BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
SB 1400 S
Senator Simitian B
As Amended March 24, 2008
Hearing Date: April 29, 2008 1
Business and Professions Code 4
ADM:jd 0
0
SUBJECT
Sweepstakes: Disclosures; Prohibited Acts
DESCRIPTION
This bill would recast, update, and enhance California's
sweepstakes law by requiring additional disclosures and
consumer protections.
The bill would, among other things:
prohibit sweepstakes materials from representing that a
person has been specially selected when more than 25% of
the persons receiving the materials have received the
same materials; and, if the materials represent that a
person has been specially selected, the solicitation
would be required to include a statement of the number of
persons in the group that received the same materials;
prohibit sweepstakes materials from making untrue
representations regarding such things as special
treatment or personal attention and urgency of response
time;
prohibit sweepstakes materials from simulating or falsely
representing that it is a document authorized, issued, or
approved by any court, official, or agency of the United
States or any state, or by any lawyer, law firm, or
insurance or brokerage company; or create a false
impression as to its source, authorization, or approval;
and
prohibit a sweepstakes sponsor, as defined, from sharing
or selling the names and information of their customers
and participants without the express consent of their
(more)
SB 1400 (Simitian)
Page 2 of ?
customers or participants.
BACKGROUND
California's Unfair Competition Law (UCL) protects
consumers and businesses from a wide variety of "unlawful,
unfair or fraudulent business acts or practices and unfair,
deceptive, untrue or misleading advertising." (Business
and Professions Code Section 17200 et seq.; all further
references are to the Business and Professions Code unless
otherwise specified.) Section 17500 makes it unlawful for
any person or corporation to induce the public through any
manner or means to buy products or services through untrue
or misleading advertising. Additionally, the Legislature
has found that there is a compelling need for more complete
disclosure of rules and operation of contests and
sweepstakes in order to better protect the public.
(Section 17539.)
Attorneys General in California and Iowa sued Publishers
Clearing House, Readers Digest, and other sweepstakes
companies for untrue and misleading prize promotions that
were "draining the income of many older" citizens. The
suits were settled and the settlements included injunctive
relief, significant penalties, and restitution to victims.
Recent news articles have also alerted the public to
sweepstakes operations -- a number of which have been found
to be fraudulent -- that target veterans, retired
schoolteachers, and other elderly or vulnerable
populations. These sweepstakes solicitation operations are
frequently assisted by or operated by third party entities.
Often the targets of these sweepstakes operations end up
losing their life savings. For example, a 92-year-old Army
veteran on Social Security, living alone after his wife
died, was bilked out of $100,000, including all of his
savings, over time by sweepstakes sponsors. The conduct
did not stop until his children realized he was not eating
and was behind on his bills. (See, e.g., Bilking the
Elderly, With a Corporate Assist, New York Times, May 20,
2007.)
This bill is intended to enhance California's sweepstakes
law to better protect Californians, particularly senior
SB 1400 (Simitian)
Page 3 of ?
citizens and other vulnerable populations, from untrue,
deceptive, and misleading sweepstakes solicitations.
CHANGES TO EXISTING LAW
1.Existing law prohibits specified unfair acts or practices
in the operation of any contest, including, among others:
Representing directly or by implication that the
number of participants has been significantly limited,
or that any particular person has been selected to win
a prize unless such is the fact;
Representing directly or by implication that any
particular person has won any money, prize, thing, or
other value in a contest unless there has been a real
contest in which a meaningful percentage (at least a
majority) of the participants have failed to win;
Using the word "lucky" to describe any entry or
representing that any entry will confer an advantage
upon the recipient that other recipients will not
have, that the recipient is more likely to win than
are others, or that the entry has some value that
other entries do not have;
Misrepresenting the odds of winning any prize;
Misrepresenting the rules, terms, or conditions of
participating in a contest;
Failing to clearly and conspicuously disclose the
nature and value of prizes and the deadline for
entries;
Failing to award and distribute prizes; or
Using or distributing simulated checks, currency,
or any simulated item of value unless there is a clear
and conspicuous notice that the specimen is
nonnegotiable.
(Sections 17539.1-17539.35.)
Existing law provides that solicitation materials
containing sweepstakes entry materials shall not
represent, taking into account the context in which the
representation is made that a person is a winner or has
won a prize unless that person has in fact won a prize.
(Section 17539.15(a).)
