BILL ANALYSIS
SB 1400
Page 1
Date of Hearing: June 17, 2008
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mike Eng, Chair
SB 1400 (Simitian) - As Amended: June 9, 2008
SENATE VOTE : 31-1
SUBJECT : Sweepstakes.
SUMMARY : Recasts California's sweepstakes law by requiring
additional disclosures and consumer protections. Specifically,
this bill :
1)Adds solicitation materials selling information regarding
sweepstakes to the provisions of law concerning solicitation
materials containing sweepstakes entry materials.
2)Prohibits solicitation materials containing sweepstakes entry
materials and solicitation materials selling information
regarding sweepstakes from representing the following:
a) That a person has been specially selected in connection
with a sweepstakes unless it is true;
b) That the person receiving the solicitation has received
any special treatment or personal attention from the
sweepstakes sponsor or any officer, employee, or agent of
the sweepstakes sponsor;
c) 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,
d) That a prize notice is urgent or otherwise convey an
impression of urgency by use of description, phrasing on a
mailing envelope, or similar method, 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 appears immediately
adjacent to each representation of urgency in the same
print, size, color as each representation of urgency.
3)Prohibits solicitation materials containing sweepstakes entry
materials and solicitation materials selling information
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regarding sweepstakes from any of the following:
a) 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;
b) Creating a false impression as to its source,
authorization, or approval; and,
c) Charging or accepting any fee to enter, claim or win a
sweepstakes.
4)Requires solicitation materials containing sweepstakes entry
materials and solicitation materials selling information
regarding sweepstakes to disclose the date the final winner
will be determined.
5)Prohibits a sweepstakes sponsor from:
a) Charging a fee as a condition of entering a sweepstakes,
claiming or winning a prize, receiving a monetary
distribution, or obtaining information about a prize or
sweepstakes; or,
b) Sharing or selling the names and information of their
customers and participants related to sweepstakes without
the prior express consent of their customers or
participants.
6)Defines the following terms:
a) "No-purchase-necessary message" to mean the following
statement: "No purchase or payment of any kind is
necessary to enter or win this sweepstakes;"
b) "Specially selected" to mean a representation that a
person is a winner, a 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; and,
c) "Sweepstakes sponsor" to mean either of the following:
i) A person or entity that operates or administers a
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sweepstakes, as specified; or,
ii) 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 receive, use, or obtain a
prize or information about a prize.
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; and,
b) "Official rules" as the formal printed statement of the
rules for the promotional sweepstakes appearing in the
solicitation materials.
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.
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FISCAL EFFECT : Unknown
COMMENTS : Purpose of this bill . According to the author's
office, "In response to growing complaints about deceptive
sweepstakes mailers, California was among the first states to
pass sweepstakes laws in 1998. However, aside from minor
technical clean-up legislation, California's sweepstakes laws
have not been updated since. 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
sweepstakes laws and disclosures."
This bill seeks to strengthen consumer protections against
deceptive sweepstakes practices through improved disclosures and
representation restrictions.
Background . 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 and specific injunctions. In response to the
scandal, other states have since enacted more comprehensive
consumer protections regarding sweepstakes. 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 as a
condition of collecting a prize and sweepstakes materials from
representing 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 if more than 25% of persons
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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.
Arguments in support . The Privacy Rights Clearinghouse writes,
"Of greatest interest to our organization is the provision of SB
1400 that would prohibit sweepstakes sponsors from sharing or
selling the names and information of their customers and without
the express consent of their customers or participants.
Currently, the personal information of high activity customers
is sold to other sweepstakes who then can take advantage of such
customers. This practice violates the privacy of sweepstakes
customers, many of whom are seniors or economically
disadvantaged individuals."
Arguments in opposition . The California Chamber of Commerce
writes, "SB 1400 prohibits sweepstakes sponsors from sharing or
selling the 'names and information' of their customers and
sweepstakes participants with any entity without the prior
express consent of such customers and participants. This is
problematic for several reasons: 1) the opt-in requirement
contemplated by the 'prior express consent' language is
impractical and should be changed to an opt-out requirement, as
is consistent with existing federal law, self regulatory
guidelines and legitimate industry practice; 2) there is no
exemption for sharing information among affiliates or joint
promotion partners; 3) the prohibition is not limited to
personally identifiable information; and 4) it may be necessary
for the company sponsoring the sweepstakes to share the names
and information of entrants with its agencies or vendors
retained to assist in the conduct or administration of the
promotion."
Previous legislation . SB 1780 (Peace, Chapter 280, Statutes of
1998) prohibits sweepstakes solicitation materials from
representing that a person is a prize winner unless that person
has, in fact, won a prize. Also requires a prominent "no
purchase necessary" statement, a copy of the official rules, and
prohibits disadvantaging individuals in the contest not making a
purchase.
Double referral . This bill is double referred to the Assembly
Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
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Support
AARP
California Alliance for Consumer Protection
California Alliance for Retired Americans
California Senior Legislature
Congress of California Seniors
Consumer Action
Consumer Federation of California
Gray Panthers
Older Women's League of California
Privacy Rights Clearinghouse
Opposition
American Resort Development Association
California Attractions and Parks Association
California Broadcasters Association
California Chamber of Commerce
California Grocers Association
California Retailers Association
CTIA - The Wireless Association
Direct Marketing Association
Internet Alliance
Motion Picture Association of America
Promotion Marketing Association
State Farm Insurance
Wyndham Worldwide
Analysis Prepared by : Rebecca May / B. & P. / (916) 319-3301