BILL ANALYSIS
----------------------------------------------------------
|Hearing Date:April 7, 2008 |Bill No:SB |
| |1400 |
----------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Mark Ridley-Thomas, Chair
Bill No: SB 1400Author:Simitian
As Amended:March 24, 2008 Fiscal: No
SUBJECT: Business: Sweepstakes.
SUMMARY: Prohibits sweepstakes materials, as defined, from
making various misleading or false representations and
requires them to disclose the selection date of the final
winner.
Existing law:
1)Defines "sweepstakes" to mean any procedure for the
distribution of anything of value by lot or by chance
that is not unlawful.
2)Prohibits sweepstakes solicitation materials from
representing that a person is a prize winner unless that
person has, in fact, won a prize.
3)Requires solicitation materials containing sweepstakes
entry materials to include a prominent "no purchase is
necessary" message and a copy of the "official rules," as
specified. For purposes of this section, defines "no
purchase necessary statement" and "official rules" as
follows:
a) "No purchase necessary statement" as a language
that states no purchase is necessary as a condition of
entering the promotion sweepstakes.
b) "Official rules" as the formal printed statement of
the rules for the promotional sweepstakes appearing in
the solicitation materials.
SB 1400
Page 2
4)Prohibits sweepstakes entries that do not include an
order for products or services from being disadvantaged
in the winner selection process for the sweepstakes
entered.
5)States that sweepstakes materials shall not represent
that entries in the sweepstakes accompanied by an order
for products or services will be eligible for additional
prizes or will be more likely to win than entries from
individuals not purchasing a product or service.
This bill:
1)Recasts solicitation materials containing sweepstakes
entry materials as "sweepstakes materials" and defines
"sweepstakes materials" as the following:
a) Sweepstakes entry materials.
b) Solicitation materials connected to or promoting
sweepstakes.
c) Solicitation materials selling information
regarding sweepstakes.
2)Specifies that sweepstakes materials may not represent
that a person is a winner of any particular prize unless
that person has in fact won that prize.
3)Prohibits sweepstakes materials from representing that a
person has been specially selected, as defined, when more
than 25 percent of persons receiving the sweepstakes
materials received the same materials.
4)Requires, in instances where sweepstakes materials were
sent to less than 25 percent of persons who have been
specially selected, as defined, the sweepstakes materials
to include a statement of the number of persons in the
group that received the same sweepstakes materials. Also
requires the disclosure to be next to, and be in the
same, size, font and color of the specially selected
representation.
SB 1400
Page 3
5)Defines "specially selected" as a representation that a
person is among a limited group of persons with an
enhanced likelihood of receiving sweepstakes materials.
6)Prohibits sweepstakes materials from representing that
the person receiving the solicitation has received any
special attention from the sweepstakes sponsor or officer
or that person's employee or agent.
7)Prohibits sweepstakes materials from representing that a
person is being notified for the second or final time of
the opportunity to receive or compete for a prize, unless
that representation is true.
8)Prohibits sweepstakes materials from representing that a
prize notice is urgent or conveying a sense of urgency
unless there is a time limit period in which the
recipient must take action to claim or be eligible to
receive a prize and requires the date by which action
must be taken to be next to and be in the same, size,
font and color of the urgency representation.
9)Prohibits sweepstakes materials from:
a) Simulating or falsely representing that the
document is authorized, issued or approved by any
state or federal, official or agency or by any lawyer,
law firm or insurance or brokerage company.
b) Creating a false impression as to its source,
authorization or approval.
10)Requires sweepstakes materials to disclose the date of
the final winner determination and to contain a copy of
the official rules.
11)Redefines "no-purchase-necessary message" as the
following statement: "No purchase or payment of any kind
is necessary to enter or win this sweepstakes."
12)Prohibits a sweepstakes sponsor, as defined, from
charging a fee as a condition of collection on a prize
and sharing or selling the names and information of their
customers and sponsors without their express consent.
13)Defines "sweepstakes sponsor" as either a person or
SB 1400
Page 4
entity that operates or administers a sweepstakes, as
defined, or a person or entity that offers a prize to
another person along with a real or purported sweepstakes
that either requires or allows, or creates the impression
of requiring or allowing, the person to purchase goods or
services or pay any money as a condition of receiving,
using or obtaining a prize or information about a prize.
FISCAL EFFECT: None. This bill is keyed "nonfiscal" by
Legislative Counsel.
COMMENTS:
1.Purpose. According to the Author (who is also the
sponsor), this legislation is intended to update
California's rules and disclosure requirements for
sweepstakes solicitations to better protect consumers,
particularly the elderly who are disproportionately
targeted and victimized, against unfair or misleading
advertising of sweepstakes.
2.Background. California sweepstakes law was written in
1998, and aside from minor, technical cleanup
legislation, has not been updated since. In 2000, a
multi-state investigation of the sweepstakes
solicitations and misleading business practices of the
Publisher's Clearinghouse resulted in a 26-state $34
million settlement. In response to the scandal, other
states (Colorado, Oregon and Texas) have enacted more
stringent consumer protection measures, some of which
have been incorporated into this measure. Examples of
their protections are as follows:
Colorado : Defines "specially selected" as a
representation that a person is a winner, finalist, in
first place or tied for first place, or otherwise among a
limited group of persons with an enhanced likelihood of
receiving a prize; requires that if sweepstakes materials
represent that a person has been specially selected, the
solicitation must include a statement of the maximum
number of persons in the group, with the enhanced
likelihood of receiving a prize and prohibits sweepstakes
sponsors from charging a fee as a condition of collecting
a prize.
Texas: Prohibits sweepstakes sponsors from charging a fee
SB 1400
Page 5
as a condition of collecting a prize and sweepstakes
materials shall not represent that the person receiving
the solicitation has received any special treatment or
personal attention from sweepstakes sponsors or their
agents.
Oregon : Prohibits sweepstakes materials from representing
that a person has been specially selected, when more than
25 percent of persons receiving the sweepstakes materials
have the same chance of winning, and requires the
sweepstakes materials to disclose the date the final
winner will be determined.
3.Arguments in Support. The California Alliance for
Consumer Protection supports this measure for a variety
of reasons, with the largest being that this is a fair
and reasonable approach to keeping the honesty and
integrity of sweepstakes. The Gray Panthers support this
measure because they know how easy it is for seniors in
particular to be victimized by deceptive practices and
other states have taken more stringent actions (to
protect consumers) and California should follow their
path.
The California Alliance for Retired Americans also writes
in support of SB 1400 stating it strengthens the
protections against deceptive practices through improved
and disclosures and representation restrictions.
NOTE: Double-referral to Judiciary Committee (second).
This bill has been double referred to both the Business and
Professions Committee and the Senate Judiciary Committee.
If this bill is passed by the BP&ED Committee, it will be
referred to the Judiciary Committee.
SUPPORT AND OPPOSITION:
Support:
California Alliance for Consumer Protection - As Introduced
California Alliance for Retired Americans
Gray Panthers
Opposition:
SB 1400
Page 6
None on file as of April 1, 2008.
Consultant: Sieglinde Johnson