Senate Poised to Attack Common Sweeps MethodsIn recent hearings held by the Senate permanent subcommittee on investigations concerning the direct mail industry, senators attacked certain sweepstakes marketing offers as misleading and deceptive. According to some senators, the practice of sending multiple solicitations of the same sweepstakes in different graphic presentations should be banned.
While the subcommittee's comments may have been provoked by a particular genre of aggressive solicitations, its views and the legislation proposed by subcommittee members may greatly implicate the practices of nearly all sweepstakes marketers.
A recent hearing held July 20 followed up on the March hearings relating to the marketing practices of the Publishers Clearing House, American Family Publishers, Reader's Digest and Time Inc. In this round, the subcommittee focused its attack on smaller marketers who are not household names. The senators discussed financial losses allegedly extracted from consumers who order products through such sweepstakes along with the emotional toll suffered by consumers who enter but do not win a sweepstakes. Subcommittee members espoused that strong legislation was needed to combat marketing efforts causing consumers to purchase unwanted goods such as magazines, trinkets, or coupon and discount voucher books.
* S. 335: The Proposed Deceptive Mail Prevention and Enforcement Act. As has been widely reported in the press, members of Congress have been working hard to pass comprehensive legislation relating to deceptive mailings. The leading legislation in this arena is S. 335, the proposed Deceptive Mail Prevention and Enforcement Act introduced by subcommittee chair Sen. Susan Collins (R-ME). While all marketers support legislation and enforcement efforts that stop fraudulent and deceptive mail practices, the specific provisions of the proposed legislation and interpretations as to what constitutes deceptive practices and who is given what amount of enforcement power, needs to be closely monitored.
The actual provisions of any enacted legislation are still unknown. Neither the Senate nor the House has yet to pass the Bill. However, there are some noteworthy provisions in the proposed legislation. Portions of S. 335 would mandate certain specific disclosures for sweepstakes and skill contests. For example, sweepstakes mailings would not only have to include the present "no purchase necessary" language, but also prominently disclose "that a purchase will not increase the chances of winning" in three specific locations: the rules, the text, and on the order or entry form. The legislation would prohibit government look-a like and other allegedly deceptive forms of mailings as well. Obviously, a careful review of any enacted legislation will be imperative for all direct mail marketers.
The proposed legislation also would empower the U.S. Postal Service with extraordinary discretion to refuse to mail the offer. For example, the USPS would have the power to declare an item unmailable if it "relates to a sweepstakes" and "suggests" that making a purchase will increase the odds of winning or will result in some form of special treatment. Granting regulatory bodies enforcement powers using vague language such as "indicates" and "suggests" may spell trouble ahead. The proposed legislation also would grant the USPS broad subpoena power and the power to obtain significant financial penalties -- up to $2 million based on the mail volume of challenged pieces.
* Multiple solicitations using the same underlying sweepstakes. In heated questioning by the subcommittee July 20, ranking minority leader Sen. Carl Levin (D-MI) and other senators took strong issue with the use different promotions incorporating the same underlying sweepstakes. The senator declared that mailing an individual more than one solicitation for the same sweepstakes that states "If you have and return the winning number, you will win $" should be illegal. The senator was not impressed by the point that the contest's rules included a disclaimer that the sweepstakes may be presented with different graphic presentations nor was he impressed with the fact that any representation as to the odds of winning were literally true.
Many marketers use a sweepstakes that include different marketing presentations for the same underlying contest. For example, a consumer may receive multiple offers for magazines or products in connection with one long running sweepstakes. Other companies may "piggy back" on a sweepstakes run by another company, by paying to use an existing contest's rules, entry methods and prize award. Marketers have always assumed that as long as the sweepstakes' rules remain unchanged (such as odds of winning, timing of the contest and prize award) and the notification that the sweepstakes may be presented in other graphic forms or contexts, multiple mailings for one sweepstakes is a legitimate form of marketing. The senators' comments place this position in some doubt.
Where does all of this attention leave marketers who use sweepstakes in conjunction with their marketing efforts? Stay tuned for details as the saga continues.
Andrew B. Lustigman is a partner in The Lustigman Firm, New York, a law firm specializing in direct marketing law.