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SWEEPSTAKES DO'S and DON'TS FOR MARKETERS
A "Plain Language" Guide to the Deceptive Mail Prevention and Enforcement Act of 1999

The Deceptive Mail Prevention and Enforcement Act took effect on April 12, 2000. It covers "sweepstakes mailings, skill contests, facsimile checks, and mailings made to resemble government documents." The so-called "Sweepstakes Law" gives considerable authority to the US Postal Service, granting it subpoena power, nationwide "stop mail" authority, and the ability to impose severe civil penalties. The law is very specific about what a marketer can and cannot do, so it should be understood fully by anyone wishing to use these promotional methods. Just wanting to do the right thing may not be enough to meet the standards.

The "background and summary" of the law states that "most sweepstakes are legitimate and appropriate marketing devices" In fact, legitimate marketers have used sweepstakes to advertise their products for more than 30 years. Sweepstakes have become such an ingrained part of American culture that polls show that more than half of the adult American population enters sweepstakes every year. In addition, four out of five people who enter such contests do so without making a purchase.

Do's and Don'ts of the Law.

The law is largely a series of amendments to an old law (Chapter 30 of Title 39 of the United States Code) to make it more specific in preventing deceptive practices in sweepstakes and skill contest mailings. The law does not replace the old law; it simply adds to or modifies it. As a practical matter, a marketer should consult the law before undertaking a sweepstakes mailing, as well as consulting with legal counsel familiar with state restrictions. It should be noted that the law applies to sweepstakes sent through the US mail - not to sweepstakes conducted via the Internet or telephone.

Taking the law section-by-section, this DMA guide is intended to assist industry members in their compliance efforts when using this marketing tool.

Section 1: Short title.

The name of the law is "Deceptive Mail Prevention and Enforcement Act."

Section 2: Restrictions on mailings using misleading references to the United States Government.

The aim of this section is to outlaw promotions that a reasonable person might think come from or are endorsed by a government agency.

  • Mailings should not refer to the Postmaster General, Postmaster, a federal agency, department, commission, or federal program in a manner that gives the impression that the mailing or offer is endorsed or sent by the federal government. Mailings that do use such references must meet specific standards defined in section 3001(1), (2), or (3). For example, the mailing cannot state or imply that the product offered is approved by any agency of the federal government.
  • Mailings should not use federal government seals to give the impression that they are endorsed or sent by the government.
  • Fundraising mailings should not pretend to come from the government or falsely state or imply that someone's government benefits will be reduced unless a product or service is purchased.
    • A mailing that attempts to sell a product or service the federal government offers free, must clearly disclose that fact. If, however, the seller adds value---tax advice provided with an otherwise free tax form, for example--no disclosure is necessary. Nor is a disclosure necessary if the government only offers the product or service free to some persons, but not all

Section 3: Restrictions on sweepstakes and deceptive mailings.

This section defines some of the restrictions on sweepstakes, skill contests, and facsimile checks.

  • Required disclosures must be "clearly and conspicuously displayed;" that is, "readily noticeable, readable and understandable" by an "average" member of the target audience.
  • A "facsimile check" is defined as one that is not negotiable, yet is made to look like something that is. A facsimile check must disclose on the check that it is not negotiable and has no cash value.
  • A "skill contest" is a puzzle, game, competition, or other contest in which:
    • A prize is awarded or offered;
    • The outcome depends on the contestant's skill, and
    • A purchase, payment or donation is, or seems to be, required, to enter the contest.

Skill contests are different from sweepstakes, where the winner is chosen by chance.

  • The law requires the Postal Service not to deliver and to dispose of mailings found to be deceptive.

More on Sweepstakes:

  • A "sweepstakes" is a game of chance one plays voluntarily and for which one is not required to pay anything to enter in order to win a prize.
  • Sweepstakes mailings must disclose:
    1. That a purchase is not necessary to enter, and will not improve the chances of winning. These disclosures must appear in the mailing, in the rules and on the entry f
    2. orm and be very easy to find, read and understand;
    3. A name and business address where the sponsor can be contacted;
    4. The estimated odds of winning each prize. If the odds depend upon the number of entries, the stated odds should be based on an estimate of the number of entries;
    5. The quantity, estimated retail value and nature of every prize; and
    6. A clear statement of the payment schedule of any prize. For example, if a $1 million prize is to be awarded in equal payments over 20 years, the disclosure should indicate that the $1 million shall be paid in equal amounts of $50,000 per year for 20 years starting in 2000.
  • Mailings are prohibited that:
    1. Say or suggest that if a person doesn't buy a product or service he or she may not receive future sweepstakes mailings;
    2. Require that an entry be accompanied by an order or payment for something previously ordered;
    3. Say that an individual has won a prize when, in fact, that individual hasn't won. (Sponsors of sweepstakes should not confuse premiums, which are given to all entrants, with prizes, which are won by only some entrants. Premiums should not be held out as prizes.); and
    4. Say anything to contradict or limit the rules of the sweepstakes or disclosures required by this law.

