations under his em: direction, including respondents Independent Directory Corp., of New Ne· York, and Independent Directory Corp., of Illinois, some of which sin covered local areas and others which covered areas of several States. 26 iiN'DEPEN'DENT DIRECTORY CORP. ET AL. 21 J.~ ­ 13 Findings y PAR. 11. Respondents described in paragraphs 1, 2, 5, and 6 above .n are now, and for several years last past have been, engaged in publishs ing directories of manufacturers, wholesalers, jobbers, distributors, and business services classified under commercial headings as to product or service, listing address and telephone number and carrying advertisements of products or services for sale by the advertisers. These directories are variously captioned as Classified Telephone Directory, Interstate Industrial Register, Manufacturers' Business and Industrial Buyers' Guide, Industrial Classified Telephone Directory, and Classified Industrial Register. The listings therein, consist mainly of a.n address and telephone number placed under a product or service category; some are paid for, some are free at the option of respondents. The advertisements are paid for by the advertisers. Circulation of at least 50,000 is guaranteed for each directory and is free to each advertiser and listee therein. A few directories are sold for $10 each. PAn. 12. Independent Directory Corp., of Illinois, compiles, edits, and publishes a directory for the States of Illinois, Indiana, Wisconsin, Iowa, Minnesota., Michigan, Ohio, western Pennsylvania, West Virginia, Kentucky, Missouri, Tennessee, Mississippi, Arkansas, and Louisiana. Independent Directory Corp., of New York, compiles, edits, and publishes a directory for the States of New York, New Jersey, eastern Pennsylvania, Delaware, Maryland, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, Maine, Virginia, North and South Carolina, Georgia, Florida, and Alabama. PAn. 13. These directories, when published, are transported by the publishers thereof through the United States mails and otherwise from the points of publication thereof, namely, New York City and Chicago, Ill., to individuals, institutions, and others interested in purchasing from the advertisers therein at their respective points of locations in the various States of the United States and in the District of Columbia. Respondents Independent Directory Corp., of Illinois, and Independent Directory Corp., of New York, have maintained and do maintain a course of trade in said publications in commerce between and among the various Sta.tes of the United States. PAR. 14. Advertisements and listings for respondents' directories were solicited prior to 1938 almost entirely by salesmen, but since that time solicitation bas been by mail and also by salesmen. Respondents employ one salesman in the Chicago area and seven salesmen in the New York area for tllis purpose. Mail solicitation has increased since 1938 until for the past 5 years it accounts for approximately 26 to 30 percent of respondents' revenue.

22 FEDEIR'AL TRADE COMMISSION DECISIONS Findings 47F. T. C. 13 P AR. 15. ·when respondents' salesmen solicit advertising they clip out a prospect's advertisement from any publication in which they can find one, paste it on a copy sheet and present this, together with a contract to advertise in the next edition of respondents' directory, to the prospect. Appointment for this call may or may not have been a1 previously made by telephone. If no advertisement of the prospect c] can be found, respondents sometimes will sketch a suggested advertise- p ment on the copy sheet. In other instances, the salesman simply takes t.J a blank copy sheet along with the contract, and works out an advertise- "ment thereon with the prospect, if the latter is i11terested. If the a prospect agrees to subscribe, both he and the salesman sign the con- 1 tract, which is returned to respondents by the salesman. Respondents immediately send a duplicate of the contract to the prospect by registered mail, together with a statement of the cost. PAR. 16. In soliciting by mail, respondents Independent Directory Corp., of Illinois, and Independent Directory Corp., of New York, send to various prospects proposed contracts for paid advertisements or r paid listings. Each such contract, as printed, lu~s a large blank space immediately above the place for signatm·e. On this blank space is pasted by respondents an advertisement which the prospect has carried in his local telephone directory or some other publication, which advertisement respondents have cut out from the publication in which it appeared for the pmpose of attaching it to their own contract.

