BILL ANALYSIS
SB 1400
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Date of Hearing: June 24, 2008
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
SB 1400 (Simitian) - As Amended: June 17, 2008
SENATE VOTE : 31-1
SUBJECT : SWEEPSTAKES: ADDITIONAL CONSUMER PROTECTIONS
KEY ISSUE : SHOULD NEW CONSUMER PROTECTIONS BE ENACTED TO FIGHT
DECEPTIVE SWEEPSTAKES PRACTICES THROUGH IMPROVED DISCLOSURES AND
REPRESENTATION RESTRICTIONS?
SYNOPSIS
This bill seeks to strengthen consumer protections against
deceptive sweepstakes practices through improved disclosures and
representation restrictions. According to the author's office,
California was among the first states to pass sweepstakes laws
in 1998 in response to growing complaints about deceptive
sweepstakes mailers. However, aside from minor technical
clean-up legislation, California's sweepstakes laws have not
been appropriately updated since, all the while new deceptive
sweepstakes solicitation practices have surfaced that prey on
many Californians, especially senior citizens. Because current
law does not expressly forbid third parties from selling
information regarding sweepstakes opportunities, or bound them
by sweepstakes laws and disclosures, this important measure
seeks to fill those gaps. The analysis recommends the Committee
adopt an amendment to the bill to ensure that the Committee's
longstanding commitment to protecting the privacy rights of
consumers is maintained.
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:
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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 unless the representation of
special treatment or personal attention is true;
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
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)The official rules for a sweepstakes shall disclose
information about the date or dates the final winner or
winners will be determined.
5)Prohibits a sweepstakes sponsor from:
a) Charging a fee as a condition of entering a sweepstakes,
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claiming or winning a prize, receiving a monetary
distribution, or obtaining information about a prize or
sweepstakes; or,
b) Sharing or selling the names or personally identifiable
information of their customers and participants related to
sweepstakes without the prior express consent of their
customers or participants.
c) This provision shall not be construed to prohibit a
sweepstakes sponsor from sharing the names or other
personally identifiable information of customers or
participants under any of the following circumstances:
i) In connection with the administration of the
sweepstakes, including fulfillment of prizes and
provision of winners' lists.
ii) With entities that are affiliated with the
sweepstakes sponsor by common ownership or control.
iii) With third parties with whom the sweepstakes sponsor
has entered into a marketing agreement with respect to
the sweepstakes.
iv) Between and among the sponsors, promoters,
administrators, and operators of a specific sweepstakes.
6)Defines the following terms:
a) "No-purchase-or-payment necessary message" to mean the
following statement or a statement substantially similar to
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
sweepstakes, as specified; or,
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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.
d) Further specifies that a person or entity that merely
furnishes a prize in connection with a sweepstakes that is
operated or administered by another person or entity shall
not be deemed to be a sweepstakes sponsor.
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
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will be more likely to win than entries from individuals not
purchasing a product or service.
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
COMMENTS : This bill seeks to strengthen consumer protections
against deceptive sweepstakes practices through improved
disclosures and representation restrictions. 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." The analysis recommends the
Committee adopt an amendment to the bill to ensure that the
Committee's longstanding commitment to protecting the privacy
rights of consumers is maintained.
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
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sweepstakes sponsors or their agents.
Oregon : Prohibits sweepstakes materials from representing that
a person has been specially selected if more than 25% 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.
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."
Possible Committee Amendment : In order to comport with the
commitment to privacy values consistently taken by both
Judiciary Committees of the Legislature as well as the author,
the Committee may wish to amend the bill to delete the June 17th
amendments to the bill that would have encroached upon the
privacy interests of sweepstakes participants (at page 5, lines
11-23) such that the bill will read as follows:
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(l) (1) A sweepstakes sponsor may not charge 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.
(2) Sweepstakes sponsors are prohibited from sharing or selling
the names or addresses personally identifiable information of
their customers and participants related to sweepstakes without
the prior express consent of their customers or participants.
(3) This subdivision shall not be construed to prohibit a
sweepstakes sponsor from sharing the names or other personally
identifiable information of customers or participants under any
of the following circumstances: (A) In connection with the
administration of the sweepstakes, including fulfillment of
prizes and provision of winners' lists. (B) With entities
that are affiliated with the sweepstakes sponsor by common
ownership or control. (C) With third parties with whom the
sweepstakes sponsor has entered into a marketing agreement with
respect to the sweepstakes. (D) Between and among the
sponsors, promoters, administrators, and operators of a specific
sweepstakes.
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.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP
Consumer Action
Consumer Federation of California
California Senior Legislature
Older Women's League of California
Privacy Rights Clearinghouse
Congress of California Seniors
California Alliance for Retired Americans
Gray Panthers
California Alliance for Consumer Protection
Opposition
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California Chamber of Commerce
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334