[Senate Report 106-102]
[From the U.S. Government Publishing Office]
Calendar No. 191
106th Congress } { Report
SENATE
1st Session } { 106-102
_______________________________________________________________________
DECEPTIVE MAIL PREVENTION AND
ENFORCEMENT ACT
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL VIEWS
to accompany
S. 335
TO AMEND CHAPTER 30 OF TITLE 39, UNITED STATES CODE, TO PROVIDE FOR THE
NONMAILABILITY OF CERTAIN DECEPTIVE MATTER RELATING TO GAMES OF CHANCE,
ADMINISTRATIVE PROCEDURES, ORDERS, AND CIVIL PENALTIES RELATING TO SUCH
MATTER, AND FOR OTHER PURPOSES
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
July 1, 1999.--Ordered to be printed
_____________
U.S. GOVERNMENT PUBLISHING OFFICE
69-010 PDF WASHINGTON : 1999
For sale by the Superintendent of Documents, U.S. Government Publishing Office
Internet: bookstore.gpo.gov. Phone: toll free (866) 512-1800; DC area (202)512-1800
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COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
Hannah S. Sistare, Staff Director and Counsel
Dan G. Blair, Senior Counsel
Kirk E. Walder, Investigator, Permanent Subcommittee on Investigations
R. Emmett Mattes, Detailee, U.S. Postal Inspection Service,
Permanent Subcommittee on Investigations
Kathy D. Cutler, Congressional Fellow, Permanent Subcommittee on
Investigations
Michael L. Loesch, Counsel, International Security,
Proliferation and Federal Services Subcommittee
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Laurie R. Rubenstein, Minority Chief Counsel
Deirdre A. Foley, Minority Congressional Fellow
Nanci E. Langley, Minority Deputy Staff Director, International
Security,
Proliferation and Federal Services Subcommittee
Leslie Bell, Minority Congressional Fellow, Permanent Subcommittee on
Investigations
Darla D. Cassell, Administrative Clerk
Calendar No. 191
106th Congress } { Report
SENATE
1st Session } { 106-102
======================================================================
TITLEDECEPTIVE MAIL PREVENTION AND ENFORCEMENT ACT
_______
July 1, 1999.--Ordered to be printed
_______
Mr. Thompson, from the Committee on Governmental Affairs, submitted the
following
REPORT
CONFERENCE REPORT
[To accompany S. 335]
The Committee on Governmental Affairs, to which was
referred the bill (S. 335) to amend chapter 30 of title 39,
United States Code, to provide for the nonmailability of
certain deceptive matter relating to games of chance,
administrative procedures, orders, and civil penalties relating
to such matter, and for other purposes; having considered the
same, reports favorably thereon with an amendment in the nature
of a substitute and recommends that the bill as amended do
pass.
C O N T E N T S
Page
I. Purpose..........................................................1
II. Summary of Legislation...........................................2
III. Background and Need for Legislation..............................3
IV. Investigations and Findings......................................6
V. Legislative History.............................................11
A. Legislation......................................... 11
B. Hearings............................................ 13
C. Committee Action.................................... 15
VI. Section-by-Section Analysis.....................................16
VII. Regulatory Impact Statement.....................................29
VIII.Congressional Budget Office Cost Estimate.......................29
IX. Executive Communications........................................32
X. Additional Views of Senator Edwards.............................33
XI. Changes In Existing Law.........................................36
I. Purpose
The purpose of this bill is to establish strong consumer
protections to prevent a number of types of deceptive mailings.
The legislation will impose various requirements on sweepstakes
mailings, skill contests, facsimile checks, and mailings made
to look like government documents. The 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 deceptive mailings.
II. Summary of Legislation
S. 335, as amended by the Committee substitute, 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 provide 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 universal notification system
which would allow consumers to call one toll-free number to
learn how to be removed from the mailing lists of such
companies. All sweepstakes or skill contest mailings would be
required to contain this telephone number and the address of
the notification system.
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 legislation 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.
The provisions of the bill would take effect 120 days after
the date of enactment.
III. Background and Need for 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 estimate that Americans
annually spend $7 billion on magazine subscriptions, and 12% 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 recency, 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, or 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 ``junk'' 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.
The tactics of sweepstakes mailings have generated
thousands of consumer complaints, including complaints to state
Attorneys General, the Federal Trade Commission (``FTC''), the
USPS, 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.
Envelopes and checks may be designed to resemble government
mailings, using symbols such as an eagle, the Statue of
Liberty, or words such as ``Buy U.S. Savings Bonds.'' 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.
Federal and state law
Sweepstakes and skill contests are largely regulated by
state law. At the federal level, the USPS and FTC possess
jurisdiction to regulate and investigate sweepstakes and skill
contests. Current federal laws do not specifically cover
sweepstakes but address them indirectly by forbidding
lotteries, false representations, and unfair trade practices.
Chapter 30 of title 39 contains the civil provisions
authorizing enforcement actions against deceptive mailings.
Sweepstakes that obtain money through the mails by means of
false representations violate 39 U.S.C. 3005. This statute also
forbids conducting a lottery which, although not expressly
stated, requires that all sweepstakes must contain an option to
enter without payment of consideration. A lottery contains
three elements: prize, chance, and consideration. A free entry
option excludes the consideration element. No federal statutes
or regulations enforced by the USPS make specific reference to
sweepstakes.
Criminal action can be taken against deceptive mailings
under 18 U.S.C. Sec. 1341, the federal mail fraud statute. The
two necessary elements for a violation of this statute are (1)
formation of a scheme with the intent to defraud, and (2) use
of the mails in furtherance of that scheme. Parties sending
deceptive mailings have been prosecuted under this statute,
albeit infrequently.
The FTC may also take action against practices that are
unfair or deceptive. The FTC utilizes several standards to
determine whether a practice is deceptive. There must be a
representation, omission, or practice that is likely to mislead
the consumer. The FTC evaluates the relevant misrepresentation
statement from the viewpoint of a consumer acting reasonably
under the circumstances.
Twenty-seven states have specific statutes which govern
sweepstakes. State laws cover numerous facets of sweepstakes
promotions, including general disclosures, odds of winning,
number and value of prizes awarded, rules, winners list, pre-
contest filing, simulated checks, prize restrictions, and the
use of certain words.
States such as New York make it unlawful to represent that
a person is a ``winner'' or has been ``selected'' or words of
similar import when all or a substantial number of those
solicited receive the same ``prize'' or ``opportunity.'' State
laws which restrict the use of certain terms are directed at
sweepstakes that suggest to the recipient that he or she is a
member of a select group when everyone who receives the
sweepstakes is a member of the same class of contestants.
IV. Investigations and Findings
The investigation and hearings held by the Permanent
Subcommittee on Investigations and the Subcommittee on
International Security, Proliferation, and Federal Services
revealed that deceptive mailings can take many forms and use a
variety of techniques. Such practices include:
1. Misleading promotions suggesting that an
individual has won a major sweepstakes, but will only
receive the prize if a product is purchased;
2. Misleading promotions suggesting that purchase of
a product is necessary for, or will increase the
chances of winning in, future sweepstakes contests;
3. Confusing promotional copy and official rules that
include inconsistences which encourage individuals to
make unnecessary purchases in the hope of winning a
prize;
4. Sending multiple sweepstakes promotions with
different copy for the same sweepstakes contest,
implying that each promotion involves a different
sweepstakes;
5. Targeting customers making purchases with repeated
subsequent mailings, which entice consumers to make
excessive and unneeded purchases;
6. Misleading statements seeming to guarantee the
award of a large cash prize, and requesting purchase of
a product, when most individuals actually receive an
insignificant cash award, such as $.50 or $1.00;
7. Using a deceptively named company, and using
envelopes and/or symbols and statements that create the
impression that the mailing is official government
correspondence;
8. Offering to sell information that is provided for
free by the federal government or enticing a purchase
by falsely implying a cut in federal benefits; and
9. Sending facsimile checks that entice individuals
to respond to marketing appeals.