    More on skill contests:

    • Mailings for skill contests or promotions must:
      1. State all terms and conditions, including rules and entry procedures in language that is easy to find, read and understand and;
      2. Provide a name and the business address where the sponsor can be contacted.
    • Skill contest mailings must disclose:
      1. The number of rounds or levels of the contest and the cost to enter each level;
      2. Whether subsequent rounds will be more difficult to solve;
      3. The maximum cost to enter all rounds;
      4. The estimated number or percentage of entrants who may win, or have won the sponsor's last three contests;
      5. Qualifications of the judges if the contest is not judged by the sponsor;
      6. The method used in judging and;
      7. The date prizes will be awarded, how many, the nature and estimated value of each prize, and the payment schedule.
    • Ads for sweepstakes, skill contests, and facsimile checks that appear in magazines, newspapers and other periodicals can be mailed as long as the advertisements are not personalized and do not offer a way to make a payment or order a product or service.
    • The law gives consumers the right to stop receiving sweepstakes mailings and spells out the process:
      • Marketers must give consumers a reasonable way to request removal from sweepstakes mailing lists. The request must be in writing and come from the individual personally, or from the conservator, guardian, or person with a power of attorney. It can also be forwarded by an attorney general; and
      • Marketers must maintain a record of all "stop mail" requests and be able to suppress these names at the applicable addresses for five years from receipt of request.

    [Note: There is a more stringent requirement for name removal, effective as of December 12, 2000. See the discussion in Section 8.]

    Section 4: Postal Service orders to prohibit deceptive mailings.

    This section discusses the authority of the Postmaster to prohibit delivery and receipt of mail found in violation of the law.

    • Under previously existing law, the Postmaster already had the authority to:
      1. Intercept sweepstakes and skill contest entries mailed back to a company in violation of the law, and to return them to the senders;
      2. Refuse to redeem a money order made out to that company;
      3. Refund the money order to the person who bought it; and
      4. Stop the violator from further deceptive practices.

    Section 5: Temporary restraining order.

    This section explains how a district court, upon a proper showing, may stop a mailing from being sent or received.

    • A proper showing requires proof that the case against the violator will probably be won on the merits. In the law, "proof" means "probable cause." In addition, showing "irreparable harm" is not needed to stop a mailing.
    • If the mailing is sent from or received in more than one judicial district, a restraining order applies in all relevant districts. If the order is reviewed, it will occur where it was issued. The Postmaster no longer needs to apply in each district separately to detain mail.
    • The defendant can examine detained mail, and the Postmaster shall see to it that all the defendant's other mail is delivered or received promptly as addressed.
    • No finding of intent to deceive or to conduct a lottery is required to support a restraining order.

    Section 6: Civil penalties and costs.

    This section permits civil penalties for violations before a stop order is issued and larger penalties for violating a stop order after it is issued. It also penalizes failure to prevent unwanted mailings.

    • The penalty for a violation before a stop order is issued is based on the number of pieces mailed:

      Quantity Penalty

      Less than 50,000 mail pieces: $25,000 penalty

      50,000 to 100,000 mail pieces: $50,000 penalty

      Each 10,000 above 100,000 mail pieces: $5,000 penalty

      Maximum penalty: $1,000,000

    • The penalty for evading a stop order is raised from $10,000 per day to a sliding scale based on the number of pieces mailed:

      Quantity Penalty

      Less than 50,000 mail pieces: $50,000 penalty

      50,000 to 100,000 mail pieces: $100,000 penalty

      Each 10,000 above 100,000 mail pieces: $10,000 penalty

      Maximum penalty: $2,000,000

    • Failure to set up a reasonable system to prevent unwanted mailings can result in a fine of $10,000 for each improper mailing.

    Section 7: Administrative subpoenas.

    This section allows the Postal Service to issue subpoenas and defines how that authority should be exercised.

