[House Report 106-431]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 106-431
======================================================================
DECEPTIVE MAIL PREVENTION AND ENFORCEMENT ACT
_______
November 1, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Burton of Indiana, from the Committee on Government Reform,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 170]
[Including cost estimate of the Congressional Budget Office]
The Committee on Government Reform, to whom was referred
the bill (H.R. 170) to require certain notices in any mailing
using a game of chance for the promotion of a product or
service, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
I. Purpose and Summary..............................................9
II. Background and Need for the Legislation.........................11
III. Legislative Hearings and Committee Actions......................13
IV. Committee Hearings and Written Testimony........................13
V. Explanation of the Bill.........................................17
VI. Committee Oversight Findings....................................31
VII. Budget Analysis and Projections.................................31
VIII.Cost Estimate of the Congressional Budget Office................31
IX. Statement of Constitutional Authority...........................34
X. Committee Recommendation........................................34
XI. Congressional Accountability Act, P.L. 104-1....................34
XII. Unfunded Mandates Reform Act; P.L. 104-4, Section 423...........34
XIII.Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b).....34
XIV. Changes in Existing Law.........................................35
XV. Additional Views................................................48
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Deceptive Mail Prevention and
Enforcement Act''.
SEC. 2. RESTRICTIONS ON MAILINGS USING MISLEADING REFERENCES TO THE
UNITED STATES GOVERNMENT.
Section 3001 of title 39, United States Code, is amended--
(1) in subsection (h)--
(A) in the first sentence by striking ``contains a
seal, insignia, trade or brand name, or any other term
or symbol that reasonably could be interpreted or
construed as implying any Federal Government
connection, approval or endorsement'' and inserting the
following: ``which reasonably could be interpreted or
construed as implying any Federal Government
connection, approval, or endorsement through the use of
a seal, insignia, reference to the Postmaster General,
citation to a Federal statute, name of a Federal agency,
department, commission, or program, trade or brand name,
or any other term or symbol; or contains any reference to
the Postmaster General or a citation to a Federal statute
that misrepresents either the identity of the mailer or
the protection or status afforded such matter by the
Federal Government''; and
(B) in paragraph (2)--
(i) in subparagraph (A) by striking ``and''
at the end;
(ii) in subparagraph (B) by striking ``or''
at the end and inserting ``and''; and
(iii) by inserting after subparagraph (B) the
following:
``(C) such matter does not contain a false
representation stating or implying that Federal
Government benefits or services will be affected by any
purchase or nonpurchase; or'';
(2) in subsection (i) in the first sentence--
(A) in the first sentence by striking ``contains a
seal, insignia, trade or brand name, or any other term
or symbol that reasonably could be interpreted or
construed as implying any Federal Government
connection, approval or endorsement'' and inserting the
following: ``which reasonably could be interpreted or
construed as implying any Federal Government
connection, approval, or endorsement through the use of
a seal, insignia, reference to the Postmaster General,
citation to a Federal statute, name of a Federal
agency, department, commission, or program, trade or
brand name, or any other term or symbol; or contains
any reference to the Postmaster General or a citation
to a Federal statute that misrepresents either the
identity of the mailer or the protection or status
afforded such matter by the Federal Government''; and
(B) in paragraph (2)--
(i) in subparagraph (A) by striking ``and''
at the end;
(ii) in subparagraph (B) by striking ``or''
at the end and inserting ``and''; and
(iii) by inserting after subparagraph (B) the
following:
``(C) such matter does not contain a false
representation stating or implying that Federal
Government benefits or services will be affected by any
contribution or noncontribution; or'';
(3) by redesignating subsections (j) and (k) as subsections
(m) and (n), respectively; and
(4) by inserting after subsection (i) the following:
``(j)(1) Any matter otherwise legally acceptable in the mails which
is described in paragraph (2) is nonmailable matter, shall not be
carried or delivered by mail, and shall be disposed of as the Postal
Service directs.
``(2) Matter described in this paragraph is any matter that--
``(A) constitutes a solicitation for the purchase of or
payment for any product or service that--
``(i) is provided by the Federal Government; and
``(ii) may be obtained without cost from the Federal
Government; and
``(B) does not contain a clear and conspicuous statement
giving notice of the information set forth in clauses (i) and
(ii) of subparagraph (A).''.
SEC. 3. RESTRICTIONS ON SWEEPSTAKES AND DECEPTIVE MAILINGS.
Section 3001 of title 39, United States Code, is amended by inserting
after subsection (j) (as added by section 2(4) of this Act) the
following:
``(k)(1) In this subsection--
``(A) the term `clearly and conspicuously displayed' means
presented in a manner that is readily noticeable, readable, and
understandable to the group to whom the applicable matter is
disseminated;
``(B) the term `facsimile check' means any matter that--
``(i) is designed to resemble a check or other
negotiable instrument; but
``(ii) is not negotiable;
``(C) the term `skill contest' means a puzzle, game,
competition, or other contest in which--
``(i) a prize is awarded or offered;
``(ii) the outcome depends predominately on the skill
of the contestant; and
``(iii) a purchase, payment, or donation is required
or implied to be required to enter the contest; and
``(D) the term `sweepstakes' means a game of chance for which
no consideration is required to enter.
``(2) Except as provided in paragraph (4), any matter otherwise
legally acceptable in the mails which is described in paragraph (3) is
nonmailable matter, shall not be carried or delivered by mail, and
shall be disposed of as the Postal Service directs.
``(3) Matter described in this paragraph is any matter that--
``(A)(i) includes entry materials for a sweepstakes or a
promotion that purports to be a sweepstakes; and
``(ii)(I) does not contain a statement that discloses in the
mailing, in the rules, and on the order or entry form, that no
purchase is necessary to enter such sweepstakes;
``(II) does not contain a statement that discloses in the
mailing, in the rules, and on the order or entry form, that a
purchase will not improve an individual's chances of winning
with such entry;
``(III) does not state all terms and conditions of the
sweepstakes promotion, including the rules and entry procedures
for the sweepstakes;
``(IV) does not disclose the sponsor or mailer of such matter
and the principal place of business or an address at which the
sponsor or mailer may be contacted;
``(V) does not contain sweepstakes rules that state--
``(aa) the estimated odds of winning each prize;
``(bb) the quantity, estimated retail value, and
nature of each prize; and
``(cc) the schedule of any payments made over time;
``(VI) represents that individuals not purchasing products or
services may be disqualified from receiving future sweepstakes
mailings;
``(VII) requires that a sweepstakes entry be accompanied by
an order or payment for a product or service previously
ordered;
``(VIII) represents that an individual is a winner of a prize
unless that individual has won such prize; or
``(IX) contains a representation that contradicts, or is
inconsistent with sweepstakes rules or any other disclosure
required to be made under this subsection, including any
statement qualifying, limiting, or explaining the rules or
disclosures in a manner inconsistent with such rules or
disclosures;
``(B)(i) includes entry materials for a skill contest or a
promotion that purports to be a skill contest; and
``(ii)(I) does not state all terms and conditions of the
skill contest, including the rules and entry procedures for the
skill contest;
``(II) does not disclose the sponsor or mailer of the skill
contest and the principal place of business or an address at
which the sponsor or mailer may be contacted; or
``(III) does not contain skill contest rules that state, as
applicable--
``(aa) the number of rounds or levels of the contest
and the cost to enter each round or level;
``(bb) that subsequent rounds or levels will be more
difficult to solve;
``(cc) the maximum cost to enter all rounds or
levels;
``(dd) the estimated number or percentage of entrants
who may correctly solve the skill contest or the
approximate number or percentage of entrants correctly
solving the past 3 skill contests conducted by the
sponsor;
``(ee) the identity or description of the
qualifications of the judges if the contest is judged
by other than the sponsor;
``(ff) the method used in judging;
``(gg) the date by which the winner or winners will
be determined and the date or process by which prizes
will be awarded;
``(hh) the quantity, estimated retail value, and
nature of each prize; and
``(ii) the schedule of any payments made over time;
or
``(C) includes any facsimile check that does not contain a
statement on the check itself that such check is not a
negotiable instrument and has no cash value.
``(4) Matter that appears in a magazine, newspaper, or other
periodical shall be exempt from paragraph (2) if such matter--
``(A) is not directed to a named individual; or
``(B) does not include an opportunity to make a payment or
order a product or service.
``(5) Any statement, notice, or disclaimer required under paragraph
(3) shall be clearly and conspicuously displayed. Any statement,
notice, or disclaimer required under subclause (I) or (II) of paragraph
(3)(A)(ii) shall be displayed more conspicuously than would otherwise
be required under the preceding sentence.
``(6) In the enforcement of paragraph (3), the Postal Service shall
consider all of the materials included in the mailing and the material
and language on andvisible through the envelope or outside cover or
wrapper in which those materials are mailed.
``(l)(1) Any person who uses the mails for any matter to which
subsection (h), (i), (j), or (k) applies shall adopt reasonable
practices and procedures to prevent the mailing of such matter to any
person who, personally or through a conservator, guardian, or
individual with power of attorney--
``(A) submits to the mailer of such matter a written request
that such matter should not be mailed to such person; or
``(B)(i) submits such a written request to the attorney
general of the appropriate State (or any State government
officer who transmits the request to that attorney general);
and
``(ii) that attorney general transmits such request to the
mailer.
``(2) Any person who mails matter to which subsection (h), (i), (j),
or (k) applies shall maintain or cause to be maintained a record of all
requests made under paragraph (1). The records shall be maintained in a
form to permit the suppression of an applicable name at the applicable
address for a 5-year period beginning on the date the written request
under paragraph (1) is submitted to the mailer.''.
SEC. 4. POSTAL SERVICE ORDERS TO PROHIBIT DECEPTIVE MAILINGS.
Section 3005(a) of title 39, United States Code, is amended--
(1) by striking ``or'' after ``(h),'' each place it appears;
and
(2) by inserting ``, (j), or (k)'' after ``(i)'' each place
it appears.
SEC. 5. TEMPORARY RESTRAINING ORDER FOR DECEPTIVE MAILINGS.
(a) In General.--Section 3007 of title 39, United States Code, is
amended--
(1) by redesignating subsection (b) as subsection (c); and
(2) by striking subsection (a) and inserting the following:
``(a)(1) In preparation for or during the pendency of proceedings
under section 3005, the Postal Service may, under the provisions of
section 409(d), apply to the district court in any district in which
mail is sent or received as part of the alleged scheme, device,
lottery, gift enterprise, sweepstakes, skill contest, or facsimile
check or in any district in which the defendant is found, for a
temporary restraining order and preliminary injunction under the
procedural requirements of rule 65 of the Federal Rules of Civil
Procedure.
``(2)(A) Upon a proper showing, the court shall enter an order which
shall--
``(i) remain in effect during the pendency of the statutory
proceedings, any judicial review of such proceedings, or any
action to enforce orders issued under the proceedings; and
``(ii) direct the detention by the postmaster, in any and all
districts, of the defendant's incoming mail and outgoing mail,
which is the subject of the proceedings under section 3005.
``(B) A proper showing under this paragraph shall require proof of a
likelihood of success on the merits of the proceedings under section
3005.
``(3) Mail detained under paragraph (2) shall--
``(A) be made available at the post office of mailing or
delivery for examination by the defendant in the presence of a
postal employee; and
``(B) be delivered as addressed if such mail is not clearly
shown to be the subject of proceedings under section 3005.
``(4) No finding of the defendant's intent to make a false
representation or to conduct a lottery is required to support the
issuance of an order under this section.
``(b) If any order is issued under subsection (a) and the proceedings
under section 3005 are concluded with the issuance of an order under
that section, any judicial review of the matter shall be in the
district in which the order under subsection (a) was issued.''.
(b) Repeal.--
(1) In general.--Section 3006 of title 39, United States
Code, and the item relating to such section in the table of
sections for chapter 30 of such title are repealed.
(2) Conforming amendments.--(A) Section 3005(c) of title 39,
United States Code, is amended by striking ``section and
section 3006 of this title,'' and inserting ``section,''.
(B) Section 3011(e) of title 39, United States Code, is
amended by striking ``3006, 3007,'' and inserting ``3007''.
SEC. 6. CIVIL PENALTIES AND COSTS.
Section 3012 of title 39, United States Code, is amended--
(1) in subsection (a) by striking ``$10,000 for each day that
such person engages in conduct described by paragraph (1), (2),
or (3) of this subsection.'' and inserting ``$50,000 for each
mailing of less than 50,000 pieces; $100,000 for each mailing
of 50,000 to 100,000 pieces; with an additional $10,000 for
each additional 10,000 pieces above 100,000, not to exceed
$2,000,000.'';
(2) in paragraphs (1) and (2) of subsection (b) by inserting
after ``of subsection (a)'' the following: ``, (c), or (d)'';
(3) by redesignating subsections (c) and (d), as subsections
(e) and (f), respectively; and
(4) by inserting after subsection (b) the following:
``(c)(1) In any proceeding in which the Postal Service may issue an
order under section 3005(a), the Postal Service may in lieu of that
order or as part of that order assess civil penalties in an amount not
to exceed $25,000 for each mailing of less than 50,000 pieces; $50,000
for each mailing of 50,000 to 100,000 pieces; with an additional $5,000
for each additional 10,000 pieces above 100,000, not to exceed
$1,000,000.
``(2) In any proceeding in which the Postal Service assesses
penalties under this subsection the Postal Service shall determine the
civil penalty taking into account the nature, circumstances, extent,
and gravity of the violation or violations of section 3005(a), and with
respect to the violator, the ability to pay the penalty, the effect of
the penalty on the ability of the violator to conduct lawful business,
any history of prior violations of such section, the degree of
culpability and other such matters as justice may require.
``(d) Any person who violates section 3001(l) shall be liable to the
United States for a civil penalty not to exceed $10,000 for each
mailing to an individual.''.
SEC. 7. ADMINISTRATIVE SUBPOENAS.
(a) In General.--Chapter 30 of title 39, United States Code, is
amended by adding at the end the following:
``Sec. 3016. Administrative subpoenas
``(a) Subpoena Authority.--
``(1) Investigations.--
``(A) In general.--In any investigation conducted
under section 3005(a), the Postmaster General may
require by subpoena the production of any records
(including books, papers, documents, and other tangible
things which constitute or contain evidence) which the
Postmaster General considers relevant or material to
such investigation.
``(B) Condition.--No subpoena shall be issued under
this paragraph except in accordance with procedures,
established by the Postal Service, requiring that--
``(i) a specific case, with an individual or
entity identified as the subject, be opened
before a subpoena is requested;
``(ii) appropriate supervisory and legal
review of a subpoena request be performed; and
``(iii) delegation of subpoena approval
authority be limited to the Postal Service's
General Counsel or a Deputy General Counsel.
``(2) Statutory proceedings.--In any statutory proceeding
conducted under section 3005(a), the Judicial Officer may
require by subpoena the attendance and testimony of witnesses
and the production of any records (including books, papers,
documents, and other tangible things which constitute or
contain evidence) which the Judicial Officer considers relevant
or material to such proceeding.
``(3) Rule of construction.--Nothing in paragraph (2) shall
be considered to apply in any circumstance to which paragraph
(1) applies.
