DMers OK With Senate's Sweeps Bill
The bill, which the Senate on Monday passed by a vote of 93-0, would toughen the laws governing sweepstakes and end the deceptive practices used in some mass mailing campaigns. It was introduced earlier this year by Sen. Susan Collins (R-ME), chairwoman of the Senate Governmental Affairs Committee's permanent subcommittee on investigations, and Sen. Carl Levin, (D-MI), the senior Democrat on the panel.
The legislation would require sweepstakes companies to make it "clear and
conspicuous" -- under the FTC definition -- that:
* Winning is not automatic.
* Buying products doesn't increase the odds of winning.
* The odds of winning are very large.
It requires displaying various statements and warnings, including the specific odds of winning a prize and all the contest rules. Also, information must be displayed prominently and not be overshadowed by patently false or misleading claims, which are prohibitive. It also would grant the U.S. Postal Service new investigative and prosecutorial authority over the sweepstakes industry, including the ability to issue fines of up to $2 million to companies that don't comply with the regulations.
The issue now has to be examined by the House, which is why Rep. John McHugh (R-NY), chairman of the House subcommittee on the postal service, held last week's hearing. Witnesses included FTC commissioner Orson Swindle; chief postal inspector Ken Hunter; Lee M. Cassidy, executive director of the National Federation of Nonprofits; Linda Goldstein, chair emeritus of the Promotion Marketing Association; Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association; and Michael Pashby, executive vice president of consumer marketing at the Magazine Publishers of America.
At the hearing, Rep. Frank LoBiondo (R-NJ) and Rep. James Rogan (R-CA) presented their bills, H.R. 170 and H.R. 237, which are less comprehensive than S. 335 but contain provisions the marketing associations generally dismissed. For example, both bills mandate specific wording, type size and placement of disclosures on marketing mail pieces, which the organizations said could breach First Amendment rights and may take up an unreasonable proportion of space available for the promoter's communication. Industry officials also were concerned that the House bills provided the USPS with broad rulemaking authority.
While all marketing associations agreed that there must be a national standard implemented for sweepstakes mailings, they also had concerns with S. 335. For example, an amendment contains the word "prominent" in addition to the term "clear and conspicuous" for disclosures that no purchase is necessary to win.
"Adding the word 'prominently' introduces an unnecessary and potentially troublesome ambiguity into the bill," Pashby said.
Direct marketers are pleased, however, that a provision added earlier this year by Sen. John Edwards (D-NC) was eliminated. The provision would have required marketers to list a nationwide toll-free number and address in their sweepstakes that allows people to call or write to have their names taken off the mailing list, and companies would have 45 days to comply. Instead, the bill now requires a company-by-company approach: Each must have a mechanism that allows these people to be taken off their own lists. These rules follow the Telephone Consumer Protection Act.
"We never had a problem with the concept of setting up a system to get
people off the list," said Richard Barton, senior vice president of congressional relations at the DMA. "But a nationwide 800-number -- which would treat each company the same even though different companies have different list situations -- would be expensive to maintain and difficult to implement. It is so much better to follow the TCPA approach."
In addition, the marketing groups said they hoped the subcommittee will consider strong language in favor of federal pre-emption over individual state laws. Neither the Senate or the House bills pre-empt states from imposing their own laws in addition to the federal legislation. To date, 27 states have statutes regulating sweepstakes in some form. Some require sweepstakes promoters to indicate and/or include the odds of winning, the actual number of and values of prizes, a clear presentation of rules and a winners list.
"National advertisers can be destroyed by inconsistent regulations that require different formats for different states," Goldstein said. "Virtually every entity using direct mail sweepstakes does so in interstate commerce. Advertisers can live with reasonable regulation."
In general, all marketing groups said they would like the subcommittee to concentrate on the Senate's version. Legislators are expected to come to terms before this session of Congress ends in October.