Don’t Mess with Texas

Promotion law experts are worried about a bill pending in Texas. They say H.B. 2530 could make on-pack sweepstakes illegal, because it prohibits sweeps entry forms that have any connection to buying or ordering a product. That means an on-pack entry form could be considered a violation.

“The tenor of the bill is that it’s inherently deceptive to combine entry forms with order forms. That sets a terrible precedent,” says Linda Goldstein, partner with Hall, Dickler, New York City.

But that’s not Texas’s intent. The bill, which went before the Senate May 8 after passing the House April 25, was “tailored to go after Publishers Clearing House and American Family Publishers,” says Zindia Thomas, legislative aide to Rep. Robert Junell (D-San Angelo), who introduced the bill in March. “It’s very personal for Rep. Junell, because his father got mailings from Publishers Clearing House and thought he had won $2 million. It took two lawyers to convince him he didn’t.” Junell found several magazine subscriptions bought to improve the odds of winning after his father’s death in 2000. When a PCH mailing came in 2001, he approached attorney general John Cornyn to draft the bill.

If passed, the law would become effective Sept. 1 and let the state fine $5,000 to $50,000 per violation. Its Senate sponsor is Rodney Ellis (D-Houston).

“They’re taking their experience with one marketer and drafting a bill so onerous that it would impact thousands of kinds of promotions they never considered,” Goldstein says.

The bill’s requirement that marketers separate order forms from sweeps entries is designed to block PCH from automatically entering purchasers in its sweeps, Thomas says. But it won’t make on-pack sweeps illegal because “our bill is about direct-mail sweepstakes, and [on-pack sweeps] have a way to enter without purchase,” she explains.

“It’s very poorly written. The wording is very ambiguous and over-broad,” Goldstein warns.

The Promotion Marketing Association contacted members in April with four concerns. First, the disclosure requirements and marketing restrictions “are so onerous that they will amount to a de facto ban on direct-mail sweepstakes in Texas,” PMA says. Second, it could apply to any sweeps that integrates direct mail as one element. Third, the bill prohibits a direct-mail sweeps in the same calendar year as other incentive offers. And lastly, the language “sets a bad precedent for potential legislation in other states which could be more broadly applied. There is always the danger of a spillover beyond direct mail,” PMA states.

If the bill passes — which seemed likely at press time — PMA and the Direct Marketing Association likely will lobby the governor to veto it. Failing that, the associations may challenge its constitutionality.

Only Colorado has passed stricter legislation since the federal Deceptive Mail Prevention and Enforcement Act went into effect in December 1999. Its law prohibits consideration for skill games.

PCH settled with 23 states and the District of Columbia in February 2000, but Texas’s suit, filed in October 1999, is still pending.