``(b) Service.--
``(1) Service within the united states.--A subpoena issued
under this section may be served by a person designated under
section 3061 of title 18 at any place within the territorial
jurisdiction of any court of the United States.
``(2) Foreign service.--Any such subpoena may be served upon
any person who is not to be found within the territorial
jurisdiction of any court of the United States, in such manner
as the Federal Rules of Civil Procedure prescribe for service
in a foreign country. To the extent that the courts of the
United States may assert jurisdiction over such person
consistent with due process, the United States District Court
for the District of Columbia shall have the same jurisdiction
to take any action respecting compliance with this section by
such person that such court would have if such person were
personally within the jurisdiction of such court.
``(3) Service on business persons.--Service of any such
subpoena may be made upon a partnership, corporation,
association, or other legal entity by--
``(A) delivering a duly executed copy thereof to any
partner, executive officer, managing agent, or general
agent thereof, or to any agent thereof authorized by
appointment or by law to receive service of process on
behalf of such partnership, corporation, association,
or entity;
``(B) delivering a duly executed copy thereof to the
principal office or place of business of the
partnership, corporation, association, or entity; or
``(C) depositing such copy in the United States
mails, by registered or certified mail, return receipt
requested, duly addressed to such partnership,
corporation, association, or entity at its principal
office or place of business.
``(4) Service on natural persons.--Service of any subpoena
may be made upon any natural person by--
``(A) delivering a duly executed copy to the person
to be served; or
``(B) depositing such copy in the United States
mails, by registered or certified mail, return receipt
requested, duly addressed to such person at his
residence or principal office or place of business.
``(5) Verified return.--A verified return by the individual
serving any such subpoena setting forth the manner of such
service shall be proof of such service. In the case of service
by registered or certified mail, such return shall be
accompanied by the return post office receipt of delivery of
such subpoena.
``(c) Enforcement.--
``(1) In general.--Whenever any person, partnership,
corporation, association, or entity fails to comply with any
subpoena duly served upon him, the Postmaster General may
request that the Attorney General seek enforcement of the
subpoena in the district court of the United States for any
judicial district in which such person resides, is found, or
transacts business, and serve upon such person a petition for
an order of such court for the enforcement of this section.
``(2) Jurisdiction.--Whenever any petition is filed in any
district court of the United States under this section, such
court shall have jurisdiction to hear and determine the matter
so presented, and to enter such order or orders as may be
required to carry into effect the provisions of this section.
Any final order entered shall be subject to appeal under
section 1291 of title 28. Any disobedience of any final order
entered under this section by any court may be punished as
contempt.
``(d) Disclosure.--Any documentary material provided pursuant to any
subpoena issued under this section shall be exempt from disclosure
under section 552 of title 5.''.
(b) Regulations.--Not later than 120 days after the date of enactment
of this section, the Postal Service shall promulgate regulations
setting out the procedures the Postal Service will use to implement the
amendment made by subsection (a).
(c) Semiannual Reports.--Section 3013 of title 39, United States
Code, is amended by striking ``and'' at the end of paragraph (4), by
redesignating paragraph (5) as paragraph (6), and by inserting after
paragraph (4) the following:
``(5) the number of cases in which the authority described in
section 3016 was used, and a comprehensive statement describing
how that authority was used in each of those cases; and''.
(d) Technical and Conforming Amendment.--The table of sections for
chapter 30 of title 39, United States Code, is amended by adding at the
end the following:
``3016. Administrative subpoenas.''.
SEC. 8. REQUIREMENTS OF PROMOTERS OF SKILL CONTESTS OR SWEEPSTAKES
MAILINGS.
(a) In General.--Chapter 30 of title 39, United States Code (as
amended by section 7 of this Act) is amended by adding after section
3016 the following:
``Sec. 3017. Nonmailable skill contests or sweepstakes matter;
notification to prohibit mailings
``(a) Definitions.--In this section--
``(1) the term `promoter' means any person who--
``(A) originates and mails any skill contest or
sweepstakes, except for any matter described in section
3001(k)(4); or
``(B) originates and causes to be mailed any skill
contest or sweepstakes, except for any matter described
in section 3001(k)(4);
``(2) the term `removal request' means a request stating that
an individual elects to have the name and address of such
individual excluded from any list used by a promoter for
mailing skill contests or sweepstakes;
``(3) the terms `skill contest', `sweepstakes', and `clearly
and conspicuously displayed' have the same meanings as given
them in section 3001(k); and
``(4) the term `duly authorized person', as used in
connection with an individual, means a conservator or guardian
of, or person granted power of attorney by, such individual.
``(b) Nonmailable Matter.--
``(1) In general.--Matter otherwise legally acceptable in the
mails described in paragraph (2)--
``(A) is nonmailable matter;
``(B) shall not be carried or delivered by mail; and
``(C) shall be disposed of as the Postal Service
directs.
``(2) Nonmailable matter described.--Matter described in this
paragraph is any matter that--
``(A) is a skill contest or sweepstakes, except for
any matter described in section 3001(k)(4); and
``(B)(i) is addressed to an individual who made an
election to be excluded from lists under subsection
(d); or
``(ii) does not comply with subsection (c)(1).
``(c) Requirements of Promoters.--
``(1) Notice to individuals.--Any promoter who mails a skill
contest or sweepstakes shall provide with each mailing a
statement that--
``(A) is clearly and conspicuously displayed;
``(B) includes the address or toll-free telephone
number of the notification system established under
paragraph (2); and
``(C) states that the notification system may be used
to prohibit the mailing of all skill contests or
sweepstakes by that promoter to such individual.
``(2) Notification system.--Any promoter that mails or causes
to be mailed a skill contest or sweepstakes shall establish and
maintain a notification system that provides for any individual
(or other duly authorized person) to notify the system of the
individual's election to have the name and address of the
individual excluded from all lists of names and addresses used
by that promoter to mail any skill contest or sweepstakes.
``(d) Election To Be Excluded From Lists.--
``(1) In general.--An individual (or other duly authorized
person) may elect to exclude the name and address of that
individual from all lists of names and addresses used by a
promoter of skill contests or sweepstakes by submitting a
removal request to the notification system established under
subsection (c).
``(2) Response after submitting removal request to the
notification system.--Not later than 60 calendar days after a
promoter receives a removal request pursuant to an election
under paragraph (1), the promoter shall exclude the
individual's name and address from all lists of names and
addresses used by that promoter to select recipients for any
skill contest or sweepstakes.
``(3) Effectiveness of election.--An election under paragraph
(1) shall remain in effect, unless an individual (or other duly
authorized person) notifies the promoter in writing that such
individual--
``(A) has changed the election; and
``(B) elects to receive skill contest or sweepstakes
mailings from that promoter.
``(e) Private Right of Action.--
``(1) In general.--An individual who receives one or more
mailings in violation of subsection (d) may, if otherwise
permitted by the laws or rules of court of a State, bring in an
appropriate court of that State--
``(A) an action to enjoin such violation,
``(B) an action to recover for actual monetary loss
from such a violation, or to receive $500 in damages
for each such violation, whichever is greater, or
``(C) both such actions.
It shall be an affirmative defense in any action brought under
this subsection that the defendant has established and
implemented, with due care, reasonable practices and procedures
to effectively prevent mailings in violation of subsection (d).
If the court finds that the defendant willfully or knowingly
violated subsection (d), the court may, in its discretion,
increase the amount of the award to an amount equal to not more
than 3 times the amount available under subparagraph (B).
``(2) Action allowable based on other sufficient notice.--A
mailing sent in violation of section 3001(l) shall be
actionable under this subsection, but only if such an action
would not also be available under paragraph (1) (as a violation
of subsection (d)) based on the same mailing.
``(f) Promoter Nonliability.--A promoter shall not be subject to
civil liability for the exclusion of an individual's name or address
from any list maintained by that promoter for mailing skill contests or
sweepstakes, if--
``(1) a removal request is received by the promoter's
notification system; and
``(2) the promoter has a good faith belief that the request
is from--
``(A) the individual whose name and address is to be
excluded; or
``(B) another duly authorized person.
``(g) Prohibition on Commercial Use of Lists.--
``(1) In general.--
``(A) Prohibition.--No person may provide any
information (including the sale or rental of any name
or address) derived from a list described in
subparagraph (B) to another person for commercial use.
``(B) Lists.--A list referred to under subparagraph
(A) is any list of names and addresses (or other
related information) compiled from individuals who
exercise an election under subsection (d).
``(2) Civil penalty.--Any person who violates paragraph (1)
shall be assessed a civil penalty by the Postal Service not to
exceed $2,000,000 per violation.
``(h) Civil Penalties.--
``(1) In general.--Any promoter--
``(A) who recklessly mails nonmailable matter in
violation of subsection (b) shall be liable to the
United States in an amount of $10,000 per violation for
each mailing to an individual of nonmailable matter; or
``(B) who fails to comply with the requirements of
subsection (c)(2) shall be liable to the United States.
``(2) Enforcement.--The Postal Service shall, in accordance
with the same procedures as set forth in section 3012(b),
provide for the assessment of civil penalties under this
section.''.
(b) Technical and Conforming Amendments.--The table of sections for
chapter 30 of title 39, United States Code, is amended by adding after
the item relating to section 3016 the following:
``3017. Nonmailable skill contests or sweepstakes matter; notification
to prohibit mailings.''.
(c) Effective Date.--This section shall take effect 1 year after the
date of enactment of this Act.
SEC. 9. STATE LAW NOT PREEMPTED.
(a) In General.--Nothing in the provisions of this Act (including the
amendments made by this Act) or in the regulations promulgated under
such provisions shall be construed to preempt any provision of State or
local law that imposes more restrictive requirements, regulations,
damages, costs, or penalties. No determination by the Postal Service
that any particular piece of mail or class of mail is in compliance
with such provisions of this Act shall be construed to preempt any
provision of State or local law.
(b) Effect on State Court Proceedings.--Nothing contained in this
section shall be construed to prohibit an authorized State official
from proceeding in State court on the basis of an alleged violation of
any general civil or criminal statute of such State or any specific
civil or criminal statute of such State.
SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.
(a) References to Repealed Provisions.--Section 3001(a) of title 39,
United States Code, is amended by striking ``1714,'' and ``1718,''.
(b) Conformance With Inspector General Act of 1978.--
(1) In general.--Section 3013 of title 39, United States
Code, is amended--
(A) by striking ``Board'' each place it appears and
inserting ``Inspector General'';
(B) in the third sentence by striking ``Each such
report shall be submitted within sixty days after the
close of the reporting period involved'' and inserting
``Each such report shall be submitted within 1 month
(or such shorter length of time as the Inspector
General may specify) after the close of the reporting
period involved''; and
(C) by striking the last sentence and inserting the
following:
``The information in a report submitted under this section to the
Inspector General with respect to a reporting period shall be included
as part of the semiannual report prepared by the Inspector General
under section 5 of the Inspector General Act of 1978 for the same
reporting period. Nothing in this section shall be considered to permit
or require that any report by the Postmaster General under this section
include any information relating to activities of the Inspector
General.''.
(2) Effective date.--This subsection shall take effect on the
date of enactment of this Act, and the amendments made by this
subsection shall apply with respect to semiannual reporting
periods beginning on or after such date of enactment.
(3) Savings provision.--For purposes of any semiannual
reporting period preceding the first semiannual reporting
period referred to in paragraph (2), the provisions of title
39, United States Code, shall continue to apply as if the
amendments made by this subsection had not been enacted.
SEC. 11. EFFECTIVE DATE.
Except as provided in section 8 or 10(b), this Act shall take effect
120 days after the date of enactment of this Act.
I. Purpose and Summary
H.R. 170 would establish strong consumer protections to
prevent a number of types of deceptive mailings. It will impose
various requirements on sweepstakes mailings, skill contests,
facsimile checks, and mailings made to look like government
documents. The reported bill will establish strong financial
penalties, provide the Postal Service with additional authority
to investigate and stop deceptive mailings, and preserve the
ability of states to impose stricter requirements on such
mailings.
H.R. 170, as amended by the substitute agreed to by the
Committee on October 28, would require sweepstakes mailings to
clearly and conspicuously display: (1) a statement in the
mailing, including the rules and order form, that no purchase
is necessary to enter the contest; (2) a statement that a
purchase would not improve the recipient's chances of winning;
(3) all terms and conditions of the sweepstakes promotion,
including the rules and entry procedures in language that is
easy to find, read and understand; (4) the sponsor or mailer of
the promotion and the principal place of business or other
contact address of the sponsor or mailer; and (5) rules that
clearly state the estimated odds of winning each prize, the
quantity, estimated retail value, and nature of each prize, and
the schedule of any payments made over time. In addition, the
bill would prohibit sweepstakes mailings from making certain
statements, including statements that an entry must be
accompanied by an order or payment for a product previously
ordered or that an individual is a winner of a prize unless
that individual actually has won a prize.
The bill also imposes requirements on skill contest
mailings. Skill contests are defined as a puzzle, game,
competition, or other contest in which a prize is awarded based
on skill, and a purchase, payment, or donation is required.
Skill contests mailings would be required to follow provisions
on rules and disclosure of the sponsor similar to sweepstakes
promotions. Skill contests mailings also must disclose: (1) the
number of rounds, the cost to enter each round, whether
subsequent rounds will be more difficult, and the maximum cost
to enter all rounds; (2) the percentage of entrants who may
solve correctly the skill contest; (3) the identity of the
judges and the method used in judging; and (4) the date the
winner will be determined as well as quantity and estimated
value of each prize.
The bill imposes new federal standards on facsimile checks
sent in any mailing. These checks must include a statement on
the check itself that it is non-negotiable and has no cash
value.
The legislation strengthens existing law on government
look-alike mailings. Such mailings often come in a brown
envelope and may use terms that imply a connection with the
federal government, but actually are solicitations by a private
sector company for a product or service. To address government
look-alike mailings, the bill prohibits mailings that imply a
connection to, approval, or endorsement by the federal
government through the misleading use of a seal, insignia,
reference to the Postmaster General, citation to a federal
statute, trade or brand name, or any other term or symbol,
unless the mailings carry two disclaimers already contained in
existing law.
Additionally, the bill prohibits mailings that contain any
false representation implying that federal government benefits
or services will be affected by any purchase or non-purchase.
Any mailing that offers to sell any product or service provided
by the federal government without cost must contain a notice to
that effect.
In addition to restrictions on the deceptive mailings
themselves, the bill imposes new obligations on the companies
sending sweepstakes and skill contests. Any person who uses the
mail for any covered mailing would be required to adopt
reasonable practices and procedures to prevent the mailing of
these materials to any person, who by virtue of a written
request, including requests made by a conservator, guardian,
individual with power of attorney or a state attorney general,
states their intent not to receive such mailings. The bill
requires these persons or companies to maintain records of such
requests for five years.
The bill further requires companies sending sweepstakes or
skill contests to establish a notification system, which would
allow consumers to call a toll-free number to be removed from
the mailing lists of the company. All sweepstakes or skill
contest mailings would be required to contain the contact
information for the company's notification system. The bill
establishes a private right of action in state court for
citizens who receive a follow-up mailing despite having
requested removal from a mailer's lists. A similar provision
was enacted as part of the Telephone Consumer Protection Act of
1991 (47 U.S.C. 227).