Pan. 17. These proposed mail order contracts state on their face, immediately above the attached advertisement so appropriated, that the attached copy appears in another publication and that the contract is not a renewal or proof, but if signed and returned is an authorizatjon to publish an advertisement in respondents' directory. Such contract forms also conta,in the name The I independent Directory and Independent Directory Corp. and state that the latter is not connected with any telephone company. Such contract forms contain a detailed statement of the States in which respondents' directory is to be distributed, a printed statement of advertising space rates, in the case of advertising contract forms, and the price of listings in the case of listing forms. Each such contract form also carries the statement immediately preceding the line printed for the signature of the prospective advertiser, that the latter authorizes the respective respondents, Independent Directory Corporations, to insert representations similar to the attached advertisement in the next issue of respondents' Industrial Classified Telephone Directory or Classified Industrial ll\"'DEPENDENT DIRECTORY CORP. ET AL. 23 13 Findings Directory or Classified I ndustrial Register. Some forms also carry pictures of respondents' directories.

Pan. 18. Respondents' forms used in 1!>41, 1942, 1943, and1944 had the words "telephone directory" or "phone directory" in the largest and most conspicuous type on the form with the above-described disclaimers and cautions in smaller, less conspicuous but nevertheless plain type, substantially removed in some instances from the larger i t.ype. Since 1944 or thereabout, however, the words "telephone" and "phone" have been omitted from the heavy type heading and do not appear except in the authorization immediately above the signatnrc t line. For the past several years the words "telephone" and "directory" have been entirely removed from these forms by respondents. Respondents have recently removed from their directory covers the words "telephone" and "directory."

PAR. 19. The proposed mail-order contract form is accompanied d by a return envelope bearing the printed name and address of the r respective Independent Directory Corporation, but no duplicate of a k proposed mail order cm1tract form is enclosed for retention by the e prospect. Respondents Independent Directory Corporations, of Illis nois and New York, occasionally send with such proposed contract forms to prospective advertisers a mimeographed sales letter or reproductions of appreciative correspondence from users of the directory.

PAR. 20. The record in this proceeding shows that because of the e, presence of their advertisements on respondents' contract forms a. at representative number of prospects receiving such forms by mail have ct ~igued A-nd returned the same to respondents without reading, or without reading thoroughly, in the belief that they were renewing their advertisements or listings carried by them in their local telephoner:~ ~ld directories or other publications. Led PAn. 21. Most of these prospects who have so signed under such led misapprehensions had never l1ad any dealing with respondents and the lis- name "Independent Directory Corporation" meant nothing to them. 1 of They had advertised in their local telephone directory for many years, of ranging up to 35 years, and a number of them advertised in no other ent publication. In a number of such instances the clipped advertisement was unique or distinctive to the prospect or to the telephone directory in which it appeared because of drawings, type of print, make-up, andro-rd- Ions the distinctive yellow paper used in most classified advertising sections ' ts' of telephone directories. In other instances tlie advertisement was ial distinctive because of branded merchandise handled, or handled exclusively, by the prospect or because of trade-marks of the prospect. 24 FEDE'.R'AL TRADE COMMLSS'ION DECISIONS Findings 47F.T. C. 13 PAR. 22. In a number of instances the prospect had, shortly before receiving respondents' mail order contract form with his telephone directory advertisement pasted thereon, been visited by or telephoned by unidentified salesmen inquiring whether the prospect wished to renew his telephone directory advertising or listing and informing him that the contract therefor would shortly come in the mail. In other instances the blanks on respondents' contract forms for classi- of fication, amount of space, and cost of advertising, were still blank when v the prospects signed them.

PAR. 23. W11en respondents solicit advertising by salesmen a copy c of the contract secured, together with the amount called for therein, p is always sent by respondent to the prospect immediately after the p contract is turned in by the salesman. "\iVhen respondents solicit by t' mail only one copy of the contract to be signed is sent to the prospect t and be is not thereafter furnished with a copy unless he, after receipt d of a bill therefor, raises a question of his liability therefor. PAR. 24. Respondents do not send out bills for listings or advertise- b ments in their directories to those who sign their mail order contract t forms until just before publication of the directory. This may be ex- f tended as long as 8 months after the contracts have been signed. Usually by the time the advertiser has been sent his bill it is too late for him to cancel his advertisement because the directory has gone to press, and this is usually the first time those who have signed, in the belief that they were renewing their advertising Ol' listing in their local tele- t phone directory, become aware that they were, in fact, dealing with f respondents. d PAR. 25. For a number of years respondents have been aware of the i' fact that their practice of pasting onto their mail order contracts ap- t propriated telephone directory advertisements of the prospects has t caused a number of those prospects to sign their contracts in the mistaken belief that they were renewing the appropriated advertisement < in their local telephone directory, but the respondents have nevertheless continued this practice.

