As marketers wrap up their activities for the year and hopefully look forward to a prosperous holiday season, they should keep in mind some important legal developments that could affect their businesses.
Recent legislation restricts the use of several popular marketing methods. In addition, new litigation and enforcement activities continue to threaten marketers’ business activities.
Privacy, privacy, privacy. Marketers face a variety of challenges regarding their Web site privacy policies. The Federal Trade Commission has made it clear that it intends to challenge vigorously marketers seeking to use data collected on a Web site in a manner inconsistent with the site’s privacy policy. Recently, the FTC enjoined the sale of Toysmart.com’s customer database in bankruptcy court, as the company previously had represented that it would not disclose its customer information to third parties.
Moreover, the plaintiffs’ bar recently has been filing class actions against site owners for failing to disclose how customer data are used and whether cookies are placed on users’ hard drives. The lesson: Keep privacy issues in mind in your business practices and make sure your privacy policy fully discloses how you use the data collected. Most importantly, act in accordance with your policy.
Sweepstakes mailers should heed literal application of the Deceptive Mail Prevention and Enforcement Act. Notwithstanding the passage of the legislation, which took effect in April, staff members at the U.S. Senate permanent subcommittee on investigations – the subcommittee that took the industry to task in its investigation of the sweepstakes industry – have continued to monitor mail and forward what it perceives to be violative pieces to the U.S. Postal Inspection Service.
The key staff member on the committee has made it clear that the committee is looking closely to ensure compliance with “no purchase necessary” and “a purchase will not increase your chances of winning” disclosure requirements. Under the law, these disclosures must appear in three locations: in the text, on the order form and in the official rules. In addition, the disclosures must be made in a more conspicuous manner than the surrounding text, i.e., the words must appear in boldface or be highlighted, italicized, underlined, put in a text box or in some other form so the disclosures stand out from the surrounding text.
California “simulated checks”: Just say no. While the Deceptive Mail Prevention and Enforcement Act requires marketers using simulated or facsimile checks in their mailings to prominently disclose that the item is “not a negotiable instrument” and “does not have any cash value,” California has essentially banned the use of such checks outright. The California law, which takes effect Jan. 1, is intended to ban the use of “simulated checks” for mailings into the state. Though there appears to be a narrow exemption, nearly all marketers will be prohibited from using this popular marketing tool for mailings to this important state.
California: Citizens can initiate consumer protection cases. Many marketers are learning the hard way about who can bring cases to enforce California consumer protection laws. The California Business and Professions Code (i.e., the state’s consumer protection laws) provides that anyone can bring an action on behalf of all California residents alleging a violation of these laws, some of which are hypertechnical. The laws do not require initiation by either the state attorney general or some other governmental authority, and the plaintiff need not even purchase a product in order to file suit. Rather, anyone can bring a representative action (basically a class action) on behalf of California consumers to assert a violation of a particular consumer protection law. The lesson: Be sure your materials comply with all aspects of the complex California consumer protection statutes.
Rocky Mountain high: Sweepstakes marketers should look closely at new Colorado law. Colorado recently enacted sweepstakes legislation that has the effect of prohibiting sweepstakes mailings because compliance with the statute is nearly impossible. Any sweepstakes marketer that intends to continue mailing into the state must examine the law closely to be sure of compliance with the disclosure requirements. For example, the law requires the inclusion of the statement “you have not yet won” in direct mail sweepstakes promotions.
The law also requires disclosure of the retail value of the prize and the odds of winning immediately adjacent to the description of the prize. There are several other important restrictions that must be examined.
• Andrew B. Lustigman is a partner at The Lustigman Firm, New York.