    • Under the law, the Postal Service:
      1. May demand relevant or material records, including records, papers, documents, and other tangible things as evidence in the investigation of deceptive mail schemes; and
      2. Must develop subpoena procedures that include opening an investigation before a subpoena is issued and submitting the subpoena to headquarters-level review. The Postmaster General may only delegate the right to approve a subpoena to the Deputy Counsel or a Deputy General Counsel who are expected to be timely and efficient in handling it.
        • Judicial Officers may also issue subpoenas, and in fact have final subpoena authority in a Postal Service hearing. The purpose is to avoid conflicts of interest and assure a fair hearing.
        • The Postmaster General must turn to the federal district court to enforce its subpoena.
        • The Postal Service report on subpoena usage semiannually.

    Section 8: Requirements of promoters of skill contests or sweepstakes mailings.

    This section spells out additional rules for sweepstakes and skill contests including "stop-mail" requests.

    • Compliance with the law is the responsibility of the promoter; that is, the one who originates the sweepstakes and/or game of skill mailings.
    • Sweepstakes or skill contests in magazines, newspapers or other periodicals are exempted when they do not seek a purchase or an order on a personalized basis.
    • A request to be removed from a mailing list means the individual no longer wants to receive sweepstakes or skill contest mailings. No specific language is required, and the request can be made by a "duly authorized person;" that is, one who makes the request for someone else.
    • "Non-mailable material" includes any matter that is a skill contest or sweepstakes addressed to someone who requested removal from the mailing list; and/or does not contain the disclosures required in the law. As noted above, non-personalized matter included in a magazine, newspaper, or other periodical that does not contain an opportunity to place an order or to make a payment is exempted.
    • Skill contests and sweepstakes mailings must disclose that individuals can halt such mailings by contacting the promoter via a toll-free number or address included in the mailing. (The law does not require that requests be accepted by telephone.) Notification must be clear and conspicuous, and promoters must set up and maintain a system to execute the requests.
    • Promoters have 60 days after receiving a "stop-mail" request to remove the name from the mailing list.
    • Consumers can reverse their decisions not to receive sweepstakes or skill contest mailings by writing to the promoter.
    • "Stop mail" lists may not be disclosed, transferred, sold or rented for commercial purposes. Violators can be fined up to $2,000,000 per violation.

    Section 9: State laws not preempted.

    This section allows states and federal agencies to enact more restrictive sweepstakes and skill contest laws if they wish.

    Section 10: Technical and conforming amendments.

    This section updates reporting requirements of the law consistent with other recent legislation.

    Section 11: Effective date.

    This section declares that the law, with some minor exceptions, takes effect 120 days after the date of enactment. (Effective date is April 12, 2000.)


    Industry members should note that the DMA's Guidelines for Ethical Business Practice include several articles related to sweepstakes promotions. Skill contests are not specifically discussed in the guidelines; however, the guidelines cover basic principles of honesty and clarity in any direct marketing promotion. A copy of the guidelines can be requested from our Washington, DC office (202.955-5030) or can be viewed on our website at www.the-dma.org.

    SOME DO'S and DON'TS - A SUMMARY.

    DO'S:

    • Required disclosures must be "clear and conspicuous;"
    • All terms and conditions, including rules and entry procedures, must be included;
    • Rules must include estimated odds of winning; quantity, estimated value and nature of each prize; and schedule of payments;
    • Mailings must include the name of the sponsor and an address for contact; and
    • Statements that "no purchase is necessary" and that "a purchase will not increase an entrant's chance of winning" must be even "more conspicuous" and must be included in the rules and on the order form.

    DON'TS:

    • A statement that someone is a winner if that person is not, in fact, a winner;
    • Contradictory statements;
    • A requirement of payment for a previous purchase with an entry; and
    • A representation that failure to purchase will disqualify a person from future sweepstakes mailings.

    Removal of names from mailing lists:

    A sweepstakes mailer must also include an address or toll-free phone number where a recipient or caregiver may request to have his or her name removed from the mailing list.

    Penalties:

    Failure to follow the provisions of the law could result in fines of up to $2 million. In addition, consumers have a private right of action to sue in small claims court for failure to remove their names from sweepstakes mailing lists.

    DMA Headquarters:
    1120 Avenue of the Americas
    New York, NY 10036-6700
    212.768.7277
    212.302.6714 (fax)
    www.the-dma.org

    DMA Corporate Responsibility Department:
    1615 L St. NW, Suite 1100,
    Washington, DC 20036
    202.955.5030
    202.955.0085 (fax)
    www.the-dma.org