Review Your Mail Pieces Now

MARKETING LAW UPDATE
REVIEW YOUR MAIL PIECES NOW: WHAT MARKETERS NEED TO KNOW ABOUT THE IMPORTANT NEW POSTAL LEGISLATION

On December 13, 1999, President Clinton signed into law the Deceptive Mail Prevention and Enforcement Act. Many mistakenly believe that the law affects only sweepstakes and skill contest promotions. In fact, the law has significant provisions including high money penalties that will affect all marketers who utilize direct mail.

Accordingly, direct marketers should use this time wisely to carefully review their mailings and ensure that they are in compliance with both the new law and basic principles of advertising law.

The law has specific requirements relating to sweepstakes and skill contests. It requires certain disclosures for facsimile checks. The law has specific requirements for "government look-a-like" promotions and for goods or services that can otherwise be obtained from the government without cost. Perhaps most importantly, the Act severely strengthens the Postal Service's enforcement powers as it relates to all direct mail marketers. Highlights of the Deceptive Mail Prevention and Enforcement Act include:

Enhanced U.S. Postal Service Enforcement Powers

• The new law amends the civil penalties section of the postal code to permit a penalty assessment for deceptive mailings of up to $1,000,000 for the first offense depending on the volume of mail. This is unrelated to claims of violations of prior orders. It also establishes penalties for violations of false advertising laws of up to $25,000 based on quantities of up to 50,000 pieces; $50,000 for each mailing from 50,000 to 100,000 pieces, with an additional $5,000 for each additional 10,000 pieces above 100,000, not to exceed $1,000,000. A penalty assessed on the basis of the volume of mail could easily reach the $1,000,000 mark.
• The Postal Service is empowered with enhanced civil penalty and subpoena powers which it can use against all allegedly deceptive mailings.
• The Postal Service is empowered to seek penalties of up to $2,000,000 against a mailer for violations of an existing mail stop order.
• Enhanced Subpoena Power: The law empowers the Postal Service with significant subpoena authority for all mailings. In any mail stop proceeding brought in the Postal Court, the Postal Service is empowered to subpoena the production of any records which "the Postmaster General considers relevant or material" to the investigation.

Sweepstakes

• The statements "No purchase is necessary" and "a purchase will not improve one's chances of winning" must be disclosed clearly and conspicuously 3 times: in the Rules, on the entry or order form, and in the text of the mailing.
• The name of the sponsor (or mailer) and its principal place of business or a contact address must be disclosed.
• All terms and conditions of the sweepstakes promotion, including the rules and entry procedures must be clear.
• In addition, the Rules must contain:

1. Odds of winning each prize.
2. Quantity, estimated retail value and nature of each prize
3. Any schedule of payments of the prize, if to be made over time.

• The Rules cannot contain:

1. A statement that a consumer who does not buy will be disqualified from receiving future sweepstakes mailings.
2. A purchase requirement.
3. "You have won" language unless it is true.
4. Contradictory information from other information in the mailing.

Skill Contests

• Clear and conspicuous disclosure of all rules and entry procedures (i.e., must be in language that is easy to read, find, and understand).
• The name of the sponsor (or mailer) and its principal place of business or a contact address must be disclosed.
• In addition, the Rules must clearly and conspicuously disclose:

1. The number of rounds or levels, the cost to enter each one, and the increasing difficulty of advanced rounds if applicable.
2. The maximum cost to enter.
3. An estimate of how many will successfully solve the game and how many entrants have solved the last 3 games run by the sponsor.
4. The identity of the judges, a description of their qualifications, and their method of judging.
5. The date that winners will be determined and prizes awarded.
6. The quantity, estimated retail value, and nature of each prize.
7. Any schedule of payments of the prize, if made over time.

Exemption For Certain Sweepstakes and Skill Contests Advertising Materials

• There is a narrow exemption for sweepstakes and contests which are not directed to named individuals and which appear in magazines or newspapers where there is no opportunity to make a purchase or order products or services.
• Mailing List Suppression
• Sweepstakes and skill contests must include clear and conspicuous disclosure that the promoter may be contacted at either a specified address or toll-free number to have the recipient's name removed from the sponsor's mailing list.
• Mailers must honor "do not mail" requests received from a consumers, the consumer's representatives, or a request made to a government agency within 60 days of notification.
• A record of requesters must be kept and names suppressed for five years.
• Separate penalties and private right of action can be asserted against sweepstakes and skill contest promoters who continue to mail to persons who elect not to receive such mailings from that promoter.
• Substantial penalties of up to $2,000,000 per violation can also be imposed for marketing mailing lists derived from a "do not mail" list for any commercial use.

Facsimile Checks

• A facsimile check must contain a clear and conspicuous disclosure that it is "not a negotiable instrument" and "does not have any cash value."
• Government Look-a-like/Government Services Promotions
• Prohibits the use of any seal, symbol, insignia, term, federal statute, or reference to any federal agency, commission, or the Postmaster General that could be reasonably interpreted to imply a connection or endorsement by the federal government, or otherwise misrepresents the identity of the mailer or the status of the mailing.
• Any solicitation for payment for a product or service that is provided by the federal government at no cost must contain a clear and conspicuous disclosure of these facts.

State Laws Are Not Preempted:

The law does not supercede any state laws. Mailers must observe the federal laws as well as the laws of all states to which the mail is sent.