House Introduces Sweepstakes Regulation Bills

With two Senate subcommittees about to launch a joint investigation into the direct mail sweepstakes industry, a pair of bills have been introduced in the House to tighten the government’s control over the industry.

Separately Reps. Frank LoBiondo (R-NJ), and James E. Rogan (R-CA), are sponsoring nearly identical industry-controlling bills that essentially mirror legislation introduced in the Senate last fall by Sen. Ben Nighthorse Campbell (R-CO), which eventually died in committee.

The Senate bill died after negotiations collapsed with the Direct Marketing Association on behalf of the sweepstakes industry. Campbell resisted DMA attempts to soften some of the provisions in his bill, including one requiring large-type notices on the envelopes of sweepstakes mailers that it contained “a game of chance” or a “sweepstakes” offering.

While not commenting directly on the new House bills, Jerry Cerasale, the DMA’s senior vice president for governmental affairs, defended sweepstakes mailings as “a valuable marketing tool for the industry, which is not used just for the selling of magazines like some people think.” The DMA, he added, “wants to keep this form of marketing alive and viable.”

LoBiondo and Rogan introduced their respective measures as the Senate’s Permanent Subcommittee on Investigations and the International Security, Proliferation and Federal Services subcommittee prepare jointly to launch a probe into the industry.

Plans for the investigation, which include several hearings in February, were revealed in late December by Sen. Susan M. Collins (R-ME), who chairs the investigations subcommittee and Sen. Thad Cochran (R-MS), International Security, Proliferation and Federal Services subcommittee chairman.

Neither Collins nor Cochran would comment on the LoBiondo and Rogan bills. While both would require a notice to appear on the envelope, along with language advising the recipient that he or she has “not automatically won” a prize, neither bill dictates how large the printing must be. The USPS would be allowed to reject any mailing without those notices on the envelopes.

Both measures also would require printed games, chance or sweepstakes notices, including one saying that no purchase is necessary to win, on the first page of the mailer’s contents to be printed in conspicuous type along with an individual’s odds of winning.

LoBiondo’s bill would not pre-empt existing state laws regulating the advertising or sale of goods and services “associated with any game of chance.” Rogan’s measure, while silent on that matter, would require sweepstakes operators to provide “a clear and concise statement in the inside material [of the mailer] as to when and how the official list of winners will be made available or obtained.”

While LoBiondo’s bill is silent on what penalties violators would face, Rogan’s makes it clear that errant sweepstakes mailers face civil penalties of up to $10,000 a day for each offence, and possible criminal prosecution for fraud.