Under current law, the United States Postal Service (USPS)
has inadequate authority to investigate, penalize, and stop
deceptive mailings. The USPS does not have subpoena authority,
is unable to obtain an order to stop deceptive mailings
nationwide, and may only seek financial penalties when a
company violates an order previously imposed by the USPS for
sending deceptive mailings. This bill addresses these
weaknesses in current law by granting the USPS subpoena
authority, nationwide stop mail authority, and the ability to
impose civil penalties.
The bill also increases the civil penalties that the USPS
may impose. The civil penalties for sending mailings that do
not comply with the bill would be up to $25,000 for each
mailing of less than 50,000 pieces; $50,000 for each mailing of
50,000 to 100,000 pieces; with an additional $5,000 for each
additional 10,000 pieces above 100,000, not to exceed
$1,000,000. Any person who, through the use of the mail, evades
or attempts to evade the terms of an order would be liable for
twice the amount of this civil penalty.
The bill also recognizes the states' strong role in
investigating and prosecuting deceptive mailings. The bill
states that nothing in the Act shall preempt any provision of
state or local law that imposes more restrictive requirements,
regulations, damages, costs or penalties. Nothing contained in
the bill shall be construed to prohibit an authorized state
official from proceeding in state court on the basis of an
alleged violation of any civil or criminal statute of such
state.
Nearly all provisions of the bill would take effect 120
days after the date of enactment.
II. Background and Need for the Legislation
The direct marketing industry has used sweepstakes mailings
for over 30 years as a method to promote the sale of their
products. Companies use sweepstakes to sell magazines and other
merchandise, while other groups use sweepstakes mailings to
raise funds or promote services.
While most sweepstakes are legitimate and appropriate
marketing devices, some of these promotions can be used to
defraud and deceive consumers. Four major sweepstakes firms
each send out hundreds of millions of mailings every year, and
there is evidence that a significant number of individuals make
excessive purchases in response to these mailings. In the
aggregate, the sweepstakes industry has sent over one billion
mailings per year in recent years. Deceptive mailings include a
wide variety of promotions, including sweepstakes, skill
contests, solicitations, and sales of goods or services by
mail.
The Magazine Publishers of America estimates that Americans
annually spend $7 billion on magazine subscriptions, and 12
percent of those sales derive from sweepstakes promotions.
Thus, sweepstakes companies generate nearly $1 billion of
magazine revenues per year. Indeed, sweepstakes mailings
account for nearly one-third of all 156 million new magazine
subscriptions sold each year.
In the last 20 years, major sweepstakes companies have
greatly increased their grand prizes and the sophistication of
their marketing practices. They conduct a variety of contests
every year, many offering a multi-million-dollar prize.
Companies use many traditional direct marketing principles,
such as targeting consumers according to timing, frequency and
monetary value or the dollar amount of the purchases.
Sweepstakes companies are constantly testing their
marketing appeals, and have generally concluded that consumers
make purchases in response to mailings with large prizes,
``involvement devices'' such as stickers and stamps, and
certain types of personalized appeals. As with many direct mail
companies, sweepstakes firms send a large number of mailings to
the general public that are often followed by targeted mailings
to specialized lists of repeat customers.
Mass mailings can be personalized within several places in
a letter, and can feature symbols, devices, or documents that
make them look unique. In general, the goal of such mass
mailings is to distinguish them from other mail, enticing the
consumer to open the envelope. Upon viewing the contents of
these mass mailings, the consumer finds a personalized mailing
that offers a message that can convince the consumer to make a
purchase.
Those on a target list can be sent even more sophisticated
mailings, informing them when they became a customer, how many
purchases they have made recently, and when they last entered a
contest without making a purchase. Such mailings reinforce the
concept that purchases are linked with receiving sweepstakes
mailings and, therefore, with winning a prize. The implication,
sometimes made by a direct statement, is that if the customer
does not purchase a product, they may not receive the future
sweepstakes mailings necessary to win a prize. Sweepstakes
mailers often advertise the same contest in multiple mailings,
thereby confusing targeted or vulnerable recipients and
enticing them to make several purchases for the same contest.
The tactics of sweepstakes mailings have generated
thousands of consumer complaints, including complaints to state
Attorneys General, the Federal Trade Commission, the Postal
Service, consumer groups, and Members of Congress.
Skill contests differ from sweepstakes in that the consumer
must demonstrate skill, such as solving a word puzzle, in order
to win the prize. The key difference between a skill contest
and a sweepstakes is that a skill contest does not rely on
chance, and may require consideration to participate. Winning a
sweepstakes must be based solely on chance and no purchase can
be required. Like sweepstakes promotions, skill contests may
also be used in a deceptive manner to promote unnecessary
purchases or payments.
Consumers may be similarly deceived by skill contests
offering large prizes in return for the payment of a small
``judging fee.'' Responding to such mailings by sending money
may only result in the consumer receiving even more mailings
with additional skill contests that must be completed before
any prize is awarded. Many skill contests have several levels
that culminate in a complex contest that is extremely
difficult. Thus, by the time the consumer is close to actually
winning a prize, they have invested substantial sums of money
solving relatively easy puzzles only to be presented with an
extremely difficult puzzle that they have very little chance of
solving.
Facsimile checks are also used in promotional mailings,
sometimes by operators of sweepstakes or skill contests, to
catch the eye of the recipient. Mailings may be designed so
that such facsimile checks are displayed through a window
envelope, prompting many consumers to open the mailing. The
facsimile check itself may look real in many respects, such as
having an authorized signature and showing the name of a
financial institution. Such facsimile checks can deceive
consumers.
Mailings may also be deceptive through the use of a variety
of terms or symbols designed to make the mailing appear to be
connected or endorsed by the federal government. Some mailings
may offer to sell a product the government provides for free
without so indicating.
III. Legislative Hearings and Committee Actions
H.R. 170 was introduced on January 6, 1999, by Mr. LoBiondo
of New Jersey and Mr. Condit of California and referred to the
Committee on Government Reform. On January 20, 1999, the bill
was subsequently referred to the Postal Service Subcommittee.
The measure was considered by the Subcommittee on September 30,
1999. H.R. 170 was approved as amended by voice vote, and
forwarded to the full Committee. On October 28, 1999, the full
Committee on Government Reform considered H.R. 170 and passed
the measure as amended by voice vote.
IV. Committee Hearings and Written Testimony
Both the Senate and the House have had several bills
introduced regarding deceptive sweepstakes mailings during the
105th and the 106th Congresses.
The Postal Service Subcommittee conducted a hearing on the
issue on August 4, 1999, because of the deep concern regarding
the need to protect recipients, particularly the elderly, who
fall prey to the deceptive information transmitted in the
mailings, while at the same time recognizing that there is a
commercial aspect to legitimate sweepstakes mailing that must
be balanced against fraudulent and misleading mailings.
Representative LoBiondo and Representative Rogan testified
for their own bills, H.R. 170 and H.R. 237, which were both
introduced on January 6, 1999. The Subcommittee also invited
witnesses who commented on these bills as well as S. 335, the
Senate passed legislation, the Deceptive Mail Prevention and
Enforcement Act.
Two sweepstakes bills, H.R. 2678 and H.R. 2731, were
introduced in the House and referred to the subcommittee after
the hearing and were, therefore, not considered at that time.
hearing conducted by the subcommittee on the postal service
In addition to Representatives LoBiondo and Rogan, the
witnesses at the Subcommittee hearing on August 4, 1999,
included the Honorable Orson Swindle, Commissioner, Federal
Trade Commission (FTC); Ken Hunter, Chief Postal Inspector,
United States Postal Inspection Service; Bernard L. Ungar,
Director, Government Business Operations Issues, General
Accounting Office (GAO); Sara Cooper, National Consumers League
(NCL); Virginia Tierney, American Association of Retired
Persons (AARP); Lee M. Cassidy, National Federation of
Nonprofits (NFN); Jerry Cerasale, Direct Marketing Association
(DMA); Michael Pashby, Magazine Publishers of America (MPA);
Linda Goldstein, Promotion Marketing Association (PMA).
Commissioner Swindle of the FTC testified that the Federal
Trade Commission Act prohibits unfair methods of competition
and deceptive practices affecting commerce and has a long
history of challenging deceptive mail promotions. Its recent
efforts include ``Project Mailbox,'' a joint federal-state
initiative focusing on deceptive use of sweepstakes, prize
promotions and other misleading marketing techniques in mail
solicitations. The FTC systemically collects and analyzes
consumer complaint data, which is currently about 7,000
contacts a week, and more than 423,000 consumer complaints and
inquiries. The Commissioner testified that the legislation
covering sweepstakes was consistent with FTC's Telemarketing
Sales Rule (TSR) which covers telemarketing and consumer fraud
in that they both ensure that consumers receive information
necessary to prevent making purchasing decisions on false or
misleading information.
The Inspection Service testified that among its duties, it
is responsible for protecting consumers from being victimized
by fraudulent schemes and other crimes using the U.S. mails
system. Presently, 39 U.S.C. Sec. 3005 permits the Postal
Service to take administrative action to return mail sent in
response to a deceptive mailing, however, the proceedings may
be time-consuming. Section 3007 authorizes the U.S. district
courts to issue an injunction to prevent consumer losses while
administrative proceedings are pending; it also allows the U.S.
district courts to issue temporary restraining orders and
preliminary injunctions. Other statutes permit the Postal
Service to withhold mail sent to false or fictitious names or
addresses. However, the Inspection Service testified that
despite some success in protecting consumers, unscrupulous
promoters have capitalized on the weaknesses of the statutes
and continue to exploit the public. Though there are provisions
for false representations in lotteries, there is no such
provision for solicitations using sweepstakes, prize
promotions, games of skill, or facsimile checks. Additionally,
Mr. Hunter testified that the statues offer little in use of
penalties to deter the fraudulent use of the mails. The
Inspection Service is limited by the lack of subpoena
authority. They asked for administrative subpoena authority
such as given to other federal agencies whereby only records,
document and other non-testimonial material relevant to the
investigation could be compelled. The witness testified that
because some promoters of fraudulent mailings use multiple
fictitious names and addresses, consumers could be victimized
many times by the same promoter. They suggested that the
solicitor's name and principal place of business should be
disclosed in a clear and conspicuous manner. It was suggested
that the Inspection Service be permitted to detain mail to the
promoter for temporary periods to forestall consumer injury.
However, as some promoters receive mail in more than one
judicial district, the Postal Service and the Department of
Justice must apply to each district court in the district where
mail is received. This can be avoided by allowing the court in
any district where the promoter receives mail to order the
Postal Service to detain mail, by virtue of a temporary
restraining order, received at any address in response to the
fraudulent scheme. The Postal Inspection Service does not
advocate preemption of state and local statutes.
Mr. Ungar of the GAO testified that consumer problems with
deceptive mailings appear substantial, although comprehensive
data to indicate the full extent of consumer problems with
deceptive mailings were unavailable. However, studies conducted
by the GAO and a national market research firm provided
additional data regarding telephone pay per call schemes,
telephone carrier switching (or slamming), prizes/sweepstakes/
gifts schemes that solicit advance fees prior to participation,
complaints against credit bureau policies, and third party debt
collection.
The National Consumers League testified that there was a
need for a central source of advice on telemarketing and
assistance for fraud. The NCL created the National Fraud
Information Center, which is a hotline for consumers to call
for advice and to report suspected fraud. The information is
relayed to more than 160 federal, state and local law
enforcement agencies. Many telemarketing schemes are initiated
by mail announcing that the consumer has won a prize and they
should call to claim their winnings after paying a fee. Elderly
people are more susceptible to falling for such schemes. It is
becoming increasingly difficult to distinguish between
legitimate and fraudulent sweepstakes. Even ``no purchase
necessary'' messages do not convince consumers that a purchase
will not put them in a better winning category. The NCL
testified that a clear and prominent disclosure indicating that
the mailing is merely an invitation to enter a game of chance,
the odds of winning and that making apurchase will not in any
way improve the chance of winning is essential. They testified that the
Postal Inspection Service need more tools to stop fraudulent and
deceptive mailings and must be able to issue subpoenas to help in its
investigations.
AARP testified that it has for the past three years
campaigned against charity and telemarketing fraud because of
targeting of older Americans. It has taken steps to educate its
members and the public. In their studies, it was reported that
40 percent of older American, mean age of 72, respond to
sweepstakes solicitation. Those who ask to be billed later are
more likely to continue participation in the sweepstakes.
Twenty-three percent of those who participate believe that
purchasing something might increase their chances of winning,
in spite of disclaimers stating that a purchase is not
necessary to win. AARP endorsed provisions to require mailings
to include language stating that a purchase is not necessary to
win, providing definition and guidelines to games of skill and
providing stiff penalties for noncompliance. Also, it endorses
enhanced subpoena authority to the Postal Inspection Service to
stop deceptive mail and a notification system to provide
consumers with numbers to call to have their names removed from
the mailing lists of companies that promote products and
services through sweepstakes. Both NCL and AARP testified in
support of adding a private right of action to the bill,
similar to that that exists in the Telephone Consumer
Protection Act.
The National Federation of Nonprofits (NFN) testified that
charities especially rely on public trust to raise funds. They
said that deceptive mailings should be prevented, but
legislation should not discourage creative marketing, nor
permit reasonable people to be deceived. They testified that
the Senate bill might unnecessarily restrict charities and
other nonprofit organization from seeking funds. NFN asked that
charities and other nonprofit organizations should be exempt
from the provisions of the legislation. Furthermore, they
requested a 90-day period within which names can be added to
the ``do not mail'' list, rather than 45 days.
The Direct Marketing Association (DMA) testified that many
of its 4,800 members utilize sweepstakes promotions to
advertise their products. They reported that 80 percent of
American households have received sweepstakes and 56 percent of
those have entered. DMA testified that fraudulent operators
required a payment at entry, including shipping and handling
charges. DMA supports the increased authority for the Postal
Service to issue subpoenas for information, after providing due
process, and stop mail orders issued in one U.S. District Court
to be enforceable in all Districts in the United States. DMA
testified that 9 out of 10 sweepstakes participants do not make
a purchase. However, DMA supports a national standard to help
avoid confusion and to help those who are adversely impacted by
these mailing to no longer receive such promotions. DMA opposes
any legislation that would impede commercial speech; they
oppose the legislative provisions that prescribe specific
language, placement and size of font. They advocate that the
bill establish a national standard, and not delegate authority
to the Postal Service or another federal agency to establish
them. Commenting on the manager's amendment in the Senate, the
DMA supported the Federal Trade Commission's use of the terms
``clear and conspicuous'' and opposed the inclusion of the word
``prominent'' as confusing and not adding to the requirements
in the legislation. However, DMA supports significant penalties
for violation of the disclosures and the need for national
standards. DMA supports the inclusion of an individual, private
right of action in the bill, similar to the Telephone Consumer
Protection Act.