Companies use these techniques and others to persuade
consumers to send money or make unnecessary purchases. Many
companies conduct legitimate sweepstakes and offer worthwhile
products, but use deceptive mailings to generate excessive and
unnecessary purchases. This legislation is necessary to protect
vulnerable consumers from these practices.
Express and implied claims or representations
The investigation by the Permanent Subcommittee on
Investigations found that many mailings use deceptive language
to entice consumers into making purchases of products that they
neither need nor want. Mailings often suggest that an
individual has won a large prize or that a purchase is
necessary or will increase the chances of winning a large
prize.
The legislation approved by the Committee addresses this
problem by declaring as nonmailable any matter that makes
certain misleading representations. The legislation prohibits
various practices that mislead consumers, particularly
consumers who may be more trusting or otherwise vulnerable to a
computer-generated mass mailing. Through sophisticated mass
mail techniques, the most vulnerable of consumers can be
identified and repeatedly targeted for misleading sweepstakes
solicitations.
Sweepstakes promotions may contain outright false
representations. Most promotions contain representations that
are technically accurate but include implied
misrepresentations. Under this legislation, a
``representation'' is prohibited if it is directly false or
impliedly false. This interpretation is consistent with both
case law and the FTC's October 14, 1983 Policy Statement on
Deception which stated:
In cases of implied claims, the Commission will often
be able to determine meaning through an examination of
the representation itself, including an evaluation of
such factors as the entire document, the juxtaposition
of various phrases in the document, the nature of the
claim, and the nature of the transaction.
Sections 3001 (h), (i), and (k) of the bill approved by the
Committee use the terms ``misrepresents,'' ``represents,'' and
``representation'' in describing nonmailable matter. For
purposes of this bill, the Committee intends that
``misrepresents,'' ``represents,'' and ``representation'' mean
both express and implied representations.
Drawing from the experience of the FTC, the Committee
believes that a mailing can be misleading or deceptive even
when the representation is suggested or implied. In Thompson
Medical Company, Inc. v. Federal Trade Commission, 791 F.2d
189, 197 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987),
the court stated that ``[t]he tendency of a particular
advertisement to deceive is determined by the net impression it
is likely to make upon the viewing public. Consequently,
literally true statements may nonetheless be found deceptive,
and advertisements reasonably capable of being interpreted in a
misleading way are unlawful even though other, non- misleading
interpretations may also be possible.'' In that case, the court
held that Aspercreme advertisements were misleading because
Aspercreme did not contain aspirin as its name suggested and
the advertisement falsely implied that it was a cure for
arthritis.
Case law and the FTC's 1983 Policy Statement on Deception
also established that representations directed toward a
particularly vulnerable group of consumers must be interpreted
from the standpoint of a person from within that group.
Therefore, where a mailer has successfully identified, through
its own mailings or list rental, a particularly vulnerable
group, direct or implied representations must be interpreted as
they would be interpreted by a member of that group.
Required statements, notices and disclaimers
Subsection (k)(5) requires that ``any statement, notice, or
disclaimer required'' with respect to promotional mailings for
sweepstakes and skill contests (hereinafter, ``statements'')
must be ``clearly and conspicuously displayed.'' This provision
ensures that the statements and disclaimers required by the
bill will be readily apparent and understood by the average
reader.
Prior to adopting the ``clear and conspicuous'' standard,
the Committee reviewed the definitions of ``clear and
conspicuous'' found in the FTC's opinions and in case law. The
FTC defines ``clear and conspicuous'' in its 1983 Policy
Statement as follows:
[I]n all cases the required or advised disclosures
must be effectively communicated to consumers. To
achieve this general performance standard, the
Commission's rules and guides require that disclosures
be ``clear and conspicuous,'' using that term or other
conceptually similar articulations. In order to
determine whether the disclosure is effectively
communicated, the Commission considers the disclosure
in the context of all of the elements of the
advertisement. Ordinarily, a disclosure is clear and
conspicuous, and therefore is effectively communicated,
when it is displayed in a manner that is readily
noticeable, readable and/or audible (depending on the
medium), and understandable to the audience to whom it
is disseminated.
63 Fed. Reg. 24996, 25002 (footnotes omitted).
The Committee also reviewed case law using the ``clear and
conspicuous'' standard. ``Clear and conspicuous'' is a
disclosure standard used in laws involving banking, commerce
and trade issues, customs, and the USPS. Several cases provide
useful guidance on what is intended by the words ``clear and
conspicuous.'' In Lowery v. Finance America Corp., 231 S.E.2d
904, 910 (N.C. App. Ct. 1977), the court explained that the
``insurance disclosures contained in the Federal Disclosure
Statement given to the Lowerys are not clear, conspicuous and
in meaningful sequence.'' The court noted, ``[f]irst, the cost
of the insurance is neither clearly nor conspicuously revealed.
The cost is typed in two of many boxes at the top of the page.
These boxes are designated `Credit Life' and `Credit Dis.' The
meaning of these words is not clear to laymen for whose
protection the Act and Regulation are meant.''
In Channell v. Citicorp National Services, 89 F.3d 379, 382
(N.D. Ill. 1996), the court found that ``[t]he Act and
Regulation M do not define `clear and conspicuous,' but the
words are staples of commercial law.'' Indeed, the Uniform
Commercial Code defines ``conspicuous'' as so written that a
reasonable person against whom it is to operate ought to have
noticed it. Uniform Commercial Code (UCC) Sec. 1-201(10).
Finally, the United States District Court for the Southern
District of Florida found ``that the terms `annual percentage
rate' and `finance charge' [were] displayed in the Disclosure
Statement more conspicuously than the other terms. Although
they [were] printed in the same size, style, and boldness of
some other terms, `annual percentage rate' and `finance charge'
[were] found at the top of the page, with boxes around them
which highlight[ed] them in relation to the other terms.''
Malfa v. Household Bank, F.S.B., 825 F. Supp. 1018, 1020 (S.D.
FL 1993).
These court cases show that the term ``clear and
conspicuous'' requires language that is readily noticeable and
readily understandable. In some cases, the standard will
require typeface sufficiently large in comparison to the
surrounding typeface to draw the average reader's attention to
it. In other cases, where typeface is used that is similar in
size or style to the typeface of other important material on
the document, the required language must be highlighted in some
form to make it noticeable. Examples of highlighting include
using bold letters, surrounding the language with a noticeable
box, using contrasting ink or background color, and placing the
language in a very visible location on the relevant page. The
requirement in the bill that these statements be ``clear and
conspicuous'' is one of the most important provisions in this
legislation. In recognition of the endless variety and possible
combinations of typeface on a page, the Committee declined to
require explicit typeface styles and size. The bill instead
relies on the common sense application of the term ``clear and
conspicuous'' and expects strong enforcement by the USPS. The
``clear and conspicuous'' standard can only be satisfied if the
relevant statements and disclaimers are easily noticeable and
understandable to the average reader of a sweepstakes
promotion.
Statements concerning purchases
During the investigation and hearings of the Permanent
Subcommittee on Investigations, the Subcommittee gathered
evidence which demonstrated that many individuals purchased
products that they did not need or want because they thought a
purchase was necessary to enter the sweepstakes, or that a
purchase would increase their chances of winning. The American
Association of Retired Persons (``AARP''), in testimony to the
Subcommittee, presented survey data that showed forty percent
of seniors thought a purchase would or might increase their
chance of winning a prize in a sweepstakes. The Committee
believes the statements ``no purchase necessary'' and ``a
purchase will not increase your chances of winning'' are
essential to provide adequate consumer protection and reduce
the misperception that a purchase is required or will increase
an individual's chances of winning a sweepstakes.