PAR. 26. In cases in which advertisers who have signed respondents' contracts claim that their signing was the result of a mistake, it is respondents' practice, where the directory has not been set up in type, to cancel the contracts. In all other cases it is the respondent.-.' practice to insist upon payment a.nd if it is not made to sue for enforcement thereof.

PAR. 27. A number of the individuals and firms that have signed respondents' mail order contracts under the circumstances set out above have been engaged in businesses which are local, either by na- .INDEPENDENT DIRECTORY CORP. ET .AL. 25 13 Findings ture or by choice, and such individuals and firms would not knowingly adve1tise in any publication of interstate circulation. There is no substantial evidence in the record, however, to sustain the allegation made in the complaint that most of respondents' advertisers do only a local business or a business confined to an area much less than that covered by respondents' publication, or that the majority of respondents' advertisements are of little or no value to local advertisers.

PAR. 28. The Commission is of the further opinion that the record contains no substantial evidence to sustain the charge in the complaint that respondents' salesmen secure advertising contracts from prospects by representing directly or by implication that such advertisers are merely renewing their advertisements for another year in the publication from which respondents have taken the advertisements displayed by the salesmen.

PAR 29. As the Commission has found, the contract forms used by respondents in soliciting advertising by mail for their publications contain a number of statements and disclaimers which, if careflllly read by a prospect to whom the forms are sent, would probably preclude any misunderstanding on the part of such prospect as to the identity of the publisher from whom the contracts were received or the publication in which the advertisement attached to the forms would appear. The record shows, however, that respondents' practice of attaching to their contract forms advertisements appropriated. from local telephone directories and other publications has actually deceived many of the prospects to whom such forms have been sent into the mistaken belief that they were simply renewing their advertisements in the publications from which the advertisements were taken, and it is the Commission's opinion, in view of all the circumstances, as herein set forth, that respondents' practice in this respect carries the definite potentiality of deceiving others in similar fashion, regardless of the cautions, disclaimers, and explanations printed on the forms. In such circumstances, the appropriated advertisement may so arrest a prospect's eye and so insulate him with such familiarity and ce1tainty that to him even cursory examination of the form appears useless and time wasting. The Commission is of the opinion, therefore, and finds, that the statements, explanations, and disclaimers on the forms used by respondents are not effective to remove the likelihood of deception which may result from respondents' practice of attaching to such forms advertisements from other publications. PAR. 30. As a result of respondents' acts and practices, some individuals and firms have bought and paid for advertising space for 26 FEDE:RAL 'IRADE COMMI5SIION DECISIONS Order 47F. T. C. 13 which they had no use and which they did not desire, to their damage and injury. Such damage and injury is likely to reoccur and to continue.

CONCLUSION The acts and practices of the respondents named in paragraphs 1, Co2, 5, and 6 hereof, as herein found, are to the actual and potential Il prejudice and injury of the public and constitute unfair and deceptive noacts and practices in commerce within the intent and meaning o£ Sl the Federal Trade Commission Act. in Commissioner Mason dissenting.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the amended complaint of the Commission, the respondents' answers thereto, testimony and other evidence in support of and in opposition to the allegations of the complaint introduced d before trial examiners of the Commission theretofore duly designated 0 by it, the trial examiner's recommended decision and exceptions p thereto, and briefs and oral argument of counsel, and the Commission, c having disposed o£ the exceptions to the trial examiner's recommended g decision and having made its findings as to the facts and its conclusion a that the respondents, Independent Directory Corp., of New York, Independent Directory Corp., of Illinois, William Oleck and Maury :( Oleck, have violated the provisions of the Federal Trade Commission p Act: u It is m·dered, That the respondents, Independent Directory Corp., n. New York corporation, and Independent Directory Corp., an Illinois corporation, and their officers, and the respondents, William Oleck l and Maury Oleck, and said respondents' agents, representatives, and t employees, directly or through any corporate or other device, in con- 1 nection with the offering for sale, sale, or distribution in commerce, as "commerce" is defined in the F ederal Trade Commission Act, of advertising in telephone, industrial, commercial, or other directories or registers, or in any other publication, do forthwith cease and desist from using in the solicitation of such advertising by mail, advertisements whch have been physically clipped or removed by or for the respondents from any publication issued by others than the respondents.