Michael Pashby of the Magazine Publishers of America (MPA),
testified that sweepstakes has been used as a marketing tool in
that industry for more than 30 years. The organization supports
legislative changes to remedy the controversy in sweepstakes
mailing practices and a uniform national standard for
disclosures. MPA endorses self-regulatory efforts and consumer
education, which they implemented in January to identify
consumers who over subscribe, and reminding them of the ``no
purchase'' clause. They also support the opt-out provision of
consumers to deter future mailings. MPA is a founding member of
the Freedom to Advertise Coalition, which is against the use of
express wording, type size, style or place of sweepstakes
disclosures. They are against giving additional rulemaking
authority to the Postal Service because of the belief that the
USPS is not subject to the Administrative Procedure Act and the
public hearing and due process protections of law. MPA
advocates the ``clear and conspicuous'' standard as used by the
FTC and has concerns with the Manager's Amendment to insert
``prominently'' in the formula. PMA supports the company-by-
company opt-out provision, and a preemption provision.
Testifying on behalf of the Promotion Marketing Association
(PMA) Linda Goldstein said that PMA supported strong consumer
education to assist consumers in distinguishing between
fraudulent and legitimate promotions. She said that there is
great concern because of the decline in consumer confidence in
sweepstakes resulting in loss of business and jobs. Many
companies are instituting policies to identify high volume
purchasers and to help them understand that purchase is not
necessary to enter sweepstakes. Where appropriate, they are
also instituting refunds and cancellations of orders. PMA
supports legislation establishing uniform, minimum national
standards for sweepstakes mailing that will curb fraudulent and
deceptive practices while not restricting legitimate
sweepstakes as an effective marketing tool. They caution that
sweepstakes are a commercially protected form of free speech
and therefore the legislation should conform to first amendment
principles. PMA suggests thatthe legislation should be flexible
enough to permit individual marketers to comply with different formats
in their promotions. They support the clear and conspicuous language of
the Senate bill rather than a uniform format that is more restrictive.
PMA supports the affirmative disclosures relating to no purchase
necessary language, numerical odds of winning and terms, conditions of
the sweepstakes and the notification provision for the name removal
procedure. However, magazines because of the manner in which the
consumer acquires them, may find it burdensome to comply with the
mandated disclosures. PMA, therefore, urges an exemption for magazines
from disclosure provisions, as many marketers would place their
advertisements in media other than magazines and newspapers. PMA
opposes the Manager's Amendment to add the word ``prominently'' to the
disclosure provisions, but supports the original ``clear and
conspicuous'' language. PMA also was concerned at the lack of the
reasonable person standard in the amendment though it is used in the
FTC definition. The definition, they testified, should be determined in
context of the group to whom the representation is primarily directed.
The witness suggested some wording changes in the application of the
notification system by replacing ``prohibit'' with ``exclude'' and ``or
other duly authorized person'' with ``conservator, guardian or
individual with power-of attorney.'' PMA is in favor of federal
preemption because of the likely inconsistent regulations.
V. Explanation of the Bill
section-by-section analysis
Section 1: Short title
This section cites the title of the bill as the ``Deceptive
Mail Prevention and Enforcement Act.''
Section 2: Restrictions on mailings using misleading references to the
United States Government
This section amends existing law, section 3001 (h) and (i)
of title 39 of the U.S.C. and adds a new paragraph (j). This
section adds to existing law by better preventing mailings from
deceptively appearing to be endorsed or sent by the federal
government.
Paragraph (1) amends Section 3001(h) of Title 39 to broaden
the types of mailings that are subject to the requirements of
this subsection. The bill adds new terms to the list of those
that would trigger the existing disclaimer requirements for
solicitations by a non-governmental entity for the purchase of,
or payment for, a product or service. In addition, paragraph
(1)(C) imposes a new requirement which prohibits mailings
covered under subsection (h) from containing a false
representation stating or implying that federal government
benefits or services will be directly affected by any purchase
or nonpurchase.
The new terms provide that any mailing which reasonably
could be interpreted or construed as implying any endorsement,
approval, or connection to the federal government through a
reference to the Postmaster General, or name of a federal
agency, department, commission, or program, or through the use
of the seal or insignia of a federal entity would be considered
nonmailable matter unless it satisfied the requirements of
section 3001(h) (1), (2), or (3). In addition, mailings
containing a reference to the Postmaster General or a citation
to a federal statute that misrepresents either the identity of
the mailer or the protection afforded such matter by the
federal government would be considered nonmailable matter
unless it met the requirements of section 3001(h) (1), (2), or
(3).
Concerns have been raised that the terms used to establish
a government connection under existing law were unduly limited.
By expanding the coverage of this subsection to include use of
a reference to the Postmaster General, or name of a federal
agency, department, commission, or program, the amendment
adopted by the Committee intends to broaden the coverage of
this subsection. Mailings should not use references to the
Postmaster General or a Postmaster, the name of a federal
agency, department, or commission, or the name of a federal
program, to deceive consumers into believing the mailing or
offer is endorsed or sent by the federal government.
In addition, there is concern that mailings that sell
products or services may contain false representations implying
that an individual's federal benefits or services will be
impacted if that individual does not make a purchase or agree
to pay for a service. This section will prohibit mailings that
appear to be connected to the government from soliciting funds
through false representations implying that a reduction in an
individual's government benefits may directly result if a
product or service is not purchased. This provision is intended
to prohibit the personalized representation in a mailing that
an individual's own benefits, or those of a family member, will
be directly affected by the individual's decision to purchase
or not purchase goods or services, as opposed to false
representations about federal benefits in general. Advocacy
mailings, including those that solicit funds, which discuss the
general status of federal benefits or programs, are not covered
by this bill.
Paragraph (2) amends subsection (i) of existing law to
broaden the types of mailings that are subject to the
requirements of this subsection. In a manner identical to
paragraph (1), this paragraph adds new terms to the list of
those that would trigger the existing disclaimer requirements
for solicitations by anongovernmental entity for information or
the contribution of funds or membership fees. In addition, paragraph
(2)(C) imposes a new requirement which prohibits mailings covered under
subsection (i) from containing a false representation stating or
implying that federal government benefits or services will be affected
directly by any purchase or nonpurchase.
As in paragraph (1), paragraph (2) adds new terms to
existing law to restrict the use of terms implying the
endorsement or approval of, or some official connection to, the
federal government. These changes to existing law are made for
the same reasons described for subsection (h).
Paragraph (3) redesignates subsections (j) and (k) of
existing law as subsections (m) and (n). Any regulations
necessary to implement the provisions of this bill shall be
provided with appropriate notice and opportunity for comment.
Since provisions of this bill relate to the mailability of
matter under the existing Chapter 30, which is titled
Nonmailable Matter, existing subsection 3001(j), which is
redesignated as (m), would apply to any regulations issued to
implement provisions of this Act.
Paragraph (4) adds a new subsection (j) that declares as
nonmailable any matter that constitutes a solicitation for the
purchase of any product or service that is provided without
cost by the federal government, if it does not contain a clear
and conspicuous statement that the product or service is
provided without cost by the federal government. Such mailings
may use a corporate name that implies a connection to the
federal government, and may refer to certain federal laws or
requirements. A mailing, for example, may offer to complete a
form to obtain a Social Security number for an individual for a
$15 fee. Under the provisions of the bill, such a mailing must
contain a statement indicating that such information is
provided by the federal government and can be obtained without
cost from the federal government.
There may be instances where a company makes use of
government forms or services that are provided for free, but
adds value to these forms or services by providing an
additional service or additional expertise. For example, a tax
preparer may obtain and provide to a client government tax form
and, in doing so, also provides tax advice. In such instances
where an individual is paying for the expertise of a company,
and the mere acquisition of a government form is incidental to
the service, this subsection shall not apply.
Similarly, a company may offer to sell a service that the
federal government provides for free on a limited or qualified
basis. For example, the federal government may offer a service
only to certain individuals. If the service is not provided for
free to the public in general, then it would be permissible
under this provision to mail solicitations offering that
service without the required disclaimer.
Section 3: Restrictions on sweepstakes and deceptive mailings
This section establishes a number of consumer protections
by making sweepstakes, skill contests, and facsimile checks
nonmailable under certain circumstances.
Section 3001 of existing law is amended by adding a new
subsection (k), which details the requirements for sweepstakes,
skill contests, and facsimile checks. Subsection (k)(1)(A)
defines ``clearly and conspicuously displayed'' as presented in
a manner that is readily noticeable, readable, and
understandable to the group to whom the applicable matter is
disseminated. A disclosure that is readily noticeable and
understandable to the average member of the group to which the
mail matter was sent would meet this definition. Subsection
(k)(1)(B) defines a facsimile check as any matter designed to
resemble a check or other negotiable instrument that is not
negotiable. Subsection (k)(1)(C) defines a skill contest as a
puzzle, game, competition, or other contest in which (i) a
prize is awarded or offered; (ii) the outcome depends
predominately on the skill of the contestant; and (iii) a
purchase, payment, or donation is required or implied to be
required to enter the contest. Subsection (k)(1)(D) defines a
sweepstakes as a game of chance one voluntarily enters for
which no consideration is required.
Subsection (k)(2) directs the Postal Service not to
deliver, and to dispose of, any mail declared nonmailable by
paragraph (3). Subsection (k)(3) sets forth the conditions by
which the Postal Service shall determine if sweepstakes, skill
contests, and facsimile checks are nonmailable.
Subsection (k)(3)(A)(i) limits the requirements on
sweepstakes mailings to those mailings that include entry
materials for a sweepstakes. Some mailings may contain
information about a particular sweepstakes, but not offer an
individual the opportunity to enter the sweepstakes or purchase
a product. Such mailings might announce a future sweepstakes or
respond to the inquiry of an individual about an ongoing
sweepstakes. Since such mailings do not offer the opportunity
to make a purchase enter a sweepstakes, there is no direct link
between placing an order and entering the sweepstakes. While
this subsection does not impose requirements on sweepstakes
mailings that do not include entry materials, those sending
such sweepstakes mailings are cautioned to avoid marketing
practices designed to circumvent the consumer safeguards
provided in this section.
Subsection (k)(3)(A)(ii) contains a number of requirements
for sweepstakes mailings. Subsections (k)(3)(A)(ii)(I) and (II)
require allsweepstakes mailings to contain a statement in the
mailing, in the rules, and on the order form that no purchase is
necessary to enter the sweepstakes and that a purchase will not improve
the chances of winning with that entry.
The Committee recognizes the wide variety of formats used
in sweepstakes mailings, and should a mailing not contain a
separate solicitation, rules and entry or order form, these
statements need only appear in the rules and on the order form.
Should mailings contain the rules and order form on the same
document or on separate sides of a document, the statements
required by these subsections shall appear in both places.
Subsection (k)(3)(A)(ii)(III) requires the terms and
conditions of sweepstakes mailings, including the rules and
entry procedures, to be written in language that is easy to
find, read, and understand.
Subsection (k)(3)(A)(ii)(IV) requires each sweepstakes
mailing to state the name of the sponsor or mailer and their
principal place of business or the address at which they may be
contacted. Many sweepstakes mailings use the name of fictitious
companies or identities intended to hide the true name of the
company responsible for the sweepstakes mailing. The use of
fictitious company names, combined with the use of Post Office
Boxes or addresses of Commercial Mail Receiving Agencies makes
it difficult for consumers and enforcement agencies to identify
the actual name and address of the party responsible for the
mailing. Those sending sweepstakes mailings are expected to
disclose on each mailing a name and address where the sponsor
of the sweepstakes may be contacted.
Subsection (k)(3)(A)(ii)(V)(aa) requires the rules in each
sweepstakes mailing to list the estimated odds of winning each
prize, and the odds should be stated in clear terms. If the
odds of winning a particular prize or all prizes are dependent
on the number of entries received, the rules should state the
estimated odds based on the number of expected entries.
Subsection (k)(3)(A)(ii)(V)(bb) requires the rules in each
sweepstakes mailing to clearly state the quantity, estimated
retail value, and nature of each prize.
Subsection (k)(3)(A)(ii)(V)(cc) requires the rules in each
sweepstakes mailing to clearly state the schedule of any
payments made over time. For example, if a $1,000,000 prize is
to be awarded over 20 years, the rules should indicate that the
$1,000,000 shall be paid in equal amounts of $50,000 per year
for 20 years starting in 1999.
Subsection (k)(3)(A)(ii)(VI) prohibits sweepstakes mailings
from representing that individuals not purchasing products or
services may be disqualified from receiving future sweepstakes
mailings. There is concern that some sweepstakes mailings link
ordering products with entering the contests, and may give the
impression that not purchasing a product will prevent an
individual from receiving future contest entries.
Subsection (k)(3)(A)(ii)(VII) prohibits sweepstakes
mailings from requiring that an entry be accompanied by an
order or payment for a product or service previously ordered.
This subsection outlaws ``prompt pay'' sweepstakes, which offer
the opportunity to enter a sweepstakes only to those making or
paying for a purchase. Such sweepstakes inappropriately link
the purchase of a product with entering a sweepstakes.
Subsection (k)(3)(A)(ii)(VIII) prohibits sweepstakes
mailings from representing that an individual is a winner of a
prize unless that individual has actually won a prize.
Subsection (k)(3)(A)(ii)(IX) prohibits sweepstakes mailings
from containing any representation that contradicts or is
inconsistent with the sweepstakes rules or with any other
disclosure required under this subsection. Sweepstakes mailings
are prohibited from including any statement qualifying,
limiting, or explaining the rules or disclosures in a manner
inconsistent with the rules or disclosures.
Subsection (k)(3)(B) establishes requirements for mailings,
including entry materials for skill contests or promotions that
purport to be a skill contest. Subsection (k)(3)(B)(ii)(I)
requires skill contests to state all terms and conditions,
including the rules and entry procedures, in language that is
easy to find, read, and understand.
Subsection (k)(3)(B)(ii)(II) requires each skill contest
mailing to state the name of the sponsor or mailer and their
principal place of business or the address at which they may be
contacted.
Subsection (k)(3)(B)(ii)(III) lists the requirements for
the rules of skill contests: (aa) the number of rounds or
levels of the contest and the cost to enter each round or
level; (bb) if subsequent rounds or levels of the contest will
be more difficult to solve; (cc) the maximum cost to enter all
rounds or levels of the contest; (dd) the estimated number or
percentage of entrants who may correctly solve the skill
contest or the approximate number or percentage of entrants
correctly solving the past three skill contests conducted by
the sponsor; (ee) the identity or description of the
qualifications of the judges if the contest is judged by other
than the sponsor; (ff) the method used in judging; (gg) the
date by whichthe winner or winners will be determined and the
date or process by which prizes will be awarded; (hh) the quantity,
estimated retail value, and nature of each prize; and (ii) the schedule
of any payments made over time.
Subsection (k)(3)(C) requires any facsimile check to
contain a statement on the check itself that it is not a
negotiable instrument and has no cash value. These documents
seek to attract the attention of consumers, often by including
a device that resembles a check, but which is not negotiable.
Such facsimile checks may include a bank name, the name of the
recipient of the letter listed as the payee, a dollar amount,
and an authorized signature. Facsimile checks may create
consumer confusion, increasing the impression that an
individual has actually won a large amount of money or is
eligible to receive the payment listed on the facsimile check.
Including a clear and conspicuous disclaimer on the face of the
facsimile check, which states that the check is not a
negotiable instrument and has no cash value, will decrease the
consumer's confusion over the nature of the facsimile check.
