Plans to investigate the marketing practices of the direct mail sweepstakes industry were announced Wednesday in Washington as a federal judge in New Jersey was ordering the operators of four alleged phony sweepstakes programs to refund at least $1 million to their victims.
Sens. Susan M. Collins (R-ME), who chairs the Senate’s Permanent Subcommittee on Investigations, and Thad Cochran (R-MS) chairman of the International Security, Proliferation and Federal Services subcommittee, said in Washington their respective probes will focus on the need for new federal laws to regulate the language and appearance of sweepstakes mailers.
Last fall the sweepstakes industry, led by the Direct Marketing Association, successfully blunted legislative attempts, led by Sen. Ben Nighthorse Campbell (R-CO), that would have imposed tighter government controls upon it.
The bill died in committee after negotiations between Campbell and the DMA collapsed. The DMA sought to soften some of its provisions, including one that required sweepstakes mailers to print a notice in large type on the envelop stating that it contained a “game of chance” or a “sweepstakes” offering
The DMA also tried to get Campbell to clarify certain sections of his bill dealing with no purchase necessary messages; detailed explanations and definitions of sweepstakes rules, regulations and odds of winning; a complete, accurate description of all prizes and cash awards, and a prohibition against the use of promotional materials resembling a check or other negotiable instrument.
Existing federal law prohibits companies form requiring a purchase or charging a fee to enter a sweepstakes or from using mailers that look negotiable checks or promotional materials that look like official government documents.
Campbell, who expects to reintroduce the measure in the next several weeks, would not say if it would contain some or all of the modifications sought by the DMA.
Collins, noting the number of sweepstakes entries that have been flooding the nation’s mail boxes in recent weeks, said the use of “deceptive language, confusing rules and repeated mailings targeting vulnerable people” prompted the joint probes. “We intend to investigate these deceptive practices,” she vowed, adding that the two panels will “hold hearings and introduce legislation to better protect consumers.”
American Family Publishers, which has been sued numerous times by state and federal officials for alleged deceptive practices, and Publishers Clearing House, were identified by the staffs of the two subcommittees as the probes initial targets. At the same time they said the two panels plan to look into the activities of many of the lesser known sweepstakes companies, such as American Exchange Group, Family Publishers Clearing Center, and Best Marketing Inc., which are currently being sued for alleged fraudulent promotions by the Federal Trade Commission.
In recent years the FTC has successfully sued a number of lesser known sweepstakes promotion companies assorted truth-in-advertising and sweepstakes violations, often times obtaining at least partial refunds for consumers victimized by them.
BAJ Marketing Inc., Faction Services Ltd., BLC Service Inc., and Triple Eight International, all formerly of Barbados in the West Indies but based in British Columbia, Canada, sued federal authorities in New Jersey on behalf of the U.S. Postal Inspection Service, were ordered pay refunds totaling at least $1 million to more than 1,000 people they allegedly victimized in separate sweepstakes scams offering a variety of prizes, ranging from cash to jewelry and cars. The orders were signed by U.S. District Judge Alfred M. Wolin, who sits in Newark, NJ.
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