The bill improves existing practices by requiring two
disclosures, ``no purchase necessary'' and ``a purchase will
not increase an individual's chance of winning.'' These
disclosures must be ``in the mailing, in the rules, and on the
order or entry form.'' The Com-
mittee finds that these two statements are particularly
important. They communicate to the recipient that buying a
product is neither necessary nor advantageous with respect to
the sweepstakes. By requiring these two disclaimers to appear
in the three locations in a sweepstakes promotion most likely
to be read by the recipient, the bill makes some effort to
ensure that this key message reaches consumers who participate
in sweepstakes. Moreover, the term ``in the mailing'' means a
location in the sweepstakes promotion other than the rules or
the order or entry form that is the most likely document to be
read with respect to promoting the sweepstakes. In most cases,
this will be the front of the first piece of the mailing.
Because promotional mailings differ to such a large extent,
however, it may also be on or inside a brochure in the mailing.
The Committee cannot anticipate the content and style of each
promotion, but intends that this third location be a place in
the mailing that is designed as the centerpiece of the
sweepstakes promotion.
Rules and entry procedures
In response to examples of confusing rules and entry
procedures, the bill requires that the disclosure of the terms
and conditions of the sweepstakes or skill contests, including
the rules and entry procedures, be ``easy to find, read, and
understand.'' This means that the rules cannot be buried in a
piece of the promotional mailing that is likely to be
overlooked or ignored. In addition, the rules cannot be written
in language that would be confusing or unintelligible to the
average person. The Committee intends that the rules be readily
available to the average recipient and, once found, be readable
and simple to understand.
Applicability of requirements imposed by the legislation
The Committee recognizes that many different companies are
involved in the creation and mailing of covered matter under
the bill. This legislation would not make unlawful the normal
business activities of related industries, such as those in the
printing and mailing industries, which do not sponsor
promotional materials but merely print or mail materials at the
behest of others.
The critical requirement in section 3005 of title 39,
relating to false representations, is that a person engage in
``a scheme or device for obtaining money or property through
the mail.'' Aninnocent and unknowing person or company, that
merely prints or mails matter for a sweepstakes or contest sponsor,
does not engage in a scheme for obtaining money or property through the
mail unless such person or company originates or mutually assists with
the creation of the mailing. Therefore, such persons would not fall
within the ambit of the proposed legislation, including the definition
of promoter in section 8 of the bill, unless they participate directly
in the creative development of the mailing. The focus of any inquiry
should be on the degree to which the individual or company
substantially developed the contest and layout of the mailing versus
the simple printing or mailing of matter.
Removal of individuals from mailing lists
During the course of the hearing by the Permanent
Subcommittee on Investigations, witnesses testified about the
difficulties that they encountered when they attempted to
remove their names or the names of family members from
sweepstakes mailing lists. The hearings revealed that,
currently, the only method of removal is to contact each
individual company. The witnesses testified that it is
unnecessarily difficult to obtain the correct address to send a
request for removal. Furthermore, once an individual sends a
removal request to an individual company, it often takes many
months for the company to cease all mailings, if they do so at
all. The Committee believes that it is essential to ensure
simple and timely cessation of sweepstakes and skill contest
mailings to vulnerable consumers. For many families, this may
be the only mechanism to protect their loved ones from
exploitation. As such, the bill requires companies to
participate in a uniform notification system that will effect
removal of names from mailing lists sent by certain companies.
It was brought to the Committee's attention that it may be
difficult for some types of companies engaging in third party
mailings to comply with the requirements of section 8.
Ability of Postal Service, the Federal Trade Commission and state
officials to act against deceptive mailings
In September 1998, the General Accounting Office reported
that no comprehensive data exists to indicate the full extent
of the problems consumers have experienced with deceptive
mailings. The lack of comprehensive data is primarily because
consumers often do not report their problems with deceptive
mailings and no centralized database exists from which
comprehensive data could be obtained.
The Committee strongly recommends that the USPS and the
FTC, in consultation with the National Association of Attorneys
General, the AARP, the Better Business Bureau, the National
Fraud Information Center, the Direct Marketing Association
(``DMA''), and other interested parties, take steps to
implement a centralized database containing comprehensive data
about reported cases of deceptive mailings.
Such a database would be a repository of information
reported by consumers at the local, state, and federal levels.
Having more access to comprehensive information would enable
the USPS to more readily identify which deceptive practices are
most pervasive.
V. Legislative History
A. Legislation
During the 105th and 106th Congresses, a number of bills
have been introduced regarding deceptive mailings and
sweepstakes.
S. 301, the Honesty in Sweepstakes Act of 1999
In 1998, Senator Campbell introduced the Honesty in
Sweepstakes Act of 1998. This bill was referred to the
Committee on Governmental Affairs and to the Subcommittee on
International Security, Proliferation, and Federal Services.
Senator Campbell reintroduced a modified version of this bill
in 1999. The bill would amend federal postal law to prohibit
delivery of any mail constituting a solicitation or offer in
connection with a sales promotion for a product or service that
uses any game of chance offering anything of value (including
any sweepstakes) or anything resembling a negotiable
instrument, unless specified notices in a specific type size
are printed on the envelope and enclosed material.
This legislation would impose new disclosure requirements
to inform recipients that they are not automatic winners and
that no purchase is necessary to enter. The disclaimer must be
in conspicuous and legible type. If the envelope contains
language suggesting the recipient is a winner, then the
disclosure must also appear on the envelope. Facsimile checks
must also state that they are not checks or negotiable
instruments and have no value.
Under the bill, civil penalties for deceptive mailings were
set at up to $50,000 for each mailing of less than 50,000
pieces, $100,000 for mailings of 50,000 to 100,000 pieces, with
an additional $10,000 for each additional 10,000 pieces. The
total fine for a violation could not exceed $2 million. The
legislation requires the USPS to retain all civil penalties it
collects to fund programs to increase consumer awareness of
deceptive mailings.
S. 335, the Deceptive Mailings Prevention and Enforcement
Improvement Act
This legislation, introduced by Senator Collins, would
establish new standards for sweepstakes and other prize
promotion mailings, including clear disclosures that no
purchase is necessary to enter the contest, the value and odds
of winning each prize, the name of the promoter of the contest,
and an understandable statement of the rules.
In addition, the legislation would strengthen current laws
against mailings that mimic government documents. Mailings
could not use any language or device that gives the appearance
that the mailing is connected, approved, or endorsed by the
federal government, or that implies that the mailing is
afforded any special protection by the federal government. Any
mailing selling a product the government provides for free must
include a disclosure that the product is available from the
government at no cost. Mailings could not contain statements
implying that federal governmentbenefits or services would be
affected by any purchase, non-purchase, response, or non-response to a
mailing.
The bill also provides strong new financial penalties for
mailings that do not comply with these standards. Civil
monetary penalties include fines ranging from $50,000 to $2
million, depending on the number of mailings at issue.
The bill makes federal law enforcement efforts more
effective by giving the USPS additional tools to combat these
practices. The bill authorizes, in limited cases,
administrative subpoenas for records and documents during USPS
investigations of fraudulent mailings. Upon application to a
district court, the USPS would be authorized to detain mail
nationwide, instead of in a single judicial district, when
mailings violate 39 U.S.C. Sec. 3005. Under current law, the
USPS must file an action in each judicial district in which
mail is received. These provisions will assist the USPS in
taking immediate steps to stop deceptive mailings.
The legislation would also preserve the important role that
states play in fighting this type of fraud and deception. The
bill would not preempt state or local laws protecting consumers
from fraudulent or deceptive mailings.
S. 336, the Deceptive Games of Chance Mailings Elimination
Act of 1999
Senator Levin introduced legislation in 1998, and again in
1999, that would add new requirements to the deceptive mail
statute. His legislation would declare as nonmailable any
solicitation or sweepstakes promotion unless it: 1) conforms
with postal regulations; 2) contains sufficiently large and
noticeable disclaimers that no purchases are necessary, a
disclosure of the chances of winning, an advisory that
purchases do not enhance the chances of winning; 3) is clearly
labeled as a game of chance and contains no misleading
statements representing that recipients are guaranteed winners;
and 4) does not represent that the recipient is a member of a
selected group whose chances of winning are enhanced as a
member of that group. The bill allows the Postmaster General to
use subpoenas for investigations into deceptive mailings and to
ask the Attorney General to enforce subpoenas. The bill also
allows the USPS to assess civil penalties in lieu of, or as
part of, an administrative order.