Subsection (k)(4) provides an exemption from the
nonmailability provisions of the bill for magazines,
newspapers, and other periodicals containing sweepstakes, skill
contests, and facsimile checks if the sweepstakes, skill
contest, or facsimile check, contained therein (A) is not
directed to a named individual, or (B) does not include an
opportunity to make a payment or order a product or service.
The Committee does not intend that magazines, newspapers,
and other periodicals be judged as nonmailable simply because
they contain an advertisement publicizing a sweepstakes or
skill contest, or because they contain a facsimile check. An
advertisement alone does not present the same potential for
abuse or deception as direct mail promotions unless such
advertisement contains personalization and offers the
opportunity to make a purchase. Advertisements including those
elements would make the publication similar to a promotional
mailing soliciting a purchase from an individual and, thus,
would be required to adhere to the provisions of subsection
(k)(3) (A), (B), and (C).
Subsection (k)(5) requires any statement, notice, or
disclaimer required under paragraph (3) to be clearly and
conspicuously displayed, and the statements required under
(k)(3)(A)(ii) (I) and (II) to be more conspicuously displayed.
This provision ensures that the statements required by the bill
are readily apparent and understood by the average reader, and
ensures that the statements that no purchase is necessary and
that a purchase would not improve an entrant's chances of
winning be displayed more prominently. The Federal Trade
Commission suggested that the use of ``more conspicuously,''
rather than ``prominent,'' avoids the confusion arising from
the introduction of a new standard as suggested by S. 335, and
tracks laws enforced by that agency, including the Truth in
Lending Act, 15 U.S.C. 1632(a).
This ``more conspicuously'' requirement recognizes the
importance of the two disclaimers and the fact that what is
``clear and conspicuous'' for one disclaimer may differ from
what is necessitated by another. As in the requirement
contained in the Truth-in-Lending Act, it is intended that the
disclosures that no purchase is necessary and that a purchase
will not improve an individual's chances of winning be more
conspicuously displayed than the other statements, notices, and
disclaimers required under (k)(3). This may be accomplished in
a variety of ways as befit the format and layout of different
promotional mailings. In determining whether these two
disclosures meet the ``more conspicuously'' standard, it is
intended that consideration be given to the manner in which
these disclosures are presented in relation to the other
material appearing on the same page or document on which these
disclosures appear. It is not the intent to require that these
two disclosures necessarily appear in a larger type size,
bolder typeface, or similarly more prominent graphic depiction
than the other disclosures required under (k)(3), which may be
appearing elsewhere in the solicitation materials. For example,
these two disclosures appearing on the entry or order device
may, by virtue of their very placement and location, be deemed
to be ``displayed more conspicuously'' than other disclosures
appearing elsewhere in the solicitation.
Subsection (k)(6) directs the Postal Service, when
enforcing paragraph (3), to consider all the materials included
in the mailing and language on and visible through the
envelope. Mailings should be judged based upon their overall
impression and that all elements of a mailing should be
reviewed to determine mailability. A mailing may be designed so
that some portions comply with the requirements of paragraph
(3), even though other aspects of the mailing are deceptive and
misleading. In such cases, the Postal Service shall consider
the disclosures in the context of all the elements of the
advertisement and, if such disclosures are ineffective in
correcting the overall deceptive representation of the mail
piece, it should be declared nonmailable.
Subsection (l)(1) requires any person who uses the mails
for any mailings covered under subsections (h), (i), (j), or
(k) to adopt reasonable practices and procedures to allow
individuals to request that they no longer receive such
mailings. An individual may make such a request personally, or
through a conservator, guardian, or individual with power of
attorney. Subsection (l)(1)(A) requires such a request to be in
writing to the mailer of such matter. Subsection (l)(1)(B)
allows a written request to be submitted to an attorney general
(or any state government official who transmits the request to
that attorney general) for submission to the mailer of such
matter.
Numerous individuals have encountered great difficulty
removing their names or the names of their family members from
sweepstakes mailing lists. Companies sending promotional
mailings covered by the bill should implement a system to
remove from their mailing lists the names of individuals who do
not wish to receive such mailings. Companies may elect to
establish their own toll-free telephone number to provide
consumers with information about how they may be removed from
mailing lists or where an appropriately authorized individual
may write to request the removal of an individual. Companies
may satisfy the requirements of this subsection by
participating in the system established by section 8 of the
bill, but shall also allow individuals identified in subsection
(l)(1) to request the removal of individuals from their own
mailing lists.
Subsection (l)(2) requires any person who uses the mails
for any mailings covered under subsections (h), (i), (j), or
(k) to maintain or cause to be maintained a record of all
requests made under paragraph 1. The records shall be
maintained in a form to permit the suppression of an applicable
name at the applicable address for five years from the time a
mailer receives the request to remove the name.
Section 4: Postal Service orders to prohibit deceptive mailings
This section amends section 3005 of existing law to allow
the Postal Service to impose orders prohibiting the delivery
and receipt of mail by those found to be mailing nonmailable
matter under subsections (j) and (k), as added by sections 2
and 3 of the bill. The bill simply adds subsections (j) and (k)
to those already included in section 3005.
Under existing law, such an order allows the Postmaster to
return mail delivered to a company found in violation of the
law, forbids the payment by a postmaster of any money order or
postal note drawn to such a company, provides for return to the
customer of the sum in such postal note, and requires the
person in violation to cease and desist from engaging in the
deceptive activities.
Section 5: Temporary restraining order
This section authorizes a district court, upon a proper
showing, to issue an order to detain incoming and outgoing mail
which is the subject of a proceeding under section 3005. A
proper showing shall require proof of a likelihood of success
on the merits. When mail is sent or received in more than one
district, the order may be sought in a single district but will
be applicable in all relevant districts. Section 3007 of
existing law is amended by redesignating subsection (b) as (c)
and striking existing subsection (a) and inserting new
subsection (a) and (b). Subsection (a)(1) authorizes the Postal
Service, in preparation for or during the pendency of
proceedings under section 3005, to request from a district
court in any district in which mail is sent or received, or in
any district in which the defendant is located, a temporary
restraining order and preliminary injunction. Proceedings must
follow the requirements of Rule 65 of the Federal Rules of
Civil Procedure.
Subsection (a)(2)(A) establishes that, upon a proper
showing, the court shall enter an order that shall remain in
effect during the pendency of any statutory proceedings and any
judicial review of such proceedings, or any action to enforce
orders issued under the proceedings. The order shall direct the
Postmaster, in any and all districts, to detain the defendant's
incoming and outgoing mail that is the subject of proceedings
under section 3005. Currently, the Postal Service must apply to
each district in which a defendant receives mail in order to
obtain an injunction detaining the incoming mail. Numerous
instances have been reported where a promoter used several
addresses in multiple districts under a variety of names,
requiring the Postal Service to bring an action in each
judicial district to detain all incoming mail. This provision
promotes the efficient use of judicial and investigative
resources.
Subsection (a)(2)(B) states that a proper showing shall
require proof of a likelihood of success on the merits of the
proceedings under section 3005. The standard for issuing a
temporary restraining order under existing section 3007 is
probable cause. This provision changes the standard to bring
the standard in line with that of other statutory injunction
provisions. A proper showing shall only require proof of a
likelihood of success on the merits by a preponderance of
evidence. The bill provides that no finding of irreparable harm
would be necessary if the government has shown a likelihood of
success on the merits of the statutory based action.
Subsection (a)(3) requires that mail detained pursuant to
the statute be made available for examination by the defendant,
who would have been notified of the action pursuant to the
requirements of Rule 65 noted above. Any mail matter that the
Postal Service has not clearly shown to be the subject of
proceedings under section 3005 shall be delivered as addressed.
The Postal Service is also expected to promptly deliver any of
the defendant's mail that has no relationship to the detention.
It shall carefully review such mail so as not to impose an
undue burden or unfair restriction on the defendant's receipt
of other mail.
Subsection (a)(4) states that no finding of intent to make
a false representation or to conduct a lottery is required to
support the issuance of an order under this section.
Subsection (b) states that any judicial review of the
proceedings under sections 3005 shall be in the district in
which the order under subsection (a) was issued. Thus, the
decision made in the administrative forum would be appealed to
the District Court that granted the temporary restraining
order.
As suggested by the Department of Justice, references to
Section 3006 of title 39 are removed from this bill, since
Section 3006 was found unconstitutional by the United States
Supreme Court in Blount v. Rizzi, 400 U.S. 410 (1971), and has
not been enforced.
Section 6: Civil penalties and costs
The Postal Inspection Service testified that mailers
routinely change their promotions in order to comply with an
issued stop order but the new promotions often violate the law
in a different way. Section 3012 is amended to give the Postal
Service the authority to impose a fine without first obtaining
a stop order, and to base the Section 3012 fines on the size of
the mailing in question, rather than on the number of days on
which the activity being penalized was performed. Under current
law, the Postal Service can only impose a fine based on the
violation of a stop order, not based on the activity for which
the stop order is issued. This section provides for fines based
solely on the activity being penalized (before a stop order is
issued), and provides for larger fines for subsequently
violating a stop order. In doing so, the bill significantly
increases the civil fine available for failure to comply with a
stop order.
Subsection (a) of existing law is amended by increasing the
civil penalty for violating or evading a stop order from
$10,000 per day to a sliding scale based on the quantity of
pieces mailed. The penalty scale is $50,000 for each mailing of
less than 50,000 pieces; $100,000 for each mailing of 50,000 to
100,000 pieces; and an additional $10,000 for each additional
10,000 pieces above 100,000, not to exceed $2,000,000. These
fines are twice the amounts provided in subsection (c), since
they are intended to punish not only the activity being
penalized, but also the failure to comply with a stop order.
Subsection (c), as amended, provides for a civil penalty
prior to the issuance of a stop order. This penalty also is
calculated on a sliding scale based on the quantity of pieces
mailed. The penalty scale is $25,000 for each mailing of less
than 50,000 pieces; $50,000 for each mailing of 50,000 to
100,000 pieces; and an additional $5,000 for each additional
10,000 pieces above 100,000, not to exceed $1,000,000.
Under current law, the civil penalty imposed by subsection
(a) takes into account certain factors such as the nature,
circumstances, extent, and gravity of the violation. With
respect to the violator, current law also considers the
defendant's ability to pay the penalty, the effect of the
penalty on the ability of the violator to conduct lawful
business, any history of prior violations of such section, the
degree of culpability and other such matters as justice may
require. The civil penalty imposed in subsection (c) takes the
same factors into account.
Subsection (d) provides for a separate penalty if a company
fails to comply with the requirement to adopt reasonable
practices and procedures to prevent unwanted mailings to
consumers who have requested cessation of such mailings.
Violations of this provision can result in a civil penalty of
$10,000 for each improper mailing. Mailers who are in
compliance with the provisions included in Section 8 of this
Act would not be subject to this fine.
Section 7: Administrative subpoenas
Section 7 adds a new section 3016 to authorize the use of
subpoenas in investigations conducted under Section 3005(a) of
title 39.
Subsection (a) of section 3016 authorizes the use of
subpoenas in any investigation conducted under Section 3005(a).
The subpoena authority allows for the production of any
records, including books, papers, documents, and other tangible
things which constitute or contain evidence that is relevant or
material to the investigation. Subpoena authority will provide
an additional investigative tool necessary in investigations of
deceptive mail schemes. The subpoena authority should assist in
establishing violations of Subsections 3001 (d), (h), (i), (j),
and (k) of title 39 and in the assessment of penalties.
As suggested by the Department of Justice and the United
States Postal Service Office of the Inspector General,
subsection (a) requires the Postal Service to develop
procedures for the issuance of subpoenas, including the mandate
that: (1) a case be opened on an individual or entity before a
subpoena can be issued; (2) a headquarters-level review of each
subpoena be conducted; and (3) the Postmaster General may only
delegate subpoena approval authority to the Postal Service's
General Counsel or a Deputy General Counsel. The Committee
recognizes that effective enforcement of this legislation
requires the timely issuance of subpoenas. Therefore, the
Committee fully expects that the Postal Service will implement
efficient and effective procedures for the expeditious approval
of requested subpoenas, and the Committee plans to examine this
matter in its future oversight activities in order to ensure
that an expeditious process has indeed been established.
In addition, Subsection (a)(2) of section 3016 will make
this subpoenaauthority available to Judicial Officers during
the course of a hearing during which the Postal Service may issue an
order under Section 3005(a). The current sanctions for failure of a
party to comply with a discovery order of the presiding officer (39
C.F.R. 952.21(j))--precluding the offending party from supporting or
opposing designated charges, or inferring that facts would be adverse
to a party--may not adequately substitute for either the actual
production of documents or the testimony of persons. This change would
give the Judicial Officer an additional tool for use in ensuring a fair
hearing, available in appropriate instances at the request of either
party. Final authority to issue subpoenas is vested with the Judicial
Officer in these circumstances, to avoid conflicts of interest when the
Judicial Officer seeks to subpoena Postal Service records or testimony
on behalf of the subject of the hearings. The proposed subpoena
authority would also parallel the authority already in place in the
Program Fraud Civil Remedies Act (31 U.S.C. 3804) and, for the Board of
Contract Appeals, in the Contract Disputes Act of 1978 (41 U.S.C. 610).
Subsection (b) of section 3016 designates the method of
service of process within the United States and abroad. The
section also differentiates the service of process upon natural
persons versus businesses along with the proof of such service.
Subsection (c) of section 3016 prescribes the procedure for
the Postmaster General to seek enforcement of a subpoena.
Although the subpoenas are not self-enforcing, a federal
district court pursuant to these regulations can enforce them.
Subsection (b) of the Section 7 authorizes the Postal
Service to promulgate regulations setting forth the procedures
it will use to implement section 3016. These regulations are to
be promulgated no later than 120 days after the enactment of
this section.
As suggested by the Department of Justice and the Postal
Service's Inspector General, subsection (c) of Section 7
mandates that the Postal Service's use of the subpoena
authority created by section 3016 be included in the
information required to be included in the Inspector General's
semiannual reports under section 3013.
Section 8: Requirements of promoters of skill contests or sweepstakes
mailings
Section 8 creates a new section 3017 entitled ``Nonmailable
skill contests or sweepstakes matter; notification to prohibit
mailings.''
In general, section 8 mandates that sweepstakes operators
establish easy-to-use notification systems by which a person or
someone legally authorized to act on their behalf, such as a
legal guardian, or a relative with power of attorney, can have
their name and address removed from the promoter's sweepstakes
mailings lists. Upon appropriate notification, promoters will
have 60 calendar days to remove the names and addresses from
their mailing lists. Any subsequent mailings sent after the 60-
day period to people who have requested removal from mailing
lists are considered nonmailable matter, and the promoter may
be held liable for civil penalties for sending such matter.
Subsection (a)(1) defines who must comply with section 8.
Promoter is defined as any person who originates sweepstakes
and/or games of skill mailings. The person who merely prints or
mails matter for a skill contest or sweepstakes is not covered
by this section, unless that printer or mailer also originates
or materially assists with operating the sweepstakes or
contest. Only the originator of the sweepstakes or contest that
is the subject of the mailing must comply with section 8 to
ensure that the person responsible for the creation and
promotion of the sweepstakes is covered rather than a middleman
who simply prints or sends the mailing.