It is ftvrther ordered, for reasons appearing in the Commission's findings as to the facts in this proceeding, That the complaint herein be, and it hereby is, dismissed as to the respondents, New J ersey Directory Corp., William Oleck Advertising Corp., and David Oleck, .INDEPENDENT DIRECTORY CORP. ET AL. 27 13 . . Opinion said dismissal being without prejudice, however, to the right of the Commission to institute a new proceeding against these respondents or to take such further or other nction against them at any time in the future as may be warranted by the then existing circumstances. It is furtltm· m•rle1·ed, That the respondents, Independent Directory Corp., a New York corpora6on, Independent Directory Corp., an Illinois corpomtion, 'William Oleck and Maury Oleck, shall within GO days after service upon them of this order, file with the Commission a report in writing set6ng forth in detail the m~tnner and form in which they have complied with this order.

Commissioner Mason dissenting.

OPINION OF THt;: Cou~ussion Carson, Commissione-r:

The Independent Directory Corp. et al., is before us in this case, docket No. 5486, to answer to a. complaint that it violated section 5 . of the Fuderal Trade Commission Act. The charges in the complaint can be made very simple for the benefit of the layman or consumer for whom the lav was written. Cousumers are rarely organized. They rarely have the immediate services of lawyers and accountants and economists and other experts. But this Commission was created by the Congress to protect their right to an honest and fair market place. Upon the Commis!;ion is placed the obligation to protect not only the discerning public against deceptive advertising, but also to protect the casual, or negligent, or ignorant. The facts in this case are as follows :

The Independent Directory Corp. publish eel books in which were li~::ted the names nncl advertisements of various business organiztttions. It offered to sell that service to such organizations. It made its ofr'ers through direct solicitation by salesmen, and also through use of the postal service. In making its offers, it oflen made it a practice to clip an advertisement from the publication of another company, pasting that advertisement on rt contract form and then submitting the foJ'll1 to a prospective customer.

The complaint was made that prospective customers thought they were merely sig11ing a contract for renewal of their obligation to advertise in the publications of the orgnnizations from which Lhe advertisements were approprin tell. The origimtl contract forms were so designed that the unwary prospective buyer could have been deceived, and the evidence discloses that various purchasers were dec.eived into believing they were only executi11g a contract for renewal of prior agreements to advertise. The contract forms were, in :fact, 28 FEDE.R:AL TRADE COMMISSION DECISIONS Opinion 47F.T. C.

entirely capable of causing the prospective customer to commit error, so much so that it is difficult to believe there was any marked concern on the part of the company to protect some, at least, of its prospective customers against being deceived. · It is true that the contract forms were modified to remove some of the more flagrant traps to which the unwttry customer was exposed. But modification of the contract forms was not sufficient, especially in view of the disregard by tlle company of its original obligation to protect the consumer. The day when the consumer must submit to any dictum that "the buyer must beware'' is long passed, and it is the duty of this Commission to make certain, insofar as its authority extends, that that day shall not return. Those who make use of artfully designed contracts, with their plethora of deceitful fine print, must assume the burden of proof that the fu1e print is not in fact a well-designed and unlawful trap for the unwary. If "good will" can be restored to its rightful place in a free economy, as being the greatest asset any business can have, or should have, then there is no justification for tolerating contract forms and other methods which may well deceive the least literate of consumers. The Commission, in fairness to the respondents, has held that there was no evidence to the effect that anyone was deceived when the practice was used in connection with personal visits by salesmen, and the Commission's prohibitions have been limited, therefore, to the practice of attaching to respondents' contract forms advertisements which have been physically removed from publications issued by others than the respondents in the use of such advertisements in the respondents' solicitation of advertising by mail. Thus, this limitation by the Commission leaves untouched the respondents' personal solicitation business. The Commission's findings as to the facts and conclusion, together with its order, tells the full and complete story of the facts and circumstances upon which the majority of the Commission members reached their conclusion.

The sole issue herein is the character of circumstances surrounding the solicitation of business by respondents by mail, expressly excluding the nondeceptive character of personal and salesmen's solicitation of respondents' business. I t should be noted, further, that customers often received no copy of respondents' contract for their files, received no bill; received no information to put them on notice as to solicitation by a new and different advertising medium than the one they had used. Some prospective customers, before receiving respondents' contract forms, already had been contracted by unidentified salesmen, creating the impression that such salesmen were tele- INDEPENDENT DIRECTORY CORP. ET AL. 29 13 Opinion phone company representatives inquiring about the renewal of such ocllvertisements in the telephone directories. There can be no doubt, from careful reading of the record, that many such customers were nilsled and deceived by reason of the respondents' method of soliciting business.

