You May Not Be a Winner

As early as this month, the U.S. Senate will consider a bill regulatingdirect-mail sweepstakes. The Deceptive Mail Prevention and Enforcement Act(S-335), sponsored by Sen. Susan Collins (R-ME), was passed unanimously bythe Governmental Affairs Committee. It would require marketers to discloseon mailings, in rules, and on order forms that no purchase is necessary,and that purchase doesn’t increase odds of winning. Mailings also muststate odds and the number and value of prizes. The bill prohibitsgovernment look-alikes, and gives the U.S. Postal Service authority toseize suspect mailings nationally, not just state-by-state.

Direct marketers’ biggest concern is a data management provision tackedonto the bill at the last minute. The Edwards Provision – named for Sen.John Edwards (D-NC) – would require development of a national database totrack consumers who opt out of direct-mail sweeps. All marketers would haveto check their mailing lists against this master list to avoid mailing toregistered consumers. Violators could be fined as much as $2 million. Theindustry would have one year to set up a national database with a toll-freenumber for consumers.

Trouble is, the bill offers no details on who would maintain such adatabase, or how.

“It’s assumed the private sector, probably an industry association, wouldset it up and run it,” says Kirk Walder, investigator for Sen. Collins’office. Such a database would “start from scratch,” he says, so consumerscould opt out of sweeps mailings but still get catalogs and ads. It mightbe similar to the Direct Marketing Association’s Mail Preference service,which lists consumers who want no direct mail. (Consumers can’t blockmailings by type or by marketer.)

Its experience may put DMA on the hot seat to set up the sweeps database,but the association is skittish about its liability. “We would have to besure all the issues are nailed down” before DMA would take on theresponsibility, says senior vp-government affairs Jerry Cerasale. He addsthat DMA is still talking with Sen. Edwards’ staff about the content andwording of the bill.

If the bill passes as is, all sweeps mailings would halt until a databaseis established.

“The consequences of not having that database in place would be fatal tothe direct-marketing industry,” says Linda Goldstein, partner with HallDickler Kent Friedman Wood, New York City. The database is “the one pieceof the bill that the [promotion] industry is very concerned about, anddoesn’t support.”

It’s also the only piece that wasn’t part of public hearings. Cerasale andGoldstein praise the Collins and Edwards staffs for working with theindustry to draft legislation that protects consumers without restrictinglegitimate promotions, but say industry reps did not have the sameopportunity to work with the Senators to craft the wording of the EdwardsProvision.

Solo mailers would be easier to block than sweepstakes on bill stuffers, ora sweeps entry accompanying a catalog purchase, for example. “Sweepstakesare used by a lot of marketers in different forms,” Cerasale says.”Cross-matching against a master list would be very difficult for some.”

Once the bill is passed, marketers will have only 90 days to comply withdisclosures and design restrictions – shorter lead-time than most marketersset for campaigns. The law could go into effect by first-quarter 2000.

Federal scrutiny was prompted in part by lawsuits filed by 30-plus statesagainst American Family Publishers for sweepstakes mailings that misledconsumers into thinking they had won $11 million. In May, Jersey City,NJ-based AFP agreed to pay $4 million and change its mailings.

Co-sponsors of the bill include Senators Thad Cochran (R-MS), Carl Levin(D-MI), and Dick Durbin (D-IL).

Once the bill passes, marketers will have 90 days to get mailings in shape.Here’s what marketers should do to get ready in the meantime, advises HallDickler partner Linda Goldstein:

Figure out how to fit the required disclosures into your mailings. A “nopurchase necessary” disclosure must go on the mailing, rules, and orderform. You’ll also have to disclose the odds of winning, number of prizes,and their value.

Study the national database requirement to see how that affects yourbusiness. Let your industry association – DMA, PMA, or both – know yourconcerns.

Call or write your senator or congressman. Senate staffers worked closelywith industry reps to word the bill, but that last-minute databaserequirement didn’t get much industry feedback. If it worries you, speak upnow, or you may forever hold your pieces.