Promoters who send matter which is included in a magazine,
newspaper or other periodical, as defined and limited by
Section 3001(k)(4) of Title 39 (as amended), are not subject to
the requirements of this section for those mailings, just as
they are not subject to the disclosure requirements of Section
3 of the Bill. Because these mailings do not encourage an
individual to make a purchase in connection with the mailing,
these types of mailings are of much less concern.
Subsection (a)(2) defines a removal request as a request
stating that an individual elects to have their name and
address removed from skill contest or sweepstakes mailing
lists. Submission of this removal request will indicate an
individual's choice to be removed from all sweepstakes and
skill contest mailing lists used by the promoter who receives
the request. This subsection, however, does not require
specific language to state such an intent.
Subsection (a)(3) states that the terms ``skill contest,''
``sweepstakes,'' and ``clearly and conspicuously displayed''
are identical to the definitions of these terms previously used
in section 3 of the bill.
Subsection (a)(4) defines the term ``duly authorized
person,'' as used to describe those who may request removal
from sweepstakes and skill contest mailing lists on behalf of
another. This definition tracks the language of Subsection
3001(l)(1) as amended by Section 3 of this bill, describing
those who are authorized to request removal on behalf of
another under that section.
Subsection (b) describes nonmailable material as any matter
that (i) is a skill contest or sweepstakes (except if included
in a magazine, newspaper, or other periodical); (ii) is
addressed to an individual who made an election to be excluded
from mailing lists by using the uniform notification system;
and (iii) does not contain the information required by
subsection (c)(1).
Promoters of skill contests or sweepstakes must provide in
each mailing a clear and conspicuous statement that includes a
toll-free telephone number or address of the notification
system as required by subsection (c)(1). The mailpieces must
also state that a person can use the system to prohibit the
promoter from sending any further mailings. These requirements
are essential to inform consumers of the option to halt all
further sweepstakes and skill contest mailings from the
promoter. Placing the toll-free number directly on all mailings
with a description of the specific steps a person must take to
stop all mailings from the promoter ensures that the removal
process is easily understandable.
Subsection (c)(2) requires promoters covered by section 8
to establish and maintain a notification system.
Subsection (d)(1) specifies that an individual must submit
a removal request to the notification system in order for their
name and address to be excluded from future mailings. Promoters
are free to accept removal requests through the use of a toll-
free number.
Subsection (d)(2) states that promoters must remove an
individual's name and address from skill contests and
sweepstakes mailings lists no later than 60 calendar days after
the notification system receives an individual's removal
request. Promoters shall not include the individual's name in
mailing lists used for sweepstakes or skills contest mailings
after the 60-calendar day period has elapsed.
Sixty calendar days is a sufficient period of time to allow
promoters to check the system and remove individuals from their
mailing lists. In addition, mailers often prepare mailings
weeks before sending them, and requiring such mailers to find
and remove specific mailpieces from such mailings would be too
onerous. The goal is to keep the amount of time promoters have
to remove names to a reasonable minimum, so that months and
months will not elapse while numerous additional mailings flood
mailboxes.
Subsection (d)(3) establishes the means by which an
individual can reverse a decision not to receive sweepstakes or
skill contest mailings from a promoter. In order for an
individual to change their election to be removed from all
sweepstakes and skill contest mailing lists, the individual
must advise the promoter in writing that they wish to receive
such mailings again. During the time that an individual has
been removed from all mailing lists, promoters should not flood
such individuals with mailings or phone calls urging them to
change their election.
Subsection (e) is modeled on the private right of action
created by the Telephone Consumer Protection Act of 1991, found
at Section 227 (c)(5) of Title 47, and is expected to operate
in a similar manner. This subsection establishes a private,
individual right of action in State court for those individuals
who receive sweepstakes or skill contest mailings from a
promoter more than 60 days after the individual has elected not
to receive such mailings from the promoter. The promoter's
liability for each violation is limited to the actual monetary
loss caused by the individual's receipt of the mailing, or
$500, whichever is greater, unless the promoter willfully
violated subsection (d). Given the damage limit, action most
likely would be undertaken in the small claims court of that
state. Individuals can also seek injunctions against future
skill contest or sweepstakes mailings from the promoter in the
appropriate state court.
Subsection (f) states that promoters will not be subject to
civil liability if they exclude an individual's name and
address from their mailing lists, so long as (i) a removal
request is received by the notification system; (ii) the
promoter or person maintaining the system has a good faith
belief that the request is from the individual whose name and
address is to be excluded or is from another duly authorized
person. Promoters should not be held liable for removing
someone from their mailing lists if they have a good faith
belief that the person wished to be dropped from the lists,
even though it is subsequently discovered that the person
making the request was not actually the individual or the
person with the legal authority to request removal.
One major concern is misuse of the removal lists. Since
many on the lists will be those who have been the most
susceptible to misleading sweepstakes and skill contest
mailings, such lists could be used to determine who is
particularly vulnerable to future deception. Protection of
these names is of the utmost importance. Therefore, under
subsection (g)(1)(A), no person may disclose any information
derived from these lists for commercial purposes, especially
the sale or rental of names or addresses. Subsection (g)(1)(B)
defines ``list'' as any roster of names and addresses or other
related information compiled from individuals who elect not to
receive sweepstakes and skill contest mailings.
Penalties for violation of subsection (g)(1) are
significant. Subsection (g)(2) states that any person who
violates subsection (g)(1) shall be assessed a civil penalty by
the Postal Service of up to $2,000,000 per violation. Strong
civil penalties are necessary in order to deter misuse of the
lists.
Under subsection (h)(1)(A), any promoter who recklessly
mails sweepstakes or skills contest mailings (beyond the 60 day
period, which begins on the day the promoter receives the
request) to an individual who has made a proper removal request
is liable to the United States for $10,000 per mailing. This
strong penalty is also necessary. It will deter promoters from
violating the requirement that they remove an individual from
their mailing lists and will encourage promoters to maintain an
adequate notification system.
Failure to substantially comply with the requirement that
promoters establish and maintain a notification system will
also subject these promoters to civil penalties under
subsection (h)(1)(B). The Courts can determine appropriate
amounts on a case by-case basis.
Subsection (h)(2) states that the Postal Service shall
assess civil penalties under section 8, in accordance with the
procedures set forth in section 3012(b). Subsection (c) states
that section 8 will take effect one year after the date of
enactment of the Act.
Section 9: State laws not preempted
Subsection (a) states that nothing in this bill shall be
construed to preempt any provision of state or local law that
imposes more restrictive requirements, regulations, damages,
costs or penalties. States and localities should be able to
impose and enforce laws that also seek to prevent deceptive
mailings. Also, other agencies may take actions against
deceptive mailings under other federal laws, and the Committee
does not intend that the provisions of this bill restrict or
preempt any federal law or limit any civil penalties that may
be imposed under other federal laws.
Subsection (b) states that nothing contained in this
section shall be construed to prohibit an authorized state
official from proceeding in state court on the basis of an
alleged violation of any civil or criminal statute of such
state.
Section 10: Technical and conforming amendments
Subsection (a) removes references in Section 3001 of Title
39 to Sections 1714 and 1718 of Title 18, which were repealed
by Title XII of the Crime Control Act of 1990, Public Law 101-
647.
Subsection (b) insures that the reporting requirements of
Chapter 30 are updated to reflect conformance with the
Inspector General Act of 1978 (as required by Section
410(b)(10) of Title 39) as well as the creation of a
structurally independent Inspector General for the Postal
Service in 1996. This change takes effect upon enactment of the
bill. Under the Inspector General Act, Inspectors General are
responsible for all audits and investigations conducted within
their respective federal entities. The original intent of
section 3013, as described in the legislative history to PL 98-
186, was to require twice-yearly reports to the Congress on the
investigative activities of the Postal Service under the false
representation statutes.
Section 11: Effective date
Except as noted in Section 8 and Section 10(b), the
provisions of the bill will take effect 120 days after the date
of enactment.
VI. Committee Oversight Findings
Pursuant to rule XIII, clause 3(c)(1), of the Rules of the
House of Representatives, the results and findings for those
oversight activities are incorporated in the recommendations
found in the bill and in this report.
VII. Budget Analysis and Projections
The budget analysis and projections required by Section
308(a) of the Congressional Budget Act of 1974 are contained in
the estimate of the Congressional Budget Office.
VIII. Cost Estimate of the Congressional Budget Office
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 1, 1999.
Hon. Dan Burton,
Chairman, Committee on Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 170, the Deceptive
Mail Prevention and Enforcement Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz (for federal costs) and John Harris (for the private-
sector impact).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 170--Deceptive Mail Prevention and Enforcement Act
Summary: H.R. 170 would establish a number of new federal
crimes and restrictions relating to deceptive mailings and
sweepstakes and would increase the penalties for such offenses.
CBO estimates that implementing this legislation would not
result in any significant impact on the federal budget. Because
enactment of H.R. 170 could affect receipts, pay-as-you-go
procedures would apply to the bill. However, CBO estimates that
any impact on receipts would not be significant.
H.R. 170 contains several private-sector mandates as
defined in the Unfunded Mandates Reform Act (UMRA), but the
costs imposed by these mandates would not exceed the statutory
threshold established in UMRA ($100 million in 1996, adjusted
annually for inflation). This legislation contains no
intergovernmental mandates as defined in UMRA and would impose
no costs on the budgets of state, local, or tribal governments.
Estimated cost to the federal government: Because H.R. 170
would establish new federal crimes relating to deceptive
mailings and sweepstakes, the federal government would be able
to pursue cases that it otherwise would not be able to
prosecute. CBO expects that any increase in federal costs for
law enforcement by the Postal Service or court proceedings
would not be significant, however, because of the small number
of additional cases likely to be involved. Any additional costs
to the Postal Service would be classified as off-budget, while
any increased costs to the federal judiciary would be subject
to appropriation.
Because violators of the provisions of H.R. 170 could be
subject to civil penalties, the federal government might
collect additional fines if the bill is enacted. Collections of
such fines are recorded in the budget as governmental receipts
(revenues). CBO expects that any additional receipts would be
less than $500,000 annually.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. Enacting
H.R. 170 could affect receipts, but CBO estimates that any such
effects would be less than $500,000 a year.
Estimated impact on state, local, and tribal governments:
H.R. 170 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on the budgets of state, local,
or tribal governments.
Estimated impact on the private sector: H.R. 170 would
create several new private-sector mandates for direct-mail
advertisers and sweepstakes and contest operators. Direct-mail
advertisers would be required to remove references to the
Postmaster General from their advertisements. Sweepstakes and
contest operators would be required to add a number of
disclosures to their mailings and to honor requests from
individuals to be excluded from future mailings. CBO estimates
that the total costs of these mandates to the private sector
would fall below the threshold established in UMRA ($100
million in 1996, adjusted annually for inflation).
To keep firms from implying that their products or services
are endorsed or approved by the federal government, federal law
already prohibits most uses of federal symbols or the names and
titles of federal agencies and officers in mailed
advertisements. H.R. 170 would specifically extend that
prohibition to the name and title of the Postmaster General. In
order to comply with the mandate, firms would need to remove
references to the Postmaster General from their existing
advertisements. Because printing and postage constitute the
bulk of firms' expenses in producing and distributing
advertisements through the mail and the new prohibition would
do little to affect either, this mandate would not have a
significant impact on firms' immediate costs of doing business.
The disclosures that sweepstakes and contest operators
would be required to make include: an explanation that purchase
of the firm's products affect neither the odds of winning nor
inclusion in future mailings; a statement of rules, conditions,
fees, and entry procedure; and a description for each prize,
given the quantity, the retail value, and a numerical statement
of the odds of winning. Firms would also be required to put
disclaimers on facsimile checks and to refrain from
representing a person as a winner unless that person has won a
prize. The largest sweepstakes firms already make most of these
disclosures. To comply with themandate, an individual firm
might have to do no more than add a single disclosure, such as a
numerical statement of odds. Other firms might have to do considerably
more. The costs of redrafting and redesigning mailings would thus vary
from firm to firm. Development costs for new mailings, however, are
relatively small in relation to costs for printing and postage. CBO
anticipates that sweepstakes and contest operators would try to avoid
increasing the number of pages in their mailings because that would
result in printing and postage cost increases. Consequently, although
variation within the industry makes precise estimate difficult, the
cost to firms of adding additional disclosures would probably be small.
H.R. 170 would require sweepstakes operators to honor
direct written requests from individuals to be excluded from
future mailings. The firms would be required to store and to
honor the requests for five years. Many firms already honor
such requests, however, and, because there is little reason to
believe that the number of requests firms receive would
increase significantly in the future, it is unlikely that
firms' costs would increase because of this mandate. Currently,
only a small portion of recipients of sweepstakes-related mail
request to be excluded from future mailings. Seventy to eighty
percent of recipients simply discard unwanted mailings.
Sweepstakes and contest operators would also be required to
participate in the creation of a national notification system
that would allow individuals to make a single request that
their names be removed from the mailing lists of all
sweepstakes and contest operators. The notification system
would have to forward written requests from individuals to
participating firms within 60 business days. Such firms would
be required to include information about the notification
system in their mailings. Most sweepstakes firms already
participate in the Direct Marketing Association's Mail
Preference Service, which is similar to the notification system
required by H.R. 170. The Mail Preference Service, however,
deals with all forms of direct mail, including catalogs,
coupons, and other advertisements. In order to comply with the
mandate, sweepstakes and contest operators would need to
establish a system limited to sweepstakes and contest mailings.
The Direct Marketing Association budgets approximately $500,000
per year to operate the Mail Preference Service. CBO expects
that it would cost sweepstakes and contest operators a similar
amount each year to operate the notification system. Startup
costs would increase the amount required in the first year.
Previous CBO estimate: On June 15, 1999, CBO transmitted a
cost estimate for S. 335, the Deceptive Mail Prevention and
Enforcement Act, as ordered reported by the Senate Committee on
Governmental Affairs on May 20, 1999. Unlike H.R. 170, S. 335
would allow the Postal Service to spend any penalties collected
under the bill, and the two cost estimates reflect this
difference.
Estimate prepared by: Federal costs: Mark Grabowicz; impact
on the private sector: John Harris.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
IX. Statement of Constitutional Authority
Pursuant to rule XIII, clause 3(d)(1), the Committee finds
that clauses 7, and 18 of Article 1, Section 8 of the U.S.
Constitution grants Congress the power to enact this law.
X. Committee Recommendations
On October 28, 1999, a quorum being present, the Committee
ordered the bill favorably reported to the House for
consideration by voice vote.
XI. Congressional Accountability Act; Public Law 104-1
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(B)(3) of the Congressional Accountability Act (P.L. 104-1).
XII. Unfunded Mandates Reform Act; Public Law 104-4, Section 423
The Committee finds that the legislation does not impose
Federal mandates within the meaning of section 423 of the
Unfunded Mandates Reform Act (P.L. 104-4); enactment of H.R.
170 should also result in no significant regulatory impact.
Although H.R. 170 contains several private-sector mandates, the
Congressional Budget Office has determined that the cost of
these mandates to the private sector would be well below the
threshold specified in P.L. 104-4.
XIII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)
The Committee finds that the legislation does not establish
or authorize establishment of an advisory committee within the
definition of 5 U.S.C. App., Section 5(b).