1'ruth, H onesty,, ancl the L(Jitv There can be no quibbling or hair-splitting on the part of a government agency such as this, in the carrying out of its duties and responsibilities within its sphere of authority for the protection of fair competition and the public interest. The legal authorities are overwhelmingly in support of such an obvious truism, and one would have to seek assiduously to establish a legal exception to the general rule. To do so, one would have to argue speciously that a thing or practice is partly legal because it is partly good and only partly bad. To cite only briefly from the long list of legal authorities supporting the Commission's conclusion and order, the courts repeatedly have held that the law is not made for experts but to protect the publicthat vast multitude, which includes the ignorant, the unthinking, and the credulous, who, in making purchases, do not stop to analyze but who nre often governed by appearances and general impressions, Florence Manufacturing Co. v. Dowd, 178 F. 73. Advertisements are not intended to be carefully dissected with a dictionary at hand, but rather, to induce an impression upon prospective purchasers (Newton Tea and Spice Co. v. United States, 288 F. 475). Impressions are the primary target of the ad writers (Stanley Laborato?'ies, Ina., et al. v. Fedeml Trade Commission, 138 F. (2d) 388) [37 F. T. C. 801; 3 S. & D. 596].

Even the exact truth may not save a respondent from the consequences of his act where there is a duty to do more than to maintain mere silence, a duty to put the purchaser on notice of the true charncter of the transaction. Although the printed text of an advertisement may be literally true, its form, color, or print may be designed to mislead the casual reader. In such case, the advertiser attempts to appeal to the eye of the reader and direct his attention to an offer or advertisement which, under ordinary circumstances, he might not have noticed (United States v. 96 Ba1·rels of Vinegar, 265 U.S. 438; Boclcenstette v. Feclm·al Tmde Commission, 134 F. (2d) 369) [36 F. T. C.ll06; 3 S. &D. 539].

Advertisers, like other purchasers, may be compelled by circumstances to trust to the integrity, capacity, and diligence of others, and 30 FE'DE:RAL TRA'DE CO'MMJIS6IION DECISIONS Opinion 47F.T.C.

laws are made to protect the trusting as well as the suspicious (Federal Trade Comnnission v. Standard Ed·ucation Society, 302 U. S. 112) [25 F. T. C. 1715; 2 S. & D. 429]. Such consumers have a right to assume that fraudulent advertising traps will not be laid to ensnare them (D.onaldson v. Read Magazine, 333 U.S. 179). It is the Commission's function, in protecting the public against deceptive advertising, to protect the casual, even the negligent, reader, as well as the vigilant and more intelligent and discerning public (Pa?'lce1' Pen Co. v. Federal Tmcle Commission, 159 F . (2cl) ll09 [43 F. T. C. 1190] ; Belmont Labomt01ies, Inc. v. Fecle1·al T1·ade Commission, 103 F. (2d) 538) [28 F. T. C. 1941; 3 S. & D. 97]. A fait· test may be reasonably made by the ultimate impression upon the mind of the reader resulting· :from the stun total of what he reads and what is reasonably implied (A:ronberg v. Fecleml Trade Commission, 132 F. (2d) 165) [35 F. T . C. 979; 3 S. & D. 647l Advertisements must be considered in their entirety as they would be read by Lhose to whom they appear (Fqrcl· Moto1• Co. v. Federal Tmde Commission, 120 F. (2cl) 175) 133 F. T. C. 1781; 3 S. &D. 378].