S. 975, the Sweepstakes Toll-Free Option Protection Act of
1999
This bill was introduced by Senator Edwards and would amend
chapter 30 of title 39, United States Code, to provide for a
uniform notification system by which individual consumers may
elect not to receive mailings relating to skill contests or
sweepstakes.
B. Hearings
The Subcommittee on International Security, Proliferation,
and Federal Services, chaired by Senator Thad Cochran, held a
hearing on deceptive mailings on September 1, 1998. This
hearing included testimony from Senator Ben Nighthorse
Campbell; the head of the United States Postal Inspection
Service (``USPIS''); the Attorney General of Florida; the head
of the DMA, the trade association representing sweepstakes and
other direct mail companies; and a professor of gerontology,
who was conducting a study of the impact of sweepstakes on the
elderly.
During the hearing, the USPIS official testified that the
USPS has been working with FTC, the AARP, and the state
Attorneys General to combat deceptive mailings. This effort has
been aimed largely at the most fraudulent contests, usually
smaller firms that attempt to persuade consumers to pay money
in connection with entering a sweepstakes. USPS requested
additional authority to help postal inspectors regulate
deceptive mailings. The Attorney General of Florida testified
that his office was investigating allegations of double
billing, sales of lists of vulnerable consumers to other
sweepstakes companies, false deadlines, aggressive collection
practices, and deceptive language in sweepstakes entries.
The DMA representative testified about sweepstakes
marketing practices and expressed concern about the fraud that
currently exists, but also about consumers who respond
inappropriately to sweepstakes offers. He said that DMA
supports efforts to strengthen rules against fraudulent
sweepstakes. DMA also favored increased self-regulation and
consumer education. According to the DMA representative, DMA
was preparing to strengthen its sweepstakes guidelines; develop
programs to identify high activity respondents and inform them
that no purchase is necessary to enter; improve training for
customer service agents to identify problem cases; develop a
consumer information program to educate the public about
legitimate sweepstakes; serve as a clearinghouse for consumer
complaints; and work more closely with consumer organizations
to educate people about avoiding financially risky behavior in
connection with sweepstakes.
The Director of Gerontology at Arizona State, Dr. William
Arnold, had been requested to conduct a study for the AARP on
the elderly and sweepstakes. He testified that senior citizens
have a different belief system, and are more trusting of
mailings that appear to have government connections or other
authority figure endorsements.
In 1998, the Permanent Subcommittee on Investigations,
chaired by Senator Collins, commenced an investigation into
deceptive mailings. The investigation was prompted by
constituent complaints and by the initial hearing held by the
Subcommittee on International Security, Proliferation, and
Federal Services.
The inquiry by the Permanent Subcommittee on Investigations
resulted in two days of hearings entitled ``Deceptive Mailings
and Sweepstakes Promotions'' on March 8 and 9, 1999. During the
first day of the hearings, elderly sweepstakes contestants and
the children of such contestants described the marketing
practices that deceived them or their family members. The
witnesses testified that they or their family members believed
that purchases increased their chances of winning, the wordings
of the mailings and personalized letters from the sweepstakes
companies mistakenly implied that they were very likely to win
a prize, and the ``no purchase necessary'' disclaimers were
ineffective. The investigation revealed that the volume of
sweepstakes mailingsexceeded one billion in 1998, and that
purchase activity resulted in more mailings to an individual. Family
members also testified about the trusting nature of their relatives and
that many refused to leave home, attend doctor's appointments, or visit
other friends and family in anticipation of the big payoff that they
were promised by the sweepstakes mailings. Evidence at the hearing
showed that some consumers had spent tens of thousands of dollars,
depleted savings, and had been forced to seek employment after entering
retirement. The hearings also examined the companies' billing practices
and the procedures to remove the names of consumers from mailing lists
upon request. All the witnesses expressed problems in these areas.
Also, during the first day, the Attorney General of
Maryland and a representative from the AARP testified about the
impact of sweepstakes mailings on the elderly. The Maryland
Attorney General indicated that some companies utilize
misleading and confusing marketing tactics, including small
type, which is often overlooked by consumers with poor
eyesight. In addition, some sweepstakes mailings mimic
government documents, contain separate addresses for order and
non order entries, and appear to ``guarantee'' winning as long
as the entry is returned.
Sweepstakes promotions are also a major concern to AARP
because of the harmful impact on its members. AARP has launched
public campaigns against charity and telemarketing fraud based
on its research examining senior citizens' behavior and
perceptions pertaining to sweepstakes. The National Consumer
League's Nation Fraud Information Center has for the last four
years listed sweepstakes as one of the most frequent complaints
to their consumer hotline. Many of the complaints were about
mailings that asked consumers to call a number to claim their
winnings, but invariably they were asked to pay a fee or buy
something in order to receive their prize. Many consumers also
called the hotline to complain about repeat solicitations or
when they were confused by the deceptive practices of major
sweepstakes companies.
AARP commissioned a survey to determine what motivates
elderly people to participate in sweepstakes. The preliminary
findings, which were discussed at the hearing, showed that
forty percent of older Americans respond to sweepstakes
solicitations. Twenty-three percent of those senior citizens
surveyed believe that purchasing merchandise increases their
odds of winning, and another seventeen percent believe that
purchasing a product might increase their chances of winning.
During the second day of hearings, representatives of
American Family Enterprises, Publishers Clearing House, Time,
Inc., and The Reader's Digest Association, Inc., testified
about their sweepstakes practices. All four companies defended
their marketing practices as reasonable means to sell products.
The companies testified that they use sweepstakes to entice
consumers to open mailings, but all indicated that the vast
majority of people who enter sweepstakes do not make purchases.
They testified that the great majority of their customers order
only occasionally and in quite small amounts. They indicated
that many consumers like their products, and order them as
gifts for friends and relatives.
With respect to their mailings, the four companies
testified that a ``no purchase necessary'' statement is
included. The companies acknowledged that only a small minority
of consumers are confused by the mailings. Some of the
companies said that they have made changes in their mailings
and have begun consumer education programs, including the use
of explanatory letters to repetitive purchasers. The
sweepstakes companies testified that they are working with
industry trade associations to encourage the use of non-
promotional or ``no purchase necessary'' letters to ensure that
their customers understand that it is not necessary to purchase
a product in order to enter or win their sweepstakes. All four
companies expressed support for reasonable federal legislation
to respond to this growing problem.
C. Committee action
S. 335 was introduced by Senator Collins on February 1,
1999, and on that day the bill was referred to the Committee on
Governmental Affairs. On March 8, 1999, the bill was referred
to the Subcommittee on International Security, Proliferation
and Federal Services, and on April 12, 1999, the Subcommittee
favorably reported by polling letter the legislation for
consideration by the full Committee.
On May 20, 1999, Chairman Thompson held a business meeting
at which S. 335 was considered. Senator Collins offered an
amendment in the nature of a substitute, which was approved by
voice vote.
With no other amendments offered, Chairman Thompson moved
adoption of S. 335, as amended. The Committee bill ordered the
bill reported by unanimous voice vote.
VI. 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 preventing mailings from
deceptively appearing to be connected to the federal
government.
Paragraph (1) amends subsection (h) of existing law to
broaden the types of mailings which 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 nongovernmental 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 falserepresentation implying that federal government benefits
or services will be 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 would be considered
nonmailable matter unless it satisfied the requirements of
section 3001(h) (1), (2), or (3). In addition, mailings
containing any 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).
The Committee made these changes to existing law because of
concern that the terms used to establish a government
connection 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 Committee intends to broaden the coverage of
this subsection. The Committee believes that 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, in an effort to deceive consumers
into believing the mailing or offer is connected to the federal
government.