XIV. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 39, UNITED STATES CODE
* * * * * * *
PART IV--MAIL MATTER
* * * * * * *
CHAPTER 30--NONMAILABLE MATTER
Sec.
3001. Nonmailable matter.
* * * * * * *
[3006. Unlawful matter.]
* * * * * * *
3015. Nonmailable plant pests and injurious animals.
3016. Administrative subpoenas.
3017. Nonmailable skill contests or sweepstakes matter; notification to
prohibit mailings.
Sec. 3001. Nonmailable matter
(a) Matter the deposit of which in the mails is punishable
under section 1302, 1341, 1342, 1461, 1463, [1714,] 1715, 1716,
1717, [1718,] or 1738 of title 18, or section 26 of the Animal
Welfare Act is nonmailable.
* * * * * * *
(h) Matter otherwise legally acceptable in the mails which
constitutes a solicitation by a nongovernmental entity for the
purchase of or payment for a product or service; and [contains
a seal, insignia, trade or brand name, or any other term or
symbol that reasonably could be interpreted or construed as
implying any Federal Government connection, approval or
endorsement] which reasonably could be interpreted or construed
as implying any Federal Government connection, approval, or
endorsement through the use of a seal, insignia, reference to
the Postmaster General, citation to a Federal statute, name of
a Federal agency, department, commission, or program, trade or
brand name, or any other term or symbol; or contains any
reference to the Postmaster General or a citation to a Federal
statute that misrepresents either the identity of the mailer or
the protection or status afforded such matter by the Federal
Government is nonmailable matter and shall not be carried or
delivered by mail, and shall be disposed of as the Postal
Service directs, unless--
(1) such nongovernmental entity has such expressed
connection, approval or endorsement;
(2)(A) such matter bears on its face, in conspicuous
and legible type in contrast by typography, layout, or
color with other printing on its face, in accordance
with regulations which the Postal Service shall
prescribe, the following notice: ``THIS PRODUCT OR
SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY THE
FEDERAL GOVERNMENT, AND THIS OFFER IS NOT BEING MADE BY
AN AGENCY OF THE FEDERAL GOVERNMENT.'', or a notice to
the same effect in words which the Postal Service may
prescribe; [and]
(B) the envelope or outside cover or wrapper in which
such matter is mailed bears on its face in capital
letters and in conspicuous and legible type, in
accordance with regulations which the Postal Service
shall prescribe, the following notice: ``THIS IS NOT A
GOVERNMENT DOCUMENT.'', or a notice to the same effect
in words which the Postal Service may prescribe; [or]
and
(C) such matter does not contain a false
representation stating or implying that Federal
Government benefits or services will be affected by any
purchase or nonpurchase; or
* * * * * * *
(i) Matter otherwise legally acceptable in the mails which
constitutes a solicitation by a nongovernmental entity for
information or the contribution of funds or membership fees and
[contains a seal, insignia, trade or brand name, or any other
term or symbol that reasonably could be interpreted or
construed as implying any Federal Government connection,
approval or endorsement] which reasonably could be interpreted
or construed as implying any Federal Government connection,
approval, or endorsement through the use of a seal, insignia,
reference to the Postmaster General, citation to a Federal
statute, name of a Federal agency, department, commission, or
program, trade or brand name, or any other term or symbol; or
contains any reference to the Postmaster General or a citation
to a Federal statute that misrepresents either the identity of
the mailer or the protection or status afforded such matter by
the Federal Government is nonmailable matter and shall not be
carried or delivered by mail, and shall be disposed of as the
Postal Service directs, unless--
(1) such nongovernmental entity has such expressed
connection, approval or endorsement;
(2)(A) such matter bears on its face, in conspicuous
and legible type in contrast by typography, layout, or
color with other printing on its face, in accordance
with regulations which the Postal Service shall
prescribe, the following notice: ``THIS ORGANIZATION
HAS NOT BEEN APPROVED OR ENDORSED BY THE FEDERAL
GOVERNMENT, AND THIS OFFER IS NOT BEING MADE BY AN
AGENCY OF THE FEDERAL GOVERNMENT.'', or a notice to the
same effect in words which the Postal Service may
prescribe; [and]
(B) the envelope or outside cover or wrapper in which
such matter is mailed bears on its face in capital
letters and in conspicuous and legible type, in
accordance with regulations which the Postal Service
shall prescribe, the following notice: ``THIS IS NOT A
GOVERNMENT DOCUMENT.'', or a notice to the same effect
in words which the Postal Service may prescribe; [or]
and
(C) such matter does not contain a false
representation stating or implying that Federal
Government benefits or services will be affected by any
contribution or noncontribution; or
* * * * * * *
(j)(1) Any matter otherwise legally acceptable in the mails
which is described in paragraph (2) is nonmailable matter,
shall not be carried or delivered by mail, and shall be
disposed of as the Postal Service directs.
(2) Matter described in this paragraph is any matter that--
(A) constitutes a solicitation for the purchase of or
payment for any product or service that--
(i) is provided by the Federal Government;
and
(ii) may be obtained without cost from the
Federal Government; and
(B) does not contain a clear and conspicuous
statement giving notice of the information set forth in
clauses (i) and (ii) of subparagraph (A).
(k)(1) In this subsection--
(A) the term ``clearly and conspicuously displayed''
means presented in a manner that is readily noticeable,
readable, and understandable to the group to whom the
applicable matter is disseminated;
(B) the term ``facsimile check'' means any matter
that--
(i) is designed to resemble a check or other
negotiable instrument; but
(ii) is not negotiable;
(C) the term ``skill contest'' means a puzzle, game,
competition, or other contest in which--
(i) a prize is awarded or offered;
(ii) the outcome depends predominately on the
skill of the contestant; and
(iii) a purchase, payment, or donation is
required or implied to be required to enter the
contest; and
(D) the term ``sweepstakes'' means a game of chance
for which no consideration is required to enter.
(2) Except as provided in paragraph (4), any matter otherwise
legally acceptable in the mails which is described in paragraph
(3) is nonmailable matter, shall not be carried or delivered by
mail, and shall be disposed of as the Postal Service directs.
(3) Matter described in this paragraph is any matter that--
(A)(i) includes entry materials for a sweepstakes or
a promotion that purports to be a sweepstakes; and
(ii)(I) does not contain a statement that discloses
in the mailing, in the rules, and on the order or entry
form, that no purchase is necessary to enter such
sweepstakes;
(II) does not contain a statement that discloses in
the mailing, in the rules, and on the order or entry
form, that a purchase will not improve an individual's
chances of winning with such entry;
(III) does not state all terms and conditions of the
sweepstakes promotion, including the rules and entry
procedures for the sweepstakes;
(IV) does not disclose the sponsor or mailer of such
matter and the principal place of business or an
address at which the sponsor or mailer may be
contacted;
(V) does not contain sweepstakes rules that state--
(aa) the estimated odds of winning each
prize;
(bb) the quantity, estimated retail value,
and nature of each prize; and
(cc) the schedule of any payments made over
time;
(VI) represents that individuals not purchasing
products or services may be disqualified from receiving
future sweepstakes mailings;
(VII) requires that a sweepstakes entry be
accompanied by an order or payment for a product or
service previously ordered;
(VIII) represents that an individual is a winner of a
prize unless that individual has won such prize; or
(IX) contains a representation that contradicts, or
is inconsistent with sweepstakes rules or any other
disclosure required to be made under this subsection,
including any statement qualifying, limiting, or
explaining the rules or disclosures in a manner
inconsistent with such rules or disclosures;
(B)(i) includes entry materials for a skill contest
or a promotion that purports to be a skill contest; and
(ii)(I) does not state all terms and conditions of
the skill contest, including the rules and entry
procedures for the skill contest;
(II) does not disclose the sponsor or mailer of the
skill contest and the principal place of business or an
address at which the sponsor or mailer may be
contacted; or
(III) does not contain skill contest rules that
state, as applicable--
(aa) the number of rounds or levels of the
contest and the cost to enter each round or
level;
(bb) that subsequent rounds or levels will be
more difficult to solve;
(cc) the maximum cost to enter all rounds or
levels;
(dd) the estimated number or percentage of
entrants who may correctly solve the skill
contest or the approximate number or percentage
of entrants correctly solving the past 3 skill
contests conducted by the sponsor;
(ee) the identity or description of the
qualifications of the judges if the contest is
judged by other than the sponsor;
(ff) the method used in judging;
(gg) the date by which the winner or winners
will be determined and the date or process by
which prizes will be awarded;
(hh) the quantity, estimated retail value,
and nature of each prize; and
(ii) the schedule of any payments made over
time; or
(C) includes any facsimile check that does not
contain a statement on the check itself that such check
is not a negotiable instrument and has no cash value.
(4) Matter that appears in a magazine, newspaper, or other
periodical shall be exempt from paragraph (2) if such matter--
(A) is not directed to a named individual; or
(B) does not include an opportunity to make a payment
or order a product or service.
(5) Any statement, notice, or disclaimer required under
paragraph (3) shall be clearly and conspicuously displayed. Any
statement, notice, or disclaimer required under subclause (I)
or (II) of paragraph (3)(A)(ii) shall be displayed more
conspicuously than would otherwise be required under the
preceding sentence.
(6) In the enforcement of paragraph (3), the Postal Service
shall consider all of the materials included in the mailing and
the material and language on and visible through the envelope
or outside cover or wrapper in which those materials are
mailed.
(l)(1) Any person who uses the mails for any matter to which
subsection (h), (i), (j), or (k) applies shall adopt reasonable
practices and procedures to prevent the mailing of such matter
to any person who, personally or through a conservator,
guardian, or individual with power of attorney--
(A) submits to the mailer of such matter a written
request that such matter should not be mailed to such
person; or
(B)(i) submits such a written request to the attorney
general of the appropriate State (or any State
government officer who transmits the request to that
attorney general); and
(ii) that attorney general transmits such request to
the mailer.
(2) Any person who mails matter to which subsection (h), (i),
(j), or (k) applies shall maintain or cause to be maintained a
record of all requests made under paragraph (1). The records
shall be maintained in a form to permit the suppression of an
applicable name at the applicable address for a 5-year period
beginning on the date the written request under paragraph (1)
is submitted to the mailer.
[(j)] (m) Except as otherwise provided by law, proceedings
concerning the mailability of matter under this chapter and
chapters 71 and 83 of title 18 shall be conducted in accordance
with chapters 5 and 7 of title 5.
[(k)] (n) The district courts, together with the District
Court of the Virgin Islands and the District Court of Guam,
shall have jurisdiction, upon cause shown, to enjoin violations
of section 1716 of title 18.
* * * * * * *
Sec. 3005. False representations; lotteries
(a) Upon evidence satisfactory to the Postal Service that any
person is engaged in conducting a scheme or device for
obtaining money or property through the mail by means of false
representations, including the mailing of matter which is
nonmailable under section 3001(d), (h), [or] (i), (j), or (k)
of this title, or is engaged in conducting a lottery, gift
enterprise, or scheme for the distribution of money or of real
or personal property, by lottery, chance, ordrawing of any
kind, the Postal Service may issue an order which--
(1) * * *
* * * * * * *
For purposes of the preceding sentence, the mailing of matter
which is nonmailable under such section 3001(d), (h), [or] (i),
(j), or (k) by any person shall constitute prima facie evidence
that such person is engaged in conducting a scheme or device
for obtaining money or property through the mail by false
representations.
* * * * * * *
(c) As used in this [section and section 3006 of this title,]
section, the term ``representative'' includes an agent or
representative acting as an individual or as a firm, bank,
corporation, or association of any kind.
* * * * * * *
[Sec. 3006. Unlawful matter
[Upon evidence satisfactory to the Postal Service that a
person is obtaining or attempting to obtain remittances of
money or property of any kind through the mail for an obscene,
lewd, lascivious, indecent, filthy, or vile thing or is
depositing or causing to be deposited in the United States mail
information as to where, how, or from whom such a thing may be
obtained, the Postal Service may--
[(1) direct any postmaster at an office at which mail
arrives, addressed to such a person or to his
representative, to return the mail to the sender marked
``Unlawful''; and
[(2) forbid the payment by a postmaster to such a
person or his representative of any money order or
postal note drawn to the order of either and provide
for the return to the remitter of the sum named in the
money order.]
Sec. 3007. Detention of mail for temporary periods
[(a) In preparation for or during the pendency of proceedings
under sections 3005 and 3006 of this title, the United States
district court in the district in which the defendant receives
his mail shall, upon application therefor by the Postal Service
and upon a showing of probable cause to believe either section
is being violated, enter a temporary restraining order and
preliminary injunction pursuant to rule 65 of the Federal Rules
of Civil Procedure directing the detention of the defendant's
incoming mail by the postmaster pending the conclusion of the
statutory proceedings and any appeal therefrom. The district
court may provide in the order that the detained mail be open
to examination by the defendant and such mail be delivered as
is clearly not connected with the alleged unlawful activity. An
action taken by a court hereunder does not affect or determine
any fact at issue in the statutory proceedings.]
(a)(1) In preparation for or during the pendency of
proceedings under section 3005, the Postal Service may, under
the provisions of section 409(d), apply to the district court
in any district in which mail is sent or received as part of
the alleged scheme, device, lottery, gift enterprise,
sweepstakes, skill contest, or facsimile check or in any
district in which the defendant is found, for a temporary
restraining order and preliminary injunction under the
procedural requirements of rule 65 of the Federal Rules of
Civil Procedure.
(2)(A) Upon a proper showing, the court shall enter an order
which shall--
(i) remain in effect during the pendency of the
statutory proceedings, any judicial review of such
proceedings, or any action to enforce orders issued
under the proceedings; and
(ii) direct the detention by the postmaster, in any
and all districts, of the defendant's incoming mail and
outgoing mail, which is the subject of the proceedings
under section 3005.
(B) A proper showing under this paragraph shall require proof
of a likelihood of success on the merits of the proceedings
under section 3005.
(3) Mail detained under paragraph (2) shall--
(A) be made available at the post office of mailing
or delivery for examination by the defendant in the
presence of a postal employee; and
(B) be delivered as addressed if such mail is not
clearly shown to be the subject of proceedings under
section 3005.
(4) No finding of the defendant's intent to make a false
representation or to conduct a lottery is required to support
the issuance of an order under this section.
(b) If any order is issued under subsection (a) and the
proceedings under section 3005 are concluded with the issuance
of an order under that section, any judicial review of the
matter shall be in the district in which the order under
subsection (a) was issued.
[(b)] (c) This section does not apply to mail addressed to
publishers of newspapers and other periodical publications
entitled to a periodical publication rate or to mail addressed
to the agents of those publishers.
* * * * * * *
Sec. 3011. Judicial enforcement
(a) * * *
* * * * * * *
(e) Nothing in this section or in section 3010 shall be
construed as amending, preempting, limiting, modifying, or
otherwise in any way affecting section 1461 or 1463 of title 18
or section [3006, 3007,] 3007 or 3008 of this title.