On the question of securing signatures to contmcts by misrepresentation, it has been held consistently that securing signatures in haste or by other trickery to contracts, of whose terms, nature, and effect the signer is ignorant, is prohibited by the laws administered by the Commission. Appropriating values created by a competitor 's ingenuity, labor, or expense is prohibited ( 01·ient Mttsic Roll Co., 2 F. T. C. 17G, (1919) D. 304). False, unfair, or deceptive acts defined in the Federal Trade Commission need not be such as would constitute fraud as that term is ordinarily understood in lnw (/}. D. D. Co1•p. v. Federal 1'1yule Cont1nission, 125 F. (2d) 679 ( CCS-7) 1942) [34 F. T. C. 1821: 3 S. & D. 455]. It is unlawful under the Fecleml Trade Commission Act for l\ respondent to fail affirmatively to disclose the material fact where appearances may be deceptive (Ilaslcelite A!fg. Co1•p. ·v. Federal Trade Comnnission, 127 F. (2d) 765 (CCA.-7) 1942) 134 F. T. C. 1855; 3 S. & D. 485]. Where a respondent has used confusing order blanks and has taken advantage of customers who did not tmclerstand them, the Commission may require the preparation of orders in a manner so clear as readily to be understood even by the ignorant, the tmthinking and the credulous (Do1·jman v. Fedeml 1'1•ade C01nmission, 144 F. (2d) 737,739 (CCA-8) 1944) [39 F. T. C. 700]. The fact that deceit or other forms of misrepresentation may take place within the technical confines of a written instrument docs not strip the act of its true character, whether it be honest or dishonest. It is, in essence, still a matter of intent and conscience, with logical moral and legal consequences, regardless of legal hair-splitting. INDEPENDENT DIRECTORY CORP. ET AL. 31 c. 13 Opinion zl The fu1dings and order, as herewith presented for Commission ac- . :) tion, should be approved and entered . .o DrssJ<~Nting OriNIOX Ol" Coml\USSIONm{ L ow:r-:LL B. M Asox 'C 1- In this matter I join with my colleagues in the findings. These :- dearly set forth the facts smTotinding the instant controversy. e I am not only in agreeme11t with their findings and their views I. rcgu.rding the law 0 11 false and misleading advertising but am also in complete accord in their effort to rely on case hw us es tr~blished by the courts when deciding issues before us. It is this adherence to the accumulated wisdom of centuries of judicial trial and error that keeps >T • our law merchant from slipping back into the law of the jungle. The day of caveat emptor is past.

With this brief but earnest salute to the high ideals expressed in the majority opinion, I must still say that in my opinion the order in this ,.I case is no good.

I believe we are not here dealing with false llnd mi slm~ding advertisements such as the cases cited by the majority refer to. We are rlealing with contract s which it is alleged deceived the customers whu signed the contracts in question bllt didn't read them . • This latter seJJtencc is intended to sound as incongruous as it docs. For how can tJne be deceived by what one docs not obser ve. I do not think we should tell the lllCl'chRnt, the businessman, or the public, tha.L no matter how explicit n 'vrittan contract is a.11tl no matter if the same is properly executed by the customer appending his name to the document, the written ter111s of the contract arc of no moment ; that it is impressions and HOL the written words that count. If this be so, I sense a feeling that nothing people do is to be sf am peel with thp importance of self-responsibility. Shall a contract be void if my mood is at variance with its words '~ S hall we 1nvnlidale the higlwst i orm o:f business obligation (written instruments) by finding the nuances and overtones surrounding it arc not 1n accord with what is actually nominated in the bond ? ' Vill we have to psychoanalyze the complexes of all parties as they affix Lheir signatures to make a debenture or other written instrument legal~ The F ederal Trade Commission is the protector o.f the public interest, but we are not guardians ad litem to the Mortimer S nercls who can read but won't, who don't have to sign contracts but do, nor do I believe we forward the public interest by clouding Ll1e validity of contracts no court would condemn.

