7. What are the Rules on the Use of Facsimile Checks?

The Act requires that any mailings which include a facsimile check must include a notice on the face of the check indicating that the check is not a negotiable instrument. This requirement is in addition to other notices required under other state laws.

8. What are the Penalties for Violating the New Law?

9. When Does the Act Take Effect?

FREQUENTLY ASKED QUESTIONS:

1. If the Sweepstakes or Contest Mailing Does not Contain Entry Materials, Does it Need to Comply with the Act?
   
   The disclosure requirements and the prohibited practices only apply to sweepstakes and contest mailings that also contain entry materials. However, all sweepstakes and contest mailings must contain the address or toll free number to which persons can write to be removed from the mailing list.
   
2. If I Include a Sweepstakes Insert in a Cooperative Mailing, Must I Comply with the Provisions of the Act if the Sweepstakes is Not Personalized or Does Not Request a Purchase?
   
   The exemption for sweepstakes advertisements that are not personalized or do not request a purchase only applies to advertisements appearing in newspapers, magazines or similar periodicals. Therefore, sweepstakes inserts presented in co-op mailings would be subject to the provisions of the Act. Of course, if the insert does not provide an opportunity to enter the sweepstakes, then it would not be subject to the disclosure requirements.
   
3. If I Have Multiple Entries or Game Pieces in a Mailing, Must the Disclosures that No Purchase is Necessary and that a Purchase Does Not Enhance an Entry's Chances of Winning Appear on Each Entry Form?
   
   The Act permits these disclosures to appear on the entry form or on the order form. If you have multiple game cards or entry pieces, but only a single order form, you can comply with the Act by simply placing the disclosures on the order form. If, however, you do not have an order form, or multiple entry forms also contain order forms, then these disclosures would have to be repeated on each of these forms.
   
4. What is the Standard for "Clear and Conspicuous" Disclosure?
   
   The Act defines "clear and conspicuous" consistently with the Federal Trade Commission definition. Specifically, the Act defines "clear and conspicuous" as "presented in a manner that is readily noticeable, readable and understandable to the group to whom the applicable matter is disseminated."
   
5. What Does "More Conspicuous" Mean? Does it Mean That it Has to be Larger or Bolder than the Other Disclosures?
   
   Not necessarily. In adopting the term "more conspicuous," the Congress certainly intended that the two disclosures subject to this standard be subject to a higher standard than the other disclosures. The Congress, however, very deliberately avoided imposing any specific type size or placement requirements. The report language accompanying the Act recognizes that "the more conspicuous" standard "may be accomplished in a variety of ways as befit the format and layout of different promotional mailings." The Report goes on to state, "In determining whether these two disclosures meet the "more conspicuously" standard, it is intended that consideration be given to the manner in which these disclosures are presented in relation to the other material appearing on the same page or document on which these disclosures appear. It is not the intent to require that these two disclosure necessarily appear in a larger typesize, bolder typeface or similarly more prominent graphic depiction than the other disclosures required, which may be appearing elsewhere in the solicitation materials. For example, these two disclosures appearing on the entry or order device may, by virtue of their very placement and location be deemed to be displayed more conspicuously than other disclosure appearing elsewhere in the solicitation. Note, however, that this is a key section of the law and advertisers are advised to consult with counsel on how to satisfy this requirement.
   
6. If There are Not Three Separate Components to a Mailing, e.g., Solicitation, Rules and Entry Form, How Many Times and Where Must the No Purchase Necessary and Purchase Does Not Enhance Chances of Winning Disclaimers Appear?
   
   The Report language accompanying the bill suggests that if there are not three separate components, that disclosures can be made on the entry or order form and in the rules.
   
7. Do I Still Need to Comply with State Laws
   
   The federal law does not preempt existing state laws. Therefore, promoters of skill contests and sweepstakes must still comply with the various state laws governing these types of programs.
   
8. Who is Responsible for Establishing and Maintaining the Name Removal System?
   
   The law places responsibility for complying with the Name Removal Requests on the "promoter " of the sweepstakes. The promoter, in turn, is defined as any person who originates and mails or causes to be mailed the sweepstakes or contest. The intent of the bill is to place this requirement on the entity who is primarily responsible for the operation of the sweepstakes or contest. The report accompanying the bill states that: "the person who merely prints or mails material for a skill contest or sweepstakes is not covered by this section unless that printer or mailer also originates or materially assists with operating the sweepstakes or contest. Only the originator of the sweepstakes or contest that is the subject of the mailing must comply rather than a middleman who simply prints or sends the mailing."
   
9. What Exactly Must a Promoter Do Within Sixty (60) Days With the Names of Those who Request to be Removed from the Mailing List?
   
   The sixty (60) days refers to the time period within which the promoter must remove the individual's name and address from mailing lists used for sweepstakes and skill contests. It is conceivable, therefore, that an individual will still receive a mailing after the sixty (60) day period has expired since the list used to select recipients of that mailing would have been released prior to the sixty (60) day period.
   
10. What If I Inadvertently Mail to Someone who has Requested to Be Removed from the List?
    
    It is an affirmative defense to an action brought for violation of the Act that the promoter has established and implemented with due care reasonable practices and procedures to prevent mailings to people who have submitted a name removal request. Therefore, promoters of direct mail sweepstakes and contests would be well advised to establish guidelines and procedures for the establishment and maintenance of this system to protect them in the event of an inadvertent error.