Sec. 3012. Civil penalties
(a) Any person--
(1) * * *
* * * * * * *
shall be liable to the United States for a civil penalty in an
amount not to exceed [$10,000 for each day that such person
engages in conduct described by paragraph (1), (2), or (3) of
this subsection.] $50,000 for each mailing of less than 50,000
pieces; $100,000 for each mailing of 50,000 to 100,000 pieces;
with an additional $10,000 for each additional 10,000 pieces
above 100,000, not to exceed $2,000,000. A separate penalty may
be assessed under thissubsection with respect to the conduct
described in each such paragraph.
(b)(1) Whenever, on the basis of any information available to
it, the Postal Service finds that any person has engaged, or is
engaging, in conduct described by paragraph (1), (2), or (3) of
subsection (a), (c), or (d), the Postal Service may, under the
provisions of section 409(d) of this title, commence a civil
action to enforce the civil penalties established by such
subsection. Any such action shall be brought in the district
court of the United States for the district in which the
defendant resides or receives mail.
(2) If the district court determines that a person has
engaged, or is engaging, in conduct described by paragraph (1),
(2), or (3) of subsection (a), (c), or (d), the court shall
determine the civil penalty, if any under this section, taking
into account the nature, circumstances, extent, and gravity of
the violation or violations of such subsection, and, with
respect to the violator, the ability to pay the penalty, the
effect of the penalty on the ability of the violator to conduct
lawful business, any history of prior violations of such
subsection, the degree of culpability, and such other matters
as justice may require.
(c)(1) In any proceeding in which the Postal Service may
issue an order under section 3005(a), the Postal Service may in
lieu of that order or as part of that order assess civil
penalties in an amount not to exceed $25,000 for each mailing
of less than 50,000 pieces; $50,000 for each mailing of 50,000
to 100,000 pieces; with an additional $5,000 for each
additional 10,000 pieces above 100,000, not to exceed
$1,000,000.
(2) In any proceeding in which the Postal Service assesses
penalties under this subsection the Postal Service shall
determine the civil penalty taking into account the nature,
circumstances, extent, and gravity of the violation or
violations of section 3005(a), and with respect to the
violator, the ability to pay the penalty, the effect of the
penalty on the ability of the violator to conduct lawful
business, any history of prior violations of such section, the
degree of culpability and other such matters as justice may
require.
(d) Any person who violates section 3001(l) shall be liable
to the United States for a civil penalty not to exceed $10,000
for each mailing to an individual.
[(c)] (e) All penalties collected under authority of this
section shall be paid into the Treasury of the United States.
[(d)] (f) In any proceeding at any time under this section,
the defendant shall be entitled as a defense or counterclaim to
seek judicial review, if not already had, pursuant to chapter 7
of title 5, of the order issued under section 3005 of this
title. However, nothing in this section shall be construed to
preclude independent judicial review otherwise available
pursuant to chapter 7 of title 5 of an order issued under
section 3005 of this title.
Sec. 3013. Semiannual reports on investigative activities of the Postal
Service
The Postmaster General shall submit semiannual reports to the
[Board] Inspector General summarizing the investigative
activities of the Postal Service. One semiannual report shall
be submitted for the reporting period beginning on October 1
and ending on March 31, and the other semiannual report shall
be submitted for the reporting period beginning on April 1 and
ending on September 30. [Each such report shall be submitted
within sixty days after the close of the reporting period
involved] Each such report shall be submitted within 1 month
(or such shorter length of time as the Inspector General may
specify) after the close of the reporting period involved and
shall include with respect to such reporting period--
(1) * * *
* * * * * * *
(4) the total amount of expenditures and obligations
incurred in carrying out the investigative activities
of the Postal Service; [and]
[(5) the number of cases in which the authority
described in section 3016 was used, and a comprehensive
statement describing how that authority was used in
each of those cases; and
[(5)] (6) such other information relating to the
investigative activities of the Postal Service as the
[Board] Inspector General may require.
[Upon approval of a report submitted under the first sentence
of this section, the information in such report shall be
included in the next semiannual report required under section 5
of the Inspector General Act of 1978 (5 U.S.C. App.).] The
information in a report submitted under this section to the
Inspector General with respect to a reporting period shall be
included as part of the semiannual report prepared by the
Inspector General under section 5 of the Inspector General Act
of 1978 for the same reporting period. Nothing in this section
shall be considered to permit or require that any report by the
Postmaster General under this section include any information
relating to activities of the Inspector General.
Sec. 3016. Administrative subpoenas
(a) Subpoena Authority.--
(1) Investigations.--
(A) In general.--In any investigation
conducted under section 3005(a), the Postmaster
General may require by subpoena the production
of any records (including books, papers,
documents, and other tangible things which
constitute or contain evidence) which the
Postmaster General considers relevant or
material to such investigation.
(B) Condition.--No subpoena shall be issued
under this paragraph except in accordance with
procedures, established by the Postal Service,
requiring that--
(i) a specific case, with an
individual or entity identified as the
subject, be opened before a subpoena is
requested;
(ii) appropriate supervisory and
legal review of a subpoena request be
performed; and
(iii) delegation of subpoena approval
authority be limited to the Postal
Service's General Counsel or a Deputy
General Counsel.
(2) Statutory proceedings.--In any statutory
proceeding conducted under section 3005(a), the
Judicial Officer may require by subpoena the attendance
and testimony of witnesses and the production of any
records (including books, papers, documents, and other
tangible things which constitute or contain evidence)
which the Judicial Officer considers relevant or
material to such proceeding.
(3) Rule of construction.--Nothing in paragraph (2)
shall be considered to apply in any circumstance to
which paragraph (1) applies.
(b) Service.--
(1) Service within the united states.--A subpoena
issued under this section may be served by a person
designated under section 3061 of title 18 at any place
within the territorial jurisdiction of any court of the
United States.
(2) Foreign service.--Any such subpoena may be served
upon any person who is not to be found within the
territorial jurisdiction of any court of the United
States, in such manner as the Federal Rules of Civil
Procedure prescribe for service in a foreign country.
To the extent that the courts of the United States may
assert jurisdiction over such person consistent with
due process, the United States District Court for the
District of Columbia shall have the same jurisdiction
to take any action respecting compliance with this
section by such person that such court would have if
such person were personally within the jurisdiction of
such court.
(3) Service on business persons.--Service of any such
subpoena may be made upon a partnership, corporation,
association, or other legal entity by--
(A) delivering a duly executed copy thereof
to any partner, executive officer, managing
agent, or general agent thereof, or to any
agent thereof authorized by appointment or by
law to receive service of process on behalf of
such partnership, corporation, association, or
entity;
(B) delivering a duly executed copy thereof
to the principal office or place of business of
the partnership, corporation, association, or
entity; or
(C) depositing such copy in the United States
mails, by registered or certified mail, return
receipt requested, duly addressed to such
partnership, corporation, association, or
entity at its principal office or place of
business.
(4) Service on natural persons.--Service of any
subpoena may be made upon any natural person by--
(A) delivering a duly executed copy to the
person to be served; or
(B) depositing such copy in the United States
mails, by registered or certified mail, return
receipt requested, duly addressed to such
person at his residence or principal office or
place of business.
(5) Verified return.--A verified return by the
individual serving any such subpoena setting forth the
manner of such service shall be proof of such service.
In the case of service by registered or certified mail,
such return shall be accompanied by the return post
office receipt of delivery of such subpoena.
(c) Enforcement.--
(1) In general.--Whenever any person, partnership,
corporation, association, or entity fails to comply
with any subpoena duly served upon him, the Postmaster
General may request that the Attorney General seek
enforcement of the subpoena in the district court of
the United States for any judicial district in which
such person resides, is found, or transacts business,
and serve upon such person a petition for an order of
such court for the enforcement of this section.
(2) Jurisdiction.--Whenever any petition is filed in
any district court of the United States under this
section, such court shall have jurisdiction to hear and
determine the matter so presented, and to enter such
order or orders as may be required to carry into effect
the provisions of this section. Any final order entered
shall be subject to appeal under section 1291 of title
28. Any disobedience of any final order entered under
this section by any court may be punished as contempt.
(d) Disclosure.--Any documentary material provided pursuant
to any subpoena issued under this section shall be exempt from
disclosure under section 552 of title 5.
Sec. 3017. Nonmailable skill contests or sweepstakes matter;
notification to prohibit mailings
(a) Definitions.--In this section--
(1) the term ``promoter'' means any person who--
(A) originates and mails any skill contest or
sweepstakes, except for any matter described in
section 3001(k)(4); or
(B) originates and causes to be mailed any
skill contest or sweepstakes, except for any
matter described in section 3001(k)(4);
(2) the term ``removal request'' means a request
stating that an individual elects to have the name and
address of such individual excluded from any list used
by a promoter for mailing skill contests or
sweepstakes;
(3) the terms ``skill contest'', ``sweepstakes'', and
``clearly and conspicuously displayed'' have the same
meanings as given them in section 3001(k); and
(4) the term ``duly authorized person'', as used in
connection with an individual, means a conservator or
guardian of, or person granted power of attorney by,
such individual.
(b) Nonmailable Matter.--
(1) In general.--Matter otherwise legally acceptable
in the mails described in paragraph (2)--
(A) is nonmailable matter;
(B) shall not be carried or delivered by
mail; and
(C) shall be disposed of as the Postal
Service directs.
(2) Nonmailable matter described.--Matter described
in this paragraph is any matter that--
(A) is a skill contest or sweepstakes, except
for any matter described in section 3001(k)(4);
and
(B)(i) is addressed to an individual who made
an election to be excluded from lists under
subsection (d); or
(ii) does not comply with subsection (c)(1).
(c) Requirements of Promoters.--
(1) Notice to individuals.--Any promoter who mails a
skill contest or sweepstakes shall provide with each
mailing a statement that--
(A) is clearly and conspicuously displayed;
(B) includes the address or toll-free
telephone number of the notification system
established under paragraph (2); and
(C) states that the notification system may
be used to prohibit the mailing of all skill
contests or sweepstakes by that promoter to
such individual.
(2) Notification system.--Any promoter that mails or
causes to be mailed a skill contest or sweepstakes
shall establish and maintain a notification system that
provides for any individual (or other duly authorized
person) to notify the system of the individual's
election to have the name and address of the individual
excluded from all lists of names and addresses used by
that promoter to mail any skill contest or sweepstakes.
(d) Election To Be Excluded From Lists.--
(1) In general.--An individual (or other duly
authorized person) may elect to exclude the name and
address of that individual from all lists of names and
addresses used by a promoter of skill contests or
sweepstakes by submitting a removal request to the
notification system established under subsection (c).
(2) Response after submitting removal request to the
notification system.--Not later than 60 calendar days
after a promoter receives a removal request pursuant to
an election under paragraph (1), the promoter shall
exclude the individual's name and address from all
lists of names and addresses used by that promoter to
select recipients for any skill contest or sweepstakes.
(3) Effectiveness of election.--An election under
paragraph (1) shall remain in effect, unless an
individual (or other duly authorized person) notifies
the promoter in writing that such individual--
(A) has changed the election; and
(B) elects to receive skill contest or
sweepstakes mailings from that promoter.
(e) Private Right of Action.--
(1) In general.--An individual who receives one or
more mailings in violation of subsection (d) may, if
otherwise permitted by the laws or rules of court of a
State, bring in an appropriate court of that State--
(A) an action to enjoin such violation,
(B) an action to recover for actual monetary
loss from such a violation, or to receive $500
in damages for each such violation, whichever
is greater, or
(C) both such actions.
It shall be an affirmative defense in any action
brought under this subsection that the defendant has
established and implemented, with due care, reasonable
practices and procedures to effectively prevent
mailings in violation of subsection (d). If the court
finds that the defendant willfully or knowingly
violated subsection (d), the court may, in its
discretion, increase the amount of the award to an
amount equal to not more than 3 times the amount
available under subparagraph (B).
(2) Action allowable based on other sufficient
notice.--A mailing sent in violation of section 3001(l)
shall be actionable under this subsection, but only if
such an action would not also be available under
paragraph (1) (as a violation of subsection (d)) based
on the same mailing.
(f) Promoter Nonliability.--A promoter shall not be subject
to civil liability for the exclusion of an individual's name or
address from any list maintained by that promoter for mailing
skill contests or sweepstakes, if--
(1) a removal request is received by the promoter's
notification system; and
(2) the promoter has a good faith belief that the
request is from--
(A) the individual whose name and address is
to be excluded; or
(B) another duly authorized person.
(g) Prohibition on Commercial Use of Lists.--
(1) In general.--
(A) Prohibition.--No person may provide any
information (including the sale or rental of
any name or address) derived from a list
described in subparagraph (B) to another person
for commercial use.
(B) Lists.--A list referred to under
subparagraph (A) is any list of names and
addresses (or other related information)
compiled from individuals who exercise an
election under subsection (d).
(2) Civil penalty.--Any person who violates paragraph
(1) shall be assessed a civil penalty by the Postal
Service not to exceed $2,000,000 per violation.
(h) Civil Penalties.--
(1) In general.--Any promoter--
(A) who recklessly mails nonmailable matter
in violation of subsection (b) shall be liable
to the United States in an amount of $10,000
per violation for each mailing to an individual
of nonmailable matter; or
(B) who fails to comply with the requirements
of subsection (c)(2) shall be liable to the
United States.
(2) Enforcement.--The Postal Service shall, in
accordance with the same procedures as set forth in
section 3012(b), provide for the assessment of civil
penalties under this section.
* * * * * * *
ADDITIONAL VIEWS
The issue of consumer protection, whether it relates to
telemarketing fraud or sweepstakes deception is finally
receiving the attention it deserves. Because a number of people
fell victim to telemarketing scams, Congress, in 1991 enacted
legislation that addressed the problem of telephone fraud by
handing consumers an option to enforce regulations against
unwanted telephone solicitations. The Telephone Consumer
Protection Act of 1991 (TCPA), which establishes consumer
protections against unwanted telemarketing calls, mandates that
individual telemarketing companies place consumers on a do-not-
call list if the consumer requests not to receive further
solicitation. The act creates a private right of action,
permitting persons to file suit in state court if an entity
violates the TCPA provisions, absent state law to the contrary.
Currently, S. 335, the Deceptive Mail Prevention and
Enforcement Act, contains no provisions to provide consumers
with a private right of action and instead relies on
enforcement through civil penalties administered by the postal
service. Under S. 335, the United States Postal Service has
additional subpoena authority to investigate potential illegal
sweepstakes practices, and consumers would report violations of
the do-not-mail provision to the USPS for investigation. A
private right of action would be an effective enforcement tool,
particularly with respect to the problem of unwanted mailings.
During deliberations by the Subcommittee on the Postal
Service on H.R. 170, the Honesty in Sweepstakes Act of 1999,
sponsored by Representatives LoBiondo and Condit, Chairman
McHugh and I offered an amendment in the nature of a
substitute. Included in that amendment which was adopted by
voice vote, was language I authored which added a private right
of action to sweepstakes legislation. Thus, allowing consumers
to file suit in state court if a sweepstakes promoter continues
to send mailings despite having requested removal from a
mailer's list is an important tool. This private right of
action closely mirrors the provision in the Telephone Consumer
Protection Act of 1991, which establishes consumer protections
against unwanted and intrusive telemarketing calls.
The private right of action provision contained in section
8 of H.R. 170, is supported by the National Consumers League,
the American Association of Retired Persons and the Direct
Marketing Association.
Chaka Fattah.