Congress Plans Sweepstakes Inquiries

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If 1998 was thought of as a bad year for sweepstakes marketers, just wait till this year is over. Both the Senate and House are about to hold hearings on the issue.

Senators Susan M. Collins (R-ME) and Thad Cochran (R-MS) late last month announced a Senate inquiry that will focus on whether there is a need for new federal laws to regulate the language and appearance of mailers that are designed to persuade consumers to buy goods promoted by sweepstakes and similar contests.

"Some major sweepstakes firms use deceptive language, confusing rules and repeated mailings targeting vulnerable people," said Collins, who heads the Senate's Permanent subcommittee on Investigations. "We intend to investigate these deceptive practices, hold hearings and introduce legislation to better protect consumers."

The senators launched the investigation because of complaints from individuals across the country. Cochran, who is chairman of the International Security, Proliferation and Federal Services subcommittee, also was told about the many tactics sweepstakes marketers use to get consumers to purchase merchandise during a hearing he conducted last fall.

"One company has developed a list of 125,000 customers who each made frequent purchases -- often $1,000 or more in a year -- in response to sweepstakes mailings," Collins said.

American Family Publishers, Jersey City, NJ, which has been sued by state and federal officials for alleged deceptive practices, and Publishers Clearing House, Port Washington, NY, were identified as the investigation's initial targets. But, a spokesman said, the two panels will also look into the activities of lesser known companies.

Collins' subcommittee also discussed its investigation with Indiana Attorney General Jeff Modisitt, who heads the National Association of Attorneys General committee on sweepstakes, which will have a hearing in Indianapolis on Feb. 24.

The sweepstakes industry saw a great deal of legislative activity in 1998, including:

* Sen. Carl Levin (D-MI), the ranking minority member on the Senate's Permanent subcommittee on Investigations, introduced the Deceptive Mailing Elimination Act of 1998. Among its provisions is to eliminate deceptive practices by restricting the use of language and symbols on sweepstakes games.

* Sen. Ben Nighthorse Campbell (R-CO) introduced a bill that would have imposed tighter government controls on the sweepstakes industry, but the bill died in committee.

Levin "will be picking up where he left off and will hold bipartisan hearings as a prelude to a possible introduction of legislation again," said spokesman John Brennan. Campbell also is expected to reintroduce his measure in the next few weeks.

U.S. Rep. John McHugh (R-NY), who is chairman of the subcommittee on the postal service, also plans to pursue the sweepstakes issue this year. Spokeswoman Dana Johnson said McHugh wants to talk about H.R. 4340, presented by Rep. Frank LoBiando [R-NJ], which is the companion bill to Campbell's Honesty in Sweepstakes Act of 1998.

"There is going to be a lot of interest in [sweepstakes], particularly [Collins'] subcommittee," said Richard Barton, senior vice president of congressional affairs at the Direct Marketing Association. "We anticipate a lot of action in both the Senate and the House. We don't know where it's going right now, but we will be working on it."

Meanwhile, four sweepstakes operators recently agreed to cease their activities and pay $1 million to reimburse more than 1,000 consumers. The firms -- BAJ Marketing Inc., Faction Services Ltd., BLC Service Inc. and Triple Eight International -- are all formerly of Barbados but based in British Columbia and allegedly victimized elderly consumers in separate sweepstakes scams.

Faith Hochberg, U.S. Attorney from the District of New Jersey, announced the consent judgment, which enjoined the four companies and four of their owners and directors from conducting fraudulent direct mail campaigns toward elderly consumers. Tony Esposito, a spokesman for the Postal Inspection Service, said he received more than 1,000 complaints about the scheme.

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