Existing law provides that solicitation materials
containing sweepstakes entry materials shall include a
prominent statement of the no-purchase-necessary message
SB 1400 (Simitian)
Page 4 of ?
in readily understandable terms in the official rules or
on the entry-order device. (Section 17539.15(b).)
Existing law provides that sweepstakes entries not
accompanied by an order for products or services shall
not be subjected to any disability or disadvantage in the
winner selection process to which an entry accompanied by
an order for products or services would not be subject.
(Section 17539.15(c).)
Existing law provides that sweepstakes materials shall
not represent that an entry in the promotional
sweepstakes accompanied by an order for products or
services will be eligible to receive additional prizes or
be more likely to win than an entry not accompanied by an
order for products or services or that an entry not
accompanied by an order for products or services will
have a reduced chance of winning a prize in the
promotional sweepstakes. (Section 17539.15(d).)
Existing law requires solicitations for participation in
sweepstakes must, for each prize offered, set forth
clearly, conspicuously, and in easily readable letters
the odds of receiving the prize. (Section 17539.5(e).)
Existing law provides specified remedies and penalties
for violations, including civil penalties and injunctive
relief. (Sections 17534.5, 17535, 17536; see Comment 3.)
This bill would prohibit sweepstakes materials, as
defined, from representing that a person has been
specially selected when more than 25% of the persons
receiving the materials have received the same materials.
This bill would provide that, if sweepstakes materials
represent that a person has been specially selected, then
immediately adjacent to that representation, as
specified, the solicitation would be required to include
a statement of the number of persons in the group, or
purported group of persons, that received the same
sweepstakes materials.
This bill would prohibit sweepstakes materials from:
Representing that the person receiving the
SB 1400 (Simitian)
Page 5 of ?
solicitation has received any special treatment or
personal attention from the sweepstakes sponsor;
Representing that a person is being notified a
second or final time of the opportunity to receive or
compete for a prize, unless that representation is
true; and
Representing that a prize notice is urgent or
otherwise convey an impression of urgency unless there
is a limited time period in which the recipient must
take some action to claim, or be eligible to receive,
a prize, and the date by which that action is required
must appear immediately adjacent to each
representation of urgency.
This bill would prohibit sweepstakes materials from doing
any of the following: (1) simulating or falsely
representing that it is a document authorized, issued, or
approved by any court, official, or agency of the United
States or any state, or by any lawyer, law firm, or
insurance or brokerage company; or (2) create a false
impression as to its source, authorization, or approval.
This bill would require sweepstakes materials to disclose
the date the final winner will be determined.
This bill would prohibit a sweepstakes sponsor, as
defined, from charging a fee as a condition of collecting
a prize.
This bill would prohibit sweepstakes sponsors from
sharing or selling the names and information of their
customers and participants without the express consent of
their customers or participants.
1.Existing law defines "sweepstakes" and
"no-purchase-necessary message." (Sections 17539.15 and
17539.5; see Comment 5.)
This bill would define relevant terms, including
"sweepstakes materials," "sweepstakes sponsor," and
"specially selected." (See Comment 5.)
COMMENT
1.Stated need for the bill
SB 1400 (Simitian)
Page 6 of ?
The author writes:
Though California was among the first to have
sweepstakes solicitation laws in 1998, other states
have since adopted more comprehensive consumer
protections regarding sweepstakes. For example, other
states like Colorado have adopted more stringent
representation requirements that forbid sweepstakes
from representing that a person has been specially
selected unless it is in fact true. In addition, new
deceptive sweepstakes solicitation practices have
surfaced that prey on Californians, particularly
senior citizens. Current law does not expressly
forbid third parties from selling information
regarding sweepstakes opportunities, nor are they
bound by sweepstake laws and disclosures.
2.Added consumer protection and truth in advertising
Consumer protection
SB 1400 would prohibit sweepstakes sponsors from sharing
or selling the names and information of their customers
and participants related to sweepstakes without the
express consent of their customers or participants. The
author writes that all too often the elderly and other
vulnerable populations receive numerous sweepstakes
solicitations from multiple entities because their name
and contact information has been shared or sold between
and among sweepstakes sponsors. This bill would require
an "opt-in" to such sharing or selling of customer or
participant information, which the author argues would,
in some measure, better protect Californians from
multiple and potentially untrue, deceptive, or misleading
sweepstakes solicitations.
