State, Fed Postal Legalities Facing Marketers

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While the new postal legislation, the Deceptive Mail Prevention and Enforcement Act, will affect all advertisers and marketers that accept orders through the mail, the legislation may have its greatest impact on those who utilize sweepstakes and contests in their marketing efforts.


The act was enacted in the face of a perceived public outcry against purported misleading and deceptive sweepstakes, and other types of direct mail promotions. Not surprisingly, the law has specific requirements relating to sweepstakes, skill contests, facsimile checks, "government look-a-like" promotions and for goods or services that can otherwise be obtained from the government without cost. Notwithstanding these specific regulations, marketers are still subject to additional state regulatory scrutiny, which may assert positions seemingly at odds with federal requirements.


Sweepstakes. The act has specific mandatory disclosure requirements for sweepstakes promotions. The statements: "No Purchase is Necessary" and "A purchase will not improve one's chances of winning" must be disclosed clearly and conspicuously three times. They have to be displayed in the Rules, on the entry or order form, and in the mailing's text. Moreover, there must be a clear and conspicuous disclosure in the rules or elsewhere as to an address or toll-free number to contract if the recipient wishes to be removed from the mailing list and not receive similar future offers.


The terms "Clearly" and "Conspicuously" have generally been interpreted to mean that the words must stand out from the surrounding text by using bold-face type, larger type, etc. Further, the sponsor's name and its principal place of business, or a contact address, must be disclosed.


All of the sweepstakes' promotions terms and conditions, including the rules and entry procedures must be clear. In addition, the rules must contain an entrant's odds of winning each prize; the quantity; estimated retail value and nature of each prize; and any schedule of payments of the prize, if it's to be made over time. However, the rules cannot contain a purchase requirement, implying that a consumer who does not buy will be disqualified from receiving future sweepstakes mailings. You cannot falsely state: "You have won" unless it's true or offer any other contradictory information from other information in the mailing.


Skill Contests. While skill contests generally escaped the Senate's promotional marketing investigation, the act nonetheless has significant disclosure requirements for contest promotions. The act requires all rules and entry procedures to be clearly and conspicuously disclosed (i.e., must be in language that is easy to read, find and understand). The sponsor's name and its principal place of business, or a contact address must be disclosed.


In addition, the rules must clearly and conspicuously disclose the number of rounds or levels, the cost to enter each one, any increasing difficulty of advanced rounds; the maximum cost to enter; an estimate as to the number of entrants who will successfully solve the game; and how many entrants have solved the last three games run by the sponsor. It also must provide the judges' identity, qualifications and their method of judging; the date winners will be determined; and prizes awarded, including the quantity, estimated retail value and nature of each prize; and any schedule of payments of the prize, if made over time.


Additional Disclosures/Prohibitions. Marketers who include a facsimile check (a proposed check to be paid to the winner), must contain a clear and conspicuous disclosure that it is "not a negotiable instrument" and that it "does not have any cash value." (Some states also require that "Not A Check" be written across the face of the sample check.)


The act prohibits the use of any seal, symbol, insignia, term, federal statute or reference to any federal agency, commission or the Postmaster General, that could be reasonably interpreted to imply a connection or endorsement by the federal government. Or, include a symbol that misrepresents the identity of the mailer or the status of the mailing. Any solicitation for payment for a product or service that is provided by the federal government at no cost, must contain a clear and conspicuous disclosure of these facts.


State Laws Are Not Preempted. Despite strenuous lobbying by the industry for uniform rules, the law does not supersede any state laws. Accordingly, mailers must observe the federal laws as well as the laws of all states to which the mail is sent. The problem with this particular regulatory was illustrated this week when 15 State Attorney General's (including those from California and New York), filed suit against Publishers Clearing House - challenging its use of certain common sweepstakes techniques.


The techniques at issue include using "Everybody Wins" promotions, printing "Express Class," "Rush Priority" and "Urgent" on the outside of the sweepstakes mailing, and unfairly using government look-a-like or official forms. These states' actions against PCH demonstrate that regulators continue to move the "line" as to what is impermissible conduct. It also indicates that marketers who use sweepstakes or skill contests must carefully review their marketing materials - to ensure compliance not just with the new postal law, but with the individual laws of participating states.
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