Fallout From PCH Sweeps SettlementSweepstakes marketers are once again the target of regulatory activities. Publishers Clearing House's recent multistate settlement provides great insight into the states' current positions on sweepstakes marketing and may result in raising the bar for all marketers. In addition, recent rumblings by the U.S. Senate may force the U.S. Postal Service into increased enforcement activity.
As reported in the Aug. 28 issue of DM News, PCH recently settled lawsuits filed by 24 states and the District of Columbia. It still faces suits by other states. As part of the multistate settlement, PCH agreed to pay $18.4 million in fines and restitution and to make changes in its marketing practices. The settlements include detailed restrictions on using common sweepstakes marketing tools. They also go well beyond the requirements of the recently enacted Deceptive Mail Prevention and Enforcement Act.
Some of the more interesting aspects of the settlements are worth highlighting:
• You have won! PCH is barred from representing that a person has won a prize unless the person has won, and the prize and its value are clearly and conspicuously disclosed in the representation.
• You may have won! PCH is barred from representing that a person may be a winner unless it is clearly disclosed that the recipient has not yet won, that the winner will not be known until some time in the future and that the conditions necessary to become a winner have not yet happened (or are not yet known to have happened). Moreover, the conditions for the recipient to be determined the winner must be clearly disclosed, presented in a manner in which they are not physically separated from the representation and are presented in 100 percent of the type size and in the same font, color and style as the remainder of the representation. PCH cannot use the present or past tense in referring to the recipient as a winner.
• Congratulations, you've won this spectacular widget! Where substantially the same items are being offered to substantially all recipients, PCH is prohibited from describing the items as prizes or awards. Nor may it state that the items are distributed by chance, use the term "sweepstakes" (or the like) to describe the distribution process of these items or use the terms "luck," "lucky," "congratulations" or other such terms of good fortune to notify the recipient of his opportunity. These items may be described as gifts, premiums or bonuses, and the process by which a person can obtain the item must be clearly described.
• Tell us where you'll be when we announce the winner! PCH is barred from requesting information for use in the event a person has won, such as the person's anticipated whereabouts at the time the prize is to be awarded, requesting the person's preferences for events relating to the prize or requesting the execution of a press release, publicity document or confidentiality agreement (other than an acknowledgment of that type in the official rules). PCH can request a recipient's prize preference (such as color) only if PCH maintains that information and asks for such information from all recipients.
• Personalized, simulated prize checks or other payment documents (such as a deposit slip) cannot be used unless PCH clearly states on the face of the item that the item is simulated and that the recipient has not yet won the sweepstakes.
• Ms. Jones from our staff was so excited when she found out your status! PCH is barred from using fictitious claims regarding feelings that PCH employees have toward the recipient (other than good will), or describing fictitious conversations or meetings that have taken place (or will take place in the future) regarding the recipient.
PCH also is required to include clear and conspicuous disclosure that a purchase will not increase an entrant's chance of winning. To enter via the nonpurchase entry method, PCH cannot require more onerous requirements than those prescribed to people who enter by ordering, such as increased writing requirements.
PCH also must include a "sweepstakes facts" insert in all its mailings stating a person's odds of winning each prize. It must include a clear statement that a person's odds will not increase by making a purchase and that people can enter as often as they like. The orders specify the type size, font and location of the message. The consent orders include additional restrictions, including those relating to the sale of magazines, instant win pieces and mailings to high-purchase customers.
The Deceptive Mail Prevention and Enforcement Act became effective this past spring. This legislation, which provides the USPS with enhanced enforcement powers in terms of subpoena power and the ability to assess civil penalties in its own postal court, was enacted based on claims that existing laws were insufficient for the USPS to stop deceptive mail promotions. Yet the USPS' utilization of this supposedly necessary legislation has been virtually nonexistent.
We are unaware of any actions brought by the postal service under this legislation, other than the issuance of a few investigatory subpoenas. Apparently noticing this inactivity, certain members of the Senate have recently questioned the postal service on its enforcement activity. Moreover, the Senate Permanent Subcommittee on Investigations, the committee that took the sweepstakes industry to task in summer 1999, has recently resumed its scrutiny of sweepstakes mailings. These actions could result in even more scrutiny of the direct marketing industry.