Truth in advertising
SB 1400 would prohibit sweepstakes materials from
representing that a person has been "specially selected"
when more than 25% of the persons receiving the materials
have received the same materials; and, if the materials
represent that a person has been specially selected, the
solicitation would be required to include a statement of
SB 1400 (Simitian)
Page 7 of ?
the number of persons in the group that received the same
materials. This provision is borrowed from Oregon's
sweepstakes statutes, and presumably would signify that a
smaller population of people received the solicitation
and thus any one person would have a better chance of
winning. However, that is not clear from the current
language in the bill.
SHOULD THE BILL BE AMENDED TO PROHIBIT A SWEEPSTAKES
SOLICITATION FROM REPRESENTING THAT A PERSON IS IN A
SPECIALLY SELECTED GROUP WHEN MORE THAN 25% OF THE
PERSONS RECEIVING THE SOLICITATION HAVE THE SAME CHANCE
OF WINNING?
The bill would also prohibit sweepstakes materials from
representing that a person has received special treatment
or personal attention from the sponsor; that the person
is being notified a second or final time of the
opportunity to win unless that is true; or that a prize
notice is time sensitive unless that is true. And, the
bill would prohibit deceptive or misleading
representations as to the source, authorization, or
approval of the sweepstakes solicitation materials.
3.Remedies available
Remedies for violations of Section 17500 et seq.,
including Section 17539.15, which this bill would amend,
include injunctive relief, restitution, and civil
penalties of up to $2,500 for each violation. In
addition, anyone who violates the provisions on the
operation of sweepstakes is guilty of a misdemeanor and
may be prosecuted by the Attorney General or district
attorney. (Sections 17203, 17206, 17500, 17535, and
17536.)
4.Federal law, the Deceptive Mail Prevention and
Enforcement Act (DMPEA), does not preempt state law
The DMPEA applies to sweepstakes sent through the mail
and was enacted to establish strong consumer protections
to prevent a number of types of deceptive mailings. (39
U.S.C. Section 101 et seq.) The DMPEA requires that
sweepstakes mailings clearly and conspicuously disclose
the terms and conditions of a contest; the sponsor and
the sponsor's address; the odds of winning; all relevant
SB 1400 (Simitian)
Page 8 of ?
particulars about the prize(s) being offered; that no
purchase is necessary to enter; and that purchases will
not improve the chances of winning. The DMPEA provides
that sweepstakes promoters may not indicate that those
not placing orders will be disqualified; require that an
entry form be submitted with an order; represent that an
individual is a winner unless he or she has in fact won;
or send a facsimile check unless it includes notice that
the check is non-negotiable and has no cash value.
The DMPEA provides for an opt-out option for sweepstakes
notifications, and it explicitly does not preempt state
law.
5.Definitions
Current law defines "sweepstakes" to mean any procedure
for the distribution of anything of value by lot or by
chance that is not unlawful under any provision of law.
This bill would define "sweepstakes materials" to mean
sweepstakes entry materials; solicitation materials
connected to or promoting sweepstakes; and solicitation
materials selling information regarding sweepstakes.
This bill would define "no-purchase-necessary message" to
mean the following statement: "No purchase or payment of
any kind is necessary to enter or win this sweepstakes."
This bill would define "specially selected" to mean a
representation that a person is among a limited group of
persons with an enhanced likelihood of receiving
sweepstakes materials.
This bill would define "sweepstakes sponsor" to mean
either: (1) a person or entity that operates or
administers a sweepstakes; or (2) a person or entity that
offers, by means of a notice, a prize to another person
in conjunction with any real or purported sweepstakes
that requires or allows, or creates the impression of
requiring or allowing, the person to purchase any goods
or services, or pay any money, as a condition of
receiving, or in conjunction with allowing the person to
SB 1400 (Simitian)
Page 9 of ?
receive, use, or obtain a prize or information about a
prize.
6.Suggested amendments
On page 2, line 16, delete the word "prominent" and
insert: "clear and conspicuous"
On page 4, line 29, before the word "express" insert
"prior"
Support: Consumer Federation of CA; Consumer Action;
AARP; Older Women's League of CA; Privacy Rights
Clearinghouse; Congress of CA Seniors
Opposition: None Known
HISTORY
Source: Author
Related Pending Legislation: None Known
Prior Legislation: None Known
Prior Vote: Senate Business, Professions and Economic
Development Committee (Ayes 8, Noes 0)
**************