In addition, the Committee is concerned that mailings which
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. While companies and organizations
may use accurate information about federal benefits or
services, 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 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 affected, as
opposed to a false representation about federal benefits in
general. Advocacy mailings that solicit funds and discuss the
general status of federal benefits or programs are not covered
by the bill.
Paragraph (2) amends subsection (i) of existing law to
broaden the types of mailings which 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 a nongovernmental 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 implying that federal government benefits or
services will be affected by any purchase or nonpurchase.
As in paragraph (1), paragraph (2) adds new terms to
existing law to restrict the use of terms implying any
endorsement, approval, or connection to the federal government.
The Committee made these changes to existing law for the same
reasons it modified subsection (h).
Paragraph (3) redesignates subsections (j) and (k) of
existing law as subsections (m) and (o). The Committee believes
that 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, the Committee notes the
applicability of existing subsection 3001 (j), which is
redesignated as (m), 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. The Committee
has reviewed mailings that offer to sell services the
government provides for free. 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.
The Committee recognizes that 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 certain
individuals limited tax preparation services. If such a service
is not provided for free to the public in general, then it
would be permissible under this provision to mail solicitations
offering such a 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 a facsimile check as any matter designed to resemble a
check or other negotiable instrument that is notnegotiable.
Subsection (k)(1)(B) 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. In such mailings, the
payment of consideration may be described in any of a number of
methods, including but not limited to the purchase of a product,
payment of a judging or other fee, or making of a contribution or
donation.
Subsection (k)(1)(C) defines a sweepstakes as a game of
chance for which no consideration is required to enter.
Subsection (k)(2) directs the USPS not to deliver, and dispose
of, any mail declared nonmailable by paragraph (3). Subsection
(k)(3) sets forth the conditions by which the USPS 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. The Committee notes that 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. The Committee
believes that, since such mailings do not offer the opportunity
to make a purchase, there is no direct link between placing an
order and entering a sweepstakes. While this subsection does
not impose requirements on sweepstakes mailings that do not
include entry materials, the Committee cautions those sending
such sweepstakes mailings 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 all sweepstakes 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. The Committee is concerned that 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 (``CMRAs'') makes it
difficult for consumers and enforcement agencies to identify
the actual name and address of the party responsible for the
mailing. The Committee expects those sending sweepstakes
mailings 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. For
example, the odds of winning the grand prize of $1,000,000 are
1 in 1,000,000. If the odds of winning a particular prize or
all prizes are dependant 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 may
be disqualified from receiving future sweepstakes mailings. The
Committee is concerned 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 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. The Committee believes that 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)(A)(ii)(X) prohibits sweepstakes from
representing that the purchase of a product will allow a
sweepstakes entry to receive an advantage in the winner
selection process. This subsection also prohibits sweepstakes
from representing that the purchase of a product will allowan
entry to be eligible for additional prizes in that sweepstakes, or
provide an entry submitted in a future sweepstakes to have a better
chance of winning. The Committee is concerned that some sweepstakes
mailings suggest that the purchase of a product will improve the
chances of winning. Sweepstakes mailings should not contain statements
or references to special treatment for sweepstakes entries that include
a purchase; nor should sweepstakes mailings offer additional prizes
only to those making a purchase. Sweepstakes mailings should treat all
sweepstakes entries in the same manner, whether or not they are
accompanied by the purchase of a product.
Subsection (k)(3)(B)(i) 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. These include: (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 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.
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. The Committee has
reviewed a number of promotional mailings containing documents
that appear to be checks. These documents seek to attract the
attention of consumers, often by portraying a device that
resembles a check. 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. The Committee believes that, 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 consumers 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 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. This provision ensures that the
statements required by the bill are readily apparent and
understood by the average reader.
Subsection (k)(6) directs the USPS, when enforcing
paragraph (3), to consider all the materials included in the
mailing and language on and visible through the envelope. The
Committee believes that 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 USPS 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.
The Committee has received numerous reports of individuals
who encountered great difficulty removing their names or the
names of their family members from mailing lists. The Committee
believes that 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 anapplicable
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 USPS 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 sections 3005 or
3006. 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 USPS, in preparation for or during the pendency
of proceedings under sections 3005 and 3006, 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 which 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 sections 3005 and 3006. Currently, the USPS must apply to
each district in which a defendant receives mail in order to
obtain an injunction detaining the incoming mail. The Committee
found numerous instances where a promoter used several
addresses in multiple districts under a variety of names,
requiring the USPS 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 sections 3005 or 3006. 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. Where Congress
has created a statutory injunction remedy, it is the sense of
the Committee 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.
The Committee expects that the USPS will give timely
notification of the detention and of the mail's location and
availability for examination. Any mail clearly shown not to be
the subject of proceedings under sections 3005 and 3006 shall
be delivered as addressed. The Committee expects the USPS 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.
The new subsection (b) states that any judicial review of
the proceedings under sections 3005 and 3006 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 which granted the temporary
restraining order.
Section 6: Civil penalties and costs
During the hearings held in the 105th Congress, the USPIS
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. To combat
this practice, section 3012 is amended to give the USPS the
authority to impose a fine without having to first obtain a
stop order. Under current law, the USPS cannot impose a fine on
the mailer until it has been issued a stop order and then
subsequently violated that order.
At the same time, this section increases the civil fine
available for failure to comply with a stop order. The bill
uses two different penalty structures for these violations.
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.
Subsection (c), as amended, provides for a civil penalty
without 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) also takes
these factors into account.
Subsection (d), as amended, 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.
Subsection (e) is amended to give the USPS the authority to
enforce the collection of new civil penalties. Current law
provides that the USPS shall pay to the General Fund of the
United States Treasury any civil penalties it recovers.
However, the Committee believes that the USPS, which is charged
with enforcing the provisions of this bill, is entitled to
recover its administrative and judicial expenses incurred while
enforcing this Act. Thus, subsection (e) provides that the USPS
shall recover its administrative and judicial costs up to
$500,000 each year, payable into the Postal Service Fund. These
costs are to be paid from the civil penalties collected by the
USPS, with the balance of the penalties being paid to the
General Fund of the United States Treasury.
Section 7: Additional authority for the postal inspection service
Section 7 adds a new section 3016 to authorize the use of
subpoenas in investigations conducted under Chapter 30 of title
39.
Subsection (a) of section 3016 authorizes the use of
subpoenas in any investigation conducted under this chapter.
The subpoena authority allows for the production of any
records, including books, papers, documents, and other tangible
things which constitute or contain evidence that the Postmaster
General finds relevant or material to the investigation. The
Committee recognizes that subpoena authority will provide an
additional investigative tool necessary in investigations under
this chapter. The subpoena authority should assist the USPS in
establishing violations of Chapter 30 of title 39 and in the
assessment of penalties.
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, they can be
enforced by a federal district court pursuant to these
regulations.
Subsection (b) of the bill authorizes the USPS 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.
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 creates a new, uniform notification
system by which a person or their legal guardian, such as a
relative with power of attorney, can have their name and
address removed from all sweepstakes mailings lists at one
time. Upon appropriate notification, promoters have 45 business
days to remove the names and addresses from their mailing
lists. Any subsequent mailings sent after the 45 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 nonmailable matter.
Subsection (a)(1) defines who must comply with section 8.
Promoter is defined as any person who originates sweepstakes
and/or games of chance mailings. The Committee does not intend
to cover under this section the person who merely prints or
mails matter for a skill contest or sweepstakes unless that
printer or mailer also originates or materially assists with
creating 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 the middleman who simply prints or sends the mailing.
Promoter is further defined under this subsection as a
person who originates and mails more than 500,000 pieces of
mail per year. Therefore, promoters who mail 500,000 or fewer
pieces of mail need not comply with section 8. The Committee
did not want to require the smallest promoters to participate
in the uniform notification system. These smaller entities
rarely send repeated and/or personally targeted mailings to
individuals. However, the Committee believes that these
promoters should still engage in reasonable practices that will
effectively cease mailings to an individual who specifically
requests that the mailings stop. As such, these small promoters
must still adopt the reasonable practices and procedures
required by subsection (l) of section 3.
