Sweeps Operators Beware: The Law is Watching

Past editions of this column have discussed the possibility of greater government scrutiny for the promotion marketing industry. While I could not pinpoint the exact form of regulatory activity (only a bona fide fortune teller could do that), my predictions have proven almost frighteningly accurate.

Legislators in great numbers are questioning the integrity and authenticity of advertising and marketing programs, seemingly construing promotions as tools to dupe an unwary, trusting public. Under this line of reasoning, sponsors are apparently motivated solely by the promise of profit.

In their haste, our lawmakers have apparently forgotten the somewhat more banal realities of the marketplace. Principally, the vast majority of sponsors are legitimate, reputable businesses, often with long-standing ties to their communities. Such businesses consider the promotion a time-honored method of creating good will among consumers, with the goal being not to make money today, but to build a solid customer base for tomorrow.

Of particular note, Florida and Montana have revisited their gambling/lottery prohibitions, consumer protection regulations, and related laws, with an eye toward expanding the class of illegal conduct. While an outright ban is unlikely, Florida, Montana, or another state may follow the recent example of California by establishing a set of rigorous, onerous requirements for conducting certain types of promotional programs.

More troubling still is the recent spate of proposed federal legislation. At last count, five separate bills have sought to closely regulate promotions offered via direct mail. For example, Senator Ben Nighthorse Campbell’s ominously titled Honesty in Sweepstakes Act of 1999 would compel direct-mail sweepstakes sponsors to prominently disclose certain information in a prescribed manner.

While not requiring usage of certain magic words per se, the proposed disclosure statement generally would advise that the mailing merely represents an opportunity for the recipient to participate in a sweepstakes, without purchase, at the indicated odds of winning. Stated more succinctly, the sponsor must expressly inform recipients, in no uncertain terms, that they have not won a prize. In the cases of noncompliance, the U.S. Postal Service would not deliver the mailing.

Staying out of trouble The question now becomes how to avoid the regulatory spotlight. For agency and sponsor alike, perhaps the best approach is to return to the basics. To start, the official rules for the promotion should be comprehensive, fully disclosing eligibility, entry procedures, odds of winning, and available prizes. Failure to address one of those topics creates a risk of exposure for the sponsor and/ or agency. The rules should be drafted clearly and concisely, so that consumers of ordinary intelligence can readily understand their rights and responsibilities.

But even the most well-drafted set of rules can’t be relied upon to save a promotion that is improperly designed or implemented.

Once the rules have been completed, all advertising for the promotion must be carefully reviewed, including point-of-purchase displays and posters, print advertisements, radio and TV spots, and Web sites. As the cliche goes, a chain is only as strong as its weakest link. That is, the inadequacy of any single advertising piece could theoretically jeopardize the legitimacy of the entire promotion.

Advertising copy must accurately describe the promotion as outlined in the official rules. Each advertising piece must contain the requisite legal disclosures – most crucially for chance promotions a statement that no purchase is necessary. While often intended merely as a means of attracting consumer attention, language and graphics theoretically function as representations by the sponsor about the promotion. Any ambiguity or inconsistency may create consumer confusion, which could lead to complaints and a regulatory challenge.

Sponsors and agencies must be mindful that the language and graphics included in the advertising serve as affirmative and binding representations. If the advertising depicts a new Porsche sports car as a prize, a Porsche better be available. Another kind of car simply is not acceptable, regardless of how the official rules may be worded.

In the current regulatory climate, sponsors and agencies must exercise great caution. While not immunizing the sponsor or agency from the inherent risks completely, these precautions will minimize the risk of adverse legal consequences. Now more than ever, reliance on so-called shortcuts and quick-fixes is foolish.