Sweeping Reform

Posted on by Chief Marketer Staff

Legislators are moving ahead with sweepstakes restrictions. Speak now, or forever hold your sweeps.

How broadly – and how tightly – should legislators and attorneys general restrict sweepstakes?

That was the question left hanging after Indiana Attorney General Jeffrey Modisett’s keynote presentation and on-stage conversation with promotion lawyers and a sweeps administrator during September’s PROMO Expo in Chicago.

Modisett outlined how the National Association of Attorneys General (NAAG) has pursued fraudulent direct-mail sweeps that lead consumers to believe they’ve won large cash prizes. The maelstrom began when several AGs sued American Family Publishers in 1998. AFP settled with AGs in Indiana, Florida, South Carolina, and West Virginia in May, agreeing to restrictions on invoicing and a requirement to send separate notification to heavy buyers that no purchase is necessary to enter.

This summer, NAAG endorsed recommendations from its Consumer Protection subcommittee on sweeps and prize promotions, which is chaired by Modisett and Florida Attorney General Robert Butterworth. NAAG also supports the Deceptive Mail Prevention and Enforcement Act that passed in the U.S. Senate 93-0 on Aug. 2. That bill, sponsored by Sen. Susan Collins (R, ME), requires sweeps sponsors to include “clear and conspicuous” no-purchase-necessary messages. The bill doesn’t preempt state law.

But Modisett suggested legislation should go further. He expects a pending bill in the House of Representatives to include NAAG’s recommendations. (A House subcommittee approved the bill in late September; a full vote is expected this fall.)

Most legislative activity has attacked direct-mail sweeps, and the Promotion Marketing Association has been quick to distance itself from shady practitioners. But legislation could throw a long shadow over all sweepstakes, and that’s got promotion lawyers worried.

“Our problem representing a broad spectrum of sweepstakes is, How do you draw that bright line between `bad’ and `good’ sweepstakes?” asked Linda Goldstein, partner at Hall, Dickler, Friedman, Kent & Wood, New York City.

Modisett suggested marketers speak with their federal representatives and help draft appropriate legislation. “I like the idea of finding problem people and dealing with them, rather than dealing with the size and type of speech.”

Don Jagoda, president of sweeps administrator Don Jagoda Associates, warned that broad legislation will “destroy a whole industry [by] killing a fly with a sledgehammer.” Added Goldstein, “We need to educate [legislators] about the breadth of sweepstakes. Sweeps isn’t an industry, it’s a marketing tactic.”

Modisett replied that at least eight sweeps companies are under investigation, adding, “If you don’t like the phrase `sweeps industry,’ tell me what you want me to use and I’ll tell you if I’m willing to say it.”

At the end of the session, Phelps Group vp Joe Harnett reflected on how marketers have “stubbed our own toe” by linking sweepstakes with purchase. “People have a misguided understanding of the tactic. Sweepstakes should be a traffic and awareness builder. It was never intended to be tied to purchase. The industry should re-focus and find other tactics to drive sales.”

– Marketers to use a “Sweepstakes Facts” insert in every mailing to disclose odds of winning, contest details, and messages similar to the Food & Drug Adminstration’s Nutrition Facts on food labels. AGs suggest these statements: “You have not won. Enter for free. Enter as often as you like. Buying won’t help you win.” Violators could be fined up to $2 million.

– Marketers to adopt “a standard, simple, uniform means to enter the sweepstakes” whether consumers buy or not.

– Marketers to “take steps to identify vulnerable consumers and prevent inappropriate solicitation of such persons.”

– No multiple deadlines for a single sweeps.

– NAAG and other consumer protection groups to aggressively notify consumers they can lose money “playing sweepstakes.”>SBThe Senate Bill…>TX- Exemp ts sweeps that don’t target an individual by name and sweeps that don’t include order or payment forms.

– Requires marketers using direct-mail sweeps to prevent mailings to consumers who opt out by writing directly to the company or to an attorney general.

– Requires direct-mail sweeps to clearly include an address or toll-free number for consumers to opt out.

– Requires mailings to clearly name the marketer and its principal place of business or a contact address.

– Fines violators up to $2 million per mailing.

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