Linda Goldstein is partner-in-charge of Hall Dickler's Advertising, Marketing and Media Department. She received her law degree from New York University Law School. Linda represents clients in every sector of the advertising and marketing industry in advertising, intellectual property, and Internet matters and is a nationally-recognized expert.

New standards have emerged from the August settlement between 23 states and the District of Columbia (AG's) Attorneys General and Publishers Clearing House. And Time, Incorporated (48 state AG's and DC). The settlement includes a total of $26.1 million in restitution to consumers, and strict notification guidelines for future direct mail sweepstakes. Five points were agreed to in the settlement:

1. Marketers must discontinue contact with heavy users who think purchases enhance their chance to win.
2. Consumers must readily understand that no purchase is required to play.
3. It must be just as easy to enter without purchase as it is with a purchase.
4. Marketers should avoid "involvement devices" that appear to involve chance, but do not, such as game pieces. that earn a prize for matching symbols, when all game pieces have matching symbols.
5. A sweepstakes can not be an "everybody wins" event.

I recommend that all marketers use this settlement as their guidelines.

Publishers Clearing House will pay $18 million in restitution (which will be given primarily to 15,000 consumers who spent more than $2,500 each trying to win. Both companies will establish a "Do Not Contact" database and stop soliciting high activity customers. Specifically, CPG agreed to:

1. Send a "No Purchase Necessary" note to consumers spending $1,000 or more a year.
2. Survey those spending over $2,500 or more to make sure they understand that they do not need to buy to enter the sweepstakes.
3. Discontinue sweepstakes mailings to recipients who believe that their odds of winning are better by making purchases.
4. Will not use a document designed to simulate a check unless the face of the document clearly states that "This is not a check".

Time, Incorporated agreed to establish a "Sweepstakes Do Not Promote List" for high activity customers and stop sending new solicitations to customers who either have a current subscription lasting more than five years or have spent more than $500 to previous promotions. In addition, they will no longer state that the letter was sent by special courier or a special class of mail if they did not. Both PCH and Time agreed to include in all mailings a sweepstakes fact sheet similar to FDA nutrition labels that include the odds of winning, deadlines, prize values and quantity of prizes offered. They will not call a consumer a winner unless he actually won and when stating that they could be a winner, will state in equal-sized type, the conditions necessary to win.

Question: Do I need to provide an alternate method of entry for an online sweepstakes?

Online instant-win promotions carry the same dangers as offline versions: More winning entries could be produced than anticipated and the sponsor could be liable for redeeming prizes that far exceed its allocated budget. The best way to limit liability is to state in the rules that, if more prize claims are received than specified in the official rules, the sponsor will conduct a random drawing from among all eligible claims. Similar language has largely insulated traditional instant-win promotions from huge liability.

Research has shown that:

You must, however, keep learning about what your consumers are interested in and strive to keep your company on their mind. Successful online promotions include both consumers and sales channels. Once you have the initial contact with the consumer, you should develop database marketing and long-term loyalty programs. You can build your database by simply adding a command code to the online entry for so that entry information is collected. All promotional information is then sent directly to the database server. The web-based promotions can assist you to effectively develop your targeted permission-based marketing efforts.

You can do this by:

Instant win games are the fastest-growing segment of online promotions. They provide the instant gratification that consumers want on the Internet and there are several innovative possibilities with instant win games. When the program is completed (or at predetermined increments), you should have customized research reports along with a list of participating consumers. You may also want a market demographics analysis depending on the scope of your project and your individual needs.

Finally, online promotions mean real-time monitoring of those promotions and reporting of online entries that allow you to see the effects of the media that supported the promotion. You will be able to access the online entrant database and manage targeted, permission-based email campaigns with integrated marketing tools. The more that you think through what your reporting needs up front, the more likely you can program those needs into the online promotion. You will learn how to optimize your promotions by focusing on targeted prospects and acquiring customers that will lower your acquisition costs.

    SENATE APPROVES SWEEPSTAKES LEGISLATION

Legislation was approved by the Senate requiring sweepstakes sponsors to clearly explain that no purchase is required to enter. Federal law already prohibits sweepstakes sponsors from charging entrants a fee or giving a winning edge to people who make a purchase. The bill also imposes million dollar fines on sweepstakes companies that violate the loaned gives the U.S. Postal Service new authority to stop the mailing quickly.

American Family Enterprises which runs a sweepstakes promoted by Ed McMahon and Dick Clark filed for bankruptcy protection to settle dozens of lawsuits alleging deceptive advertising over its sweepstakes. American Family also announced that it had reached an agreement approved by the U.S. District court of New Jersey. The settlement covers all outstanding litigation against the company. AFP admits no wrongdoing but agrees to establish a $33 million fund to pay customers who can certify that they believed purchasing magazine subscriptions was necessary to become eligible for AFP prizes. The company has also agreed to pay legal, administrative, and notice costs associated with the settlement.

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Sweepstakes can provide the following benefits:

You should give prizes of value; one grand prize and a number of lesser prizes to increase the chance of winning. We strongly recommend that your legal department review and approve all elements of your sweepstakes and allow sixty to ninety days lead-time to execute a sweepstakes in order to meet state registration deadlines.

The following checklist maybe used to assist you in planning your sweepstakes promotion, but you should always have a complete legal review performed.

Sweepstakes Planning

Geographical Considerations

Age Requirements

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  CHECKLIST FOR PREPARING RULES FOR SWEEPSTAKES

     SWEEPSTAKES AND CONTESTS