The respondents arc told in the cease and desist order that they must no longer clip out others' advertisements and paste them in their own contractual proposals if the offer is to be made by mail. 019G7i'i- G3- G .32 FEDE:RAL TRADE COMMISSION DECISIONS Opinion 47F.T.O. 13 I could think of a lot nicer ways of earning a living than clipping .and pasting someone else's ads. There is something about the process that is distasteful to me, but matters of good taste are not yet on our fa agenda. The law, not Emily Post, still must guide our actions. ca The majority appear to agree with me that clipping and pasting it 'is not per se illegal or deceptive because under the order respondents pe .are allowed to clip and paste if a salesman carries the written contr.act Wl to a purchaser but not if it is mailed. If the prohibition were imposed W< .the other way around, it might have some justification for I can is imagine a salesman bludgeoning a prospect into signing a contract tmder such circumstances as would amount to fraud, but when a -of purchaser bludgeons himself with no one else around I can see no tic way for us to protect him against his own unwillingness to be inl protected. COl A written contract is a bilateral transaction which the respective fac parties ratify by their signatures. Their subscribed names are cer- llll lis tification to the world that the terms of the contract insofar as they bu .are explicit are understood and agreed to. Respondents' contracts fully disclose all the terms and conditions of the transaction. There ] was no fine print such as banks and insurance companies often use. l'e Ye (See findings of fact issued by the majority to which I also concur.) th Those who misapprehended the terms of the contract were people who did not read what they signed. (Also see above findings.) of si The law has been settled as far back as Touchstone (1648): "'If a party that is to seal the deed can read himself and doth not, or .a~~ being illiterate or blind, doth not require to hear the deed read or Sl~ cot the contents thereof declared, in these cases albeit the deed is contrary to his mind, yet it is good and unavoidable.' In language not quite so quaint, we repeated this principle * * * adding that one who ~~ s. ~o signs a document 'is guilty of supine negligence, which * * * 191 is not the subject of protection, either in equity or at law.' We have Dt never deviated from this ruling * * *." Reed et al. v. Kellerman B (U.S. Dist. Court, E. D. Pa., June 30, 1941). 40 F. Supp. 46. H Can we protect a man against buying a pig in a poke~ I doubt if the standards, basis, and reasons supporting our authority to ban ( :false and misleading advertising justify the condemnation of written sales contracts which clearly advise the purchaser in detail of the commodity he is buying, just because the purchaser did not read what he signed. Here we are dealing with written instruments, in the instant case, voluntarily signed, executed, and mailed by prospective ;purchasers to the respondents.

J.N'DEPENDENT DIREC1.'0RY CORP. ET AL. 33 13 Opinion The law is well stated by Mr. Justice Hunt in Upton, Assignee v. 'J'ribilcock: "That the defendant did not read * * * was his own fault. It will not do for a man to enter into a contract, and when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained. If this were permitted, contracts would not be worth the paper on which they ·are written. But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission." 91 U. S. 45, 23 L. Ed. 203. In Poe v. Illinois Oentml R. Oo., 99 S. W. 2d 82, the Supreme Court -of Missouri said: "While the law affords every one reasonable protection against fraud, it does not go to the romantic length of establishing the relation of parent and child or guardian and ward between courts and adults managing their affairs, in full possession of their faculties and unrestrained in action, and indemnify them when dealing at arm's length against the consequences of their own indolence, listless inattention, or unwarranted credulity in the transaction of business affn.irs."s In a recent opinion, Va1·gas v. Esqui1·e, Inc., Circuit Judge Kerner 1·eaffirmed this age-old rule of law in this language: "It is a rule uni-:. Yersally recognized that a written contract is the highest evidence of the terms of an agreement behyeen the parties to it, and it is the dutye of every contracting party to learn and know its contents before he signs it. And in the absence of fraud, which must be proved by clearf .and convinciug evidence a man in possession of all his faculties whor signs a contract, cannot relieve himself from the obligations of ther contract by saying he did not read it when he signed it, or did noty know or nndersta.nd 'vhat it cont.'\ined." (C. C. A. 7th, Feb. 27,.e 1948) 166 F. (2d) 651. Cert. Den. 335 U. S. 813, 93 L. Ed. 18, 690 * " S.C. 29. See also: Hickman v. Sawyer et al. (C. C. A. 4th, May 26, 1914) 216 F . 281,132 C. C. A. 425,Foril Mot01· Oo. v. Pearson (C. C. A. 9th, May 5, 1930) 40 F . (2d) 858, G. L. W ebste1· Oo. Inc. v. Trinidad Bean & Elevato1• Oo. (C. C. A. 4th, Sept. 27, 1937) 92 F. (2d) 177, Hayes v. Travelen Insumnce Oo. (C. C. A. loth, Nov. 24, 1937) 93 F.>t ll (2d) 568, 12 Am. Jur. 628, # 137. . While the Commission is the businessman's court and a mere cita- ll tion is lacking in the enlightenment that a direct quotation gives, itte js interesting to note that li~rally hundreds of opinions from everytt .State and Federal court of record in this country that has passed onle this question affirm this principle, basic in the law, and I have foundre none to the contrary.

I am against the order in this case.

FEDERAL TRAUE CJOMM1SSI.ION DECISIONS34 Syllabus 47 F. T. C. :34