Advertising Law Blog

Direct marketers of all different ilks have long been the focus of the Iowa Attorney General’s office for enforcement. This scrutiny has now expanded to focus on companies that provide goods or service to marketers, particularly involving psychic or sweepstakes-related promotions. Potential targets include businesses that provide bona fide services such as mailing lists, printing, caging, graphic arts, fulfillment, shipping, customer service, and others to marketers of psychic and sweepstakes-related promotions.

Since the beginning of 2015, the Iowa Attorney General’s office has focused on mailers offering psychic and sweepstakes offers. Iowa has accused the marketers of targeting the elderly by using falsehoods and misrepresentations to obtain orders. These enforcement actions purportedly arose from complaints of family members of a 91-year old woman who reportedly responded to a significant number of offers. According to the Iowa Attorney General’s website, a number of mailers have agreed to cease mailing into Iowa and repay to the state the funds that were derived by the mailings.

In investigating the mailings to this particular Iowan, the Iowa Attorney General has more recently sent a flurry of Civil Investigative Demands and subpoenas to the industry, each accompanied by what is claimed to be a “Notice of Intent to Proceed”. The investigation is ostensibly being conducted under the authority of the Iowa Consumer Fraud Act sec.714.16 to determine whether the companies have engaged in unlawful practices by facilitating the marketing to Iowans, including the elderly, of deceptive mail solicitations from purported psychics and marketers of sweepstakes-related offers.

In many instances the actual marketers are located outside of the United States, so Iowa is attempting to reduce their ability to market by chocking legitimate suppliers of goods and services.

For example, in June, Iowa obtained a court order against Faircom, a New York direct marketing agency, and its principal. Iowa apparently did not proceed against Faircom’s client who marketed the challenged pieces as it was located overseas. Instead, Iowa charged the direct marketing agency and its principal with violating Iowa law because defendants handled the layout, printing, and distribution of the challenged mail pieces, as well as coordinating caging operations.  As part of a settlement, the order bars Faircom and its principal from participating in solicitations directed to residents of Iowa (or directed to non-Iowans from an Iowa location) that relate to psychics, clairvoyants, spiritualists, mediums, or comparable entities or deceptive merchandise orders.  The order also bars defendants from selling, renting, sharing, transferring, making available for use by others, or making any use whatsoever of the names and/or other identifying information of persons who responded to such orders.   The settlement also includes a $200,000 payment to the state.

Take away:  Suppliers are not immune from scrutiny and potential liability particularly in Iowa even if they are not the creator or disseminator of the advertising. Suppliers and marketers alike need to be vigilant with respect to their business practices particularly as it relates to foreign clients.