This year has seen the enactment and amending of legislation and the filing of lawsuits related to a number of promotional tactics. The following is an update of legal and regulatory actions that have taken place in 2008.
SWEEPSTAKES
The California legislature recently passed an omnibus sweepstakes bill — SB 1400. At press time it had passed both Houses and was awaiting signature by the governor. In its original form, this bill could have been construed to blur, if not eliminate, the right to offer an alternate method of entry to prevent a sweepstakes from being considered a lottery. This provision has been deleted.
The bill also contained a section that prohibited the sale or sharing of personal information about sweepstakes participants. These provisions were deleted as well.
As passed, the bill makes certain changes in the law, including disclosure requirements applying to solicitation materials “containing sweepstakes entry materials or selling information regarding sweepstakes,” and in many respects is similar to existing federal or state law requirements. When, and if, signed by the governor, the bill will become law Jan. 1, 2009.
TEXTING
Several class action lawsuits are pending in California involving text message sweepstakes conducted in connection with various reality television shows.
The plaintiffs have claimed that these games constitute illegal lotteries under California law, notwithstanding the availability of a free method of entry, because those who entered via text message did not receive a tangible product or service in exchange for the fee paid to play via the text-message method of entry.
The court has certified for interlocutory appeal whether those who play via the text-message method of entry must receive a product or service of equivalent value. Earlier this year, similar class actions were dismissed in Georgia, with the court there concluding that these games did not constitute illegal gambling.
GIFT CARDS
Several new gift card statutes have been recently amended or enacted. Effective July 4, 2008, Rhode Island now prohibits dormancy fees. Effective Nov. 1, 2008, Michigan will prohibit sellers/issuers of gift certificates or gift cards from charging dormancy fees or allowing card expiration before five years.
RULE-MAKING
Significant Federal Trade Commission and Federal Communications Commission actual or potential rule-making is in the works on a number of issues.
The FTC has proposed that there be greater transparency and consumer control in targeted advertising so that consumers receive a clear disclosure that their data is being collected, and that there is an opt-out right.
The FTC is reviewing existing environmental guidelines, which include “green” claims on product packaging, and is expected to issue revised guidelines dealing with existing claims and new claims such as “sustainable” or “renewable.”
The FTC has recently amended the Telemarketing Sales Rule to expressly prohibit telemarketing sales calls that deliver prerecorded messages, unless express written consent is received.
The FCC seeks comments on the application of sponsor identification regulations to embedded advertising techniques, including product placement/integration.
Several important user-generated content litigations are still pending, including Quiznos vs. Subway and Viacom vs. YouTube; in the latter an issue is whether a party can use the safe harbor provisions of the Digital Millennium Copyright Act resulting in its taking down of complained of material if the material was facilitated in the first place by such party. Quiznos vs. Subway raises a similar question concerning user-generated content in the context of the Communications Decency Act and the Lanham Act.
Edward M. Kabak is the chief legal officer for the Promotion Marketing Association, Inc. and is a speaker at the 30th PMA Law Conference to be held Nov. 20-21 at the Chicago Downtown Marriott. He can be reached at [email protected].
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