A second exemption from compliance with Section 8 is
available for promoters who send mailings that do not include
an opportunity to make a payment or buy a product or service.
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 to the Committee.
Subsection (a)(2) defines a removal request as a written
request stating that an individual elects to have their name
and address removed from sweepstakes mailing lists. The
Committee intends that submission of this removal request will
indicate an individual's choice to be removed from all
sweepstakes and skill contest mailing lists. This subsection,
however, does not require specific language to state such an
intent.
Subsections (a)(3) and (a)(4) define skill contests and
sweepstakes, respectively. These definitions are identical to
the definitions of these terms previously used in section 3 of
the bill.
Subsection (b) describes nonmailable material as any matter
that (i) is a skill contest or sweepstakes; (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 comply with the requirements of subsection
(c)(1).
Promoters of skill contests or sweepstakes must provide in
each mailing a clear and conspicuous statement that includes
the toll-free number and address of the notification system as
required by subsection (c)(1)(A). Under subsection (c)(1)(B),
promoters must also state how a person can use the system to
prohibit promoters from sending any further mailings. The
Committee believes that these requirements are essential to
inform consumers of the option to halt all further sweepstakes
and skill contest mailings. Placing the toll-free number
directly on all mailings with a description of the specific
steps a person must take to stop all mailings ensures that the
removal process is easily understandable.
Subsection (c)(2) requires promoters covered by section 8
to participate in the establishment and maintenance of the
notification system. Obviously, there will be promoters whose
businesses are created after the system has been established.
These promoters will be unable to comply with the establishment
requirement and the Committee does not expect them to do so.
However, section 8 requires that they contribute to the
maintenance of the system.
The Committee deliberately did not specify how the system
is to be created and maintained, as promoters are in the best
position to make these determinations. The Committee defers to
their judgment about how the system should be constructed and
maintained, and has confidence in the industry's ability to do
so.
Subsection (d) delineates the information that the
notification system must provide to an individual who contacts
the system in order to prohibit future mailings. Subsection
(d)(1) states that at the time of the phone call the system
must inform the individual that they must write to a specified
address in order to have their name and address removed from
all sweepstakes and games of skill mailing lists. Subsection
(d)(2) requires that the system inform the individual that
their request will take effect 45 business days after the
system receives the written removal request. This message
should be concise and easily understood, and not left at the
end of a very long message filled with other information.
Indeed, only factual information should be given to the
individual: a short, simple statement on how to remove a
person's name and address; the address of where to send the
written request; and when the request will take effect.
Subsection (e)(1) specifies that an individual must mail a
removal request to the notification system in order for their
name and address to be excluded from future mailings. Merely
calling a toll-free number is not enough to have one's name and
address excluded. The individual must take the step of writing
to the notification system. Although it would be preferable to
have a system where the toll-free call would be sufficient by
itself to effectuate removal of one's name and address, such a
system would be difficult to maintain, since it would be very
difficult to verify the identity of the person calling the
number. The mailing requirement will help alleviate this
concern and would also create a paper trail for use as evidence
that a removal request had been made.
Subsection (e)(2) states that promoters must remove an
individual's name and address from skill contests and
sweepstakes mailings lists no later than 45 business days after
the notification system receives an individual's removal
request. Promoters shall not send any sweepstakes or skills
contest mailings to the individual after the 45 business day
period has elapsed.
The Committee believes that 45 business days is a
sufficient period of time to allow promoters to check the
system and remove individuals from their mailing lists. 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 (e)(3)(A) establishes the foundation of the
single, uniform notification system. This section states that
an individual's election to exclude his or her name and address
from skill contests and sweepstakes mailing lists shall be
effective with respect to every promoter.
Subsection (e)(3)(B) states that, in order for an
individual to change their election to be removed from all
sweepstakes and skills contest mailing lists, the individual
must advise the notification system 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 (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. In other words, 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.
A major concern of the Committee is misuse of the removal
list. The list could be interpreted as a roll call of those
individuals who have been the most victimized by misleading
sweepstakesmailings and who are particularly vulnerable to
future deception. The Committee believes that protection of these names
is of the utmost importance. Therefore, under subsection (g)(1)(A), no
person may provide any information, including the sale or rental of
names or addresses contained in these lists, for commercial purposes.
Subsection (g)(1)(B) defines ``list'' as any roster of names and
addresses or other related information used, maintained, or created by
the uniform notification system. These subsections do not preclude the
system from sharing information with promoters who are using that
information to remove an individual from their mailing lists.
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 USPS of up to $2,000,000 per violation. Strong civil
penalties are necessary in order to deter non-compliance with
subsection (g)(1).
Under subsection (h)(1)(A), any promoter who recklessly
mails sweepstakes or skills contest mailings (beyond the 45 day
period, which begins on the day the notification system
receives the written request) to an individual who has sent in
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 regularly check the notification system
for the addition of new individuals.
Failure to substantially comply with the requirement that
promoters establish and maintain the notification system will
also subject these promoters to civil penalties under
subsection (h)(1)(B). The Committee did not indicate specific
amounts and believes the USPS can determine this on a case by-
case basis.
Subsection (h)(2) states that the USPS shall assess civil
penalties under section 8. 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. The Committee believes that states and
localities should be able to impose and enforce laws that also
seek to prevent deceptive mailings. The Committee notes that
other agencies may take actions against deceptive mailings
under other federal laws, and 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: Effective date
The provisions of the bill will take effect 120 days after
the date of enactment.
VII. Regulatory Impact Statement
Enactment of S. 335 should result in no significant
regulatory impact. S. 335 contains no intergovernmental
mandates, as defined by the Unfunded Mandates Reform Act
(``UMRA''), and would impose no costs on state, local, or
tribal governments. Although S. 335 contains several private-
sector mandates, the Congressional Budget Office (``CBO'') has
determined that the cost of these mandates to the private
sector would be well below the threshold specified in UMRA.
VIII. Congressional Budget Office Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 15, 1999.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 335, 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.
S. 335--Deceptive Mail Prevention and Enforcement Act
Summary: S. 335 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 S. 335 could affect direct spending and receipts,
pay-a-you-go procedures would apply to the bill. However, CBO
estimates that any impact on direct spending and receipts would
not be significant.
S. 335 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 state, local, or tribal governments.
Estimated cost to the Federal government: Because S. 335
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 those prosecuted and convicted under S. 335 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.
This legislation also would provide that any civil
penalties collected from enforcement of laws relating to
``nonmailable matter'' (mainly deceptive mailings) would be
paid to the Postal Service to cover administrative and related
costs, up to $500,000 a year. Any such payments would be direct
spending, but CBO estimates that these amounts would be less
than $500,000 a year because we do not expect collections of
fines to exceed that amount.
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
S. 335 could affect both direct spending and receipts, but CBO
estimates that any such effects would be less than $500,000 a
year.
Estimated impact on state, local, and tribal governments:
S. 335 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
Estimated impact on the private sector: S. 335 would create
several new private-sector mandates. Firms that use the postal
system to distribute unsolicited advertisements would be
required to remove references to the Postmaster General from
those advertisements. Firms that operate sweepstakes or
contests through the mail would face multiple requirements.
They would be required to include a number of prominent
disclosures in their mailings and to honor requests from
individuals to be omitted from future mailings. Based on
information from the Direct Marketing Association, CBO
estimates that the total costs of these mandates to the private
sector would be well below the threshold specified in UMRA.
In order to keep firms from implying that their products or
services are endorsed or approved by the federal government,
federal law already prohibits most use of federal symbols or
the names and titles of federal agencies and officers in mailed
advertisements. S. 335 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 newprohibition would do
little to affect either, CBO expects that this mandate would not have a
significant impact on firms' 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 affects neither the odds of winning nor
inclusion in future mailings; a clearly-written,
understandable, and easily found statement of rules,
conditions, fees, and entry procedures; and a description for
each prize, giving 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 the
vast majority of these disclosures. To comply with the mandate,
some firms 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, but
would not, in general, be substantial. CBO anticipates that
sweepstakes and contest operators would endeavor to keep the
number of pages of their mailings constant in order to avoid
increases in printing and postage costs. Consequently, although
variation within the industry makes a precise estimate
difficult, the cost to firms of adding additional disclosures
would probably be small.
S. 335 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, 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 significantly because of this mandate. Seventy
to eighty percent of all recipients do not respond to mailings
from major sweepstakes operators, but only a small number of
people request to be excluded from future mailings. The
majority of individuals just discard unwanted mailings.
Sweepstakes and contest operators that send more than
500,000 mailings per year 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
45 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 S. 335. 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.
Estimate prepared by: Federal costs: Mark Grabowicz; impact
on the private sector: John Harris.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
IX. Executive Communications
United States Postal Service,
Washington, DC, June 11, 1999.
Hon. Fred Thompson,
Chairman, Senate Committee on Governmental Affairs,
Washington, DC.
Dear Chairman Thompson: I would like to express my
appreciation for the work you and the members and staff of the
Committee on Governmental Affairs have done in the development
of meaningful legislation to address problems posed by
deceptive mailings. We are following the issue very closely and
feel the legislation as approved by the committee will enhance
consumer protection and at the same time be fair to businesses
that rely on the use of the mail to promote their products and
services.
We have reviewed all current legislation regarding
deceptive mailings and consider S. 335, the Deceptive Mail
Prevention and Enforcement Act, to be the most comprehensive.
The bill includes several provisions that will enhance the
ability of the Postal Inspection Service to protect the
American public from deceptive mailings. These include civil
penalties, administrative subpoena authority, multi-district
temporary restraining orders, clarification of government look-
alike provisions and clear standards for mailings containing
sweepstakes, games of skill, and facsimile checks.
We are proud of our accomplishments in protecting the
consumer and welcome any assistance Congress can provide.
Effective statutes will not only help us protect the consumer,
but will also maintain the American public's confidence in the
mail that many thousands of legitimate businesses rely on to
market their products and services.
I look forward to working with you to help maintain the
mail as an efficient, reliable, and secure service for the
public.
Sincerely,
William J. Henderson,
Postmaster General, CEO.
X. Additional Views of Senator Edwards
In my office, I have a large box brimming with the
sweepstakes mailings that a 92-year-old woman received during
the course of the past several months. This woman's daughter
sent it to me to help illustrate the anxiety and distress
caused to her family by sweepstakes mailings. It seems her
mother has purchased many items, believing that they will
increase her chances of winning a major prize.
This distraught woman watched witnesses tell similar
stories at the hearings held by the Permanent Subcommittee on
Investigations. When the daughter sent me the box of mailings,
she also wrote me a letter, saying ``Please, please, what more
can you do to put an end to all of this injustice? It is a slap
in my mother's face. An affront to her dignity. We, her own
family, are helpless to keep her from continuing.''
I write separately to discuss a provision of this
legislation that I helped author. I believe that it is an
important provision that could help prevent many of the abuses
that we learned about during the course of our hearings on this
issue.
As summarized by the Committee's report, Section 8 of S.
335 requires that companies mailing games of chance or
sweepstakes solicitations must participate in a single
notification system that individuals can contact to have their
name and address removed from all sweepstakes mailing lists.
Currently, there is only one way to stop all of these
mailings--each and every sweepstakes company must be contacted
individually. Finding the correct address is extremely
difficult and time consuming. And the stories I have heard from
hearing panelists indicate that contacting the companies
directly is ineffective due to the fact that the requestor
often gets passed from one representative to the next. It is
essential that we provide a way for people who want to prevent
these mailings to do so simply and effectively.
I personally have had some experiences with the current
system. It all started when my office got in touch with Pamela
Bagwell, the daughter-in-law of an elderly man who had spent
thousands of dollars buying things from sweepstakes companies.
One day, Pamela Bagwell went to visit her father-in-law, Bobby.
When she arrived at Bobby's home, Pamela found stacks and
stacks of solicitations from sweepstakes companies. She asked
Bobby about them and found out that he had made numerous
purchases thinking that buying products would increase his
chances of winning a prize. He was so convinced he would win a
prize that he even invited his neighbors to his house on the
day that the Publishers Clearing House prize patrol was
supposed to deliver the grand prize check.
Pamela estimates that Bobby spent more than $20,000 in 10
months on products he thought would help his chance of winning.
Now as I mentioned before, Bobby is an elderly man. But this is
not the worst part of this story. Bobby also has dementia.
Pamela, who has power of attorney for Bobby, contacted
Publishers Clearing House at least 6 times in October last year
to demand that the company stop sending Bobby solicitations.
She even went so far as to send the company a doctor's
certification that Bobby has dementia. And yet, the sweepstakes
mailings continued to flood Bobby's mailbox. Pamela said that
sometimes Bobby was receiving up to twenty per day, from many
different companies.
I wrote to several of these companies, including American
Family Publishers, Reader's Digest, Time, and Publishers
Clearing House. I asked them to remove Mr. Bagwell's name from
their lists. To their credit, all of the companies quickly
contacted my office in writing to indicate they were taking
steps to take the name off their mailing lists and to settle
his many accounts. I appreciate this response. But I still
think it is a sad day when people need a U.S. Senator to
intervene in order to get this type of response. People should
be able to quickly and effectively stop sweepstakes mailings
without the aid of their Senator. Unfortunately, Pamela and
Bobby Bagwell's situation is not unique. Since the hearings, my
office has received numerous calls and letters, not just from
North Carolinians, but from people all over the country who
tell similar, alarming stories about their experiences with
sweepstakes companies.
More recently, I have written letters on behalf of another
constituent. His daughter came to speak to me in Charlotte,
N.C. After we met, she contacted these companies several times
to sort out the numerous accounts her elderly father had
opened, to no avail. So again, I wrote a letter, and again, all
of the companies (except American Family Publishers) notified
me to say they would honor my request to remove my
constituent's information from their mailing lists and to
settle his accounts.
I believe that people should have the right to easily put a
stop to these mailings without the assistance of their Senator.
And sweepstakes promoters should be legally required to honor
such a request.
My colleagues on the Permanent Subcommittee on
Investigations, and I suspect other Congressional offices, have
heard similar disturbing stories and had similar frustrating
experiences. I appreciate the efforts of the companies to
develop new standards to educate people about sweepstakes
promotions. But people continue to be deceived by the mailings.
Some of these people have spent hundreds or thousands of
dollars, and since many of them are elderly, they are spending
the money they need to live on. Strong legislative efforts,
such as S. 335, the Deceptive Mail Prevention and Enforcement
Act, are necessary to prevent these situations.
I believe that the legislation should include a system that
makes it easy for consumers to remove their names from
sweepstakes mailing lists. When the only way a consumer can get
their name off the lists and settle their accounts is to have
their Senator write a letter on their behalf, it is time for us
to help devise an efficient system for preventing harm. I
believe that the single notification system created by this
legislation will do that.
Michael Pashby, Executive Vice President of Consumer
Marketing for Magazine Publishers of America, told the National
Asso
ciation of Attorneys General that ``Allowing consumers to make
a choice is how our industry operates.'' I agree that consumers
should be able to make a choice and that one of those choices
should be to stop receiving solicitations.
The use of sweepstakes solicitations is considered a
legitimate marketing tool. However, we have witnessed the
abuses that have been occurring as a result of this marketing
technique. Senators Collins and Levin should be commended for
their efforts to curb harassing, deceptive mailings. By voting
unanimously to send the Deceptive Mail Prevention and
Enforcement Act on to the full Senate for consideration, I
believe my colleagues on the Governmental Affairs Committee
have demonstrated their commitment to this goal. And I also
believe that the creation of a single notification system will
empower our constituents to add to these efforts.
XI. Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, 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
material is printed in italic, existing law in which no change
is proposed is shown in roman):
SECTION 3001. NONMAILABLE MATTER.
(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) does not contain a false representation implying
that Federal Government benefits or services will be
affected by any purchase or nonpurchase; or
(3) such matter is contained in a publication for
which the addressee has paid or promised to pay a
consideration or which he has otherwise indicated he
desires to receive, except that this paragraph shall
not apply if the solicitation is on behalf of the
publisher of the publication.
(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) does not contain a false representation implying
that Federal Government benefits or services will be
affected by any purchase or nonpurchase; or
(3) such matter is contained in a publication for
which the addressee has paid or promised to pay a
consideration or which he has otherwise indicated he
desires to receive, except that this paragraph shall
not apply if the solicitation is on behalf of the
publisher of the publication.
(j)(1) Matter otherwise legally acceptable in the mails
described under 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) Matter that is nonmailable matter referred to under
paragraph (1) is any matter that--
(A) constitutes a solicitation for the purchase of
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 under
subparagraph (A) (i) and (ii).
(k)(1) In this subsection, the term--
(A) ``facsimile check'' means any matter designed to
resemble a check or other negotiable instrument that is
not negotiable;
(B) ``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
(C) ``sweepstakes'' means a game of chance for which
no consideration is required to enter.
(2) Matter otherwise legally acceptable in the mails that
is nonmailable matter described under paragraph (3) shall not
be carried or delivered by mail and may be disposed of as the
Postal Service directs.
(3) Matter that is nonmailable matter referred to under
paragraph (2) is any matter (except matter as provided under
paragraph (4)) 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 an entry from such materials;
(III) does not state all terms and conditions of the
sweepstakes promotion, including the rules and entry
procedures for the sweepstakes, in language that is
easy to find, read, and understand;
(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 clearly
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 may be disqualified from receiving future
sweepstakes mailings;
(VII) requires that a sweepstakes entry be
accompanied by an order or payment for a product
previously ordered;
(VIII) represents that an individual is a winner of a
prize unless that individual has won a prize;
(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; or
(X) represents that the purchase of a product will
allow a sweepstakes entry to receive an advantage in
the winner selection process, to be eligible for
additional prizes in that sweepstakes, or for an entry
submitted in a future sweepstakes to have a better
chance of winning;
(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, in language that is
easy to find, read and understand;
(II) does not clearly and conspicuously 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
clearly 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 and contains materials that are a facsimile check,
skill contest, or sweepstakes is exempt from paragraph (3), if
the 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.
(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.
(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, 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)] (l) 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)] (m) 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.
SECTION 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, or drawing of any
kind, the Postal Service may issue an order which--
(1) directs the postmaster of the post office at
which mail arrives, addressed to such a person or to
his representative, to return such mail to the sender
appropriately marked as in violation of this section,
if the person, or his representative, is first notified
and given reasonable opportunity to be present at the
receiving post office notified and given reasonable
opportunity to be present at the receiving post office
to survey the mail before the postmaster returns the
mail to the sender;
(2) forbids the payment by a postmaster to the person
or his representative of any money order or postal note
drawn to the order of either and provides for the
return to the remitterof the sum named in the money
order or postal; and return to the remitter of the sum named in the
money order or postal note; and
(3) requires the person or his representative to
cease and desist from engaging in any such scheme,
device, lottery, or gift enterprise.
For purposes of the preceding sentence, the mailing of matter
which is nonmailable under 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.
SECTION 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 sections 3005 and 3006, the Postal
Service, in accordance with section 409(d), may 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 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 sections 3005 and 3006.
(B) A proper showing under this paragraph shall require
proof of a likelihood of success on the merits of the
proceedings under section 3005 or 3006.
(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 clearly
shown not to be the subject of proceedings under
sections 3005 and 3006.
(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 or 3006 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 the publishers.
SECTION 3012. CIVIL PENALTIES.
(a) Any person--
(1) who, through the use of the mail, evades or
attempts to evade the effect of an order issued under
the section 3005(a)(1) or 3005(a)(2) of this title;
(2) who fails to comply with an order issued under
section 3005(a)(3) of this title; or
(3) who (other than a publisher described by section
3007(b) of this title) has actual knowledge of any such
order, is in privity with any person described by
paragraph (1) or (2) of this subsection, and engages in
conduct to assist any such person to evade, attempt to
evade, or fail to comply with any such order, as the
case may be, through the use of the mail;
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. A separate penalty may be assessed under this
subsection with respect to the conduct described in each such
paragraph.] $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.
(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 civilpenalty, if any under this section, taking
into account the nature, circumstances, extent, and gravity of the
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) All penalties collected under the authority of this
section shall be paid into the Treasury of the United States.]
(e)(1) From all civil penalties collected in the administrative
and judicial enforcement of this chapter, an amount equal to
the administrative and judicial costs incurred by the Postal
Service in such enforcement, not to equal or exceed $500,000 in
each year, shall be--
(A) deposited in the Postal Service Fund established
under section 2003; and
(B) available for payment of such costs.
(2) Except for amounts deposited in the Postal Service Fund
under paragraph (1), all civil penalties collected in the
administrative and judicial enforcement of this chapter shall
be deposited in the General Fund of the Treasury.
[(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 to
chapter 7 of title 5 of an order issued under section 3005 of
this title.
SECTION 3016. ADMINISTRATIVE SUBPOENAS.
(a) Authorization of Use of Subpoenas by Postmaster
General.--In any investigation conducted under this chapter,
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 finds relevant or material to the
investigation.
(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 by a Postal Inspector 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.
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.
SECTION 3017. NONMAILABLE SKILL CONTESTS OR SWEEPSTAKES MATTER;
NOTIFICATION TO PROHIBIT MAILINGS
(a) Definitions.--In this section, the term--
(1) ``promoter'' means any person who originates and
causes to be mailed more than 500,000 mailings in any
calendar year of any skill contest or sweepstakes,
except for mailings that do not include an opportunity
to make a payment or order a product or service;
(2) ``removal request'' means a written 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) ``skill contest'' means a puzzle, game,
competition, or other contest in which--
(A) a prize is awarded or offered;
(B) the outcome depends predominately on the
skill of the contestant; and
(C) a purchase, payment, or donation is
required or implied to be required to enter the
contest; and
(4) ``sweepstakes'' means a game of chance for which
no consideration is required to enter.
(b) Nonmailable Matter.--
(1) In general.--Matter otherwise legally acceptable
in the mails described under 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 that is
nonmailable matter referred to under paragraph (1) is
any matter that--
(A) is a skill contest or sweepstakes; and
(B)(i) is addressed to an individual who made
an election to be excluded from lists under
subsection (e); 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 clear and conspicuous statement that--
(A) includes the address and toll-free
telephone number of the notification system
established under paragraph (2); and
(B) states how the notification system may be
used to prohibit the mailing of any skill
contest or sweepstakes to such individual.
(2) Notification system.--Any promoter that mails a
skill contest or sweepstakes shall participate in the
establishment and maintenance of a single 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 all promoters to mail any skill
contest or sweepstakes.
(d) Notification System.--If an individual contacts the
notification system through use of the toll-free telephone
number provided under subsection (c)(1)(A), the system shall--
(1) inform the individual of the information
described under subsection (c)(1)(B); and
(2) inform the individual that the election to
prohibit mailings of skill contests or sweepstakes to
that individual shall take effect 45 business days
after receipt by the system of the signed removal
request by the individual.
(e) Election To Be Excluded From Lists.--
(1) In general.--An individual may elect to exclude
the name and address of such individual from all
mailing lists used by promoters of skill contests or
sweepstakes by mailing a removal request to the
notification system established under subsection (c).
(2) Response after mailing removal request to the
notification system.--Not later than 45 business days
after receipt of a removal request, all promoters who
maintain lists containing the individual's name or
address for purposes of mailing skill contests or
sweepstakes shall exclude such individual's name and
address from all such lists.
(3) Effectiveness of election.--An election under
paragraph (1) shall--
(A) be effective with respect to every
promoter; and
(B) remain in effect, unless an individual
notifies the system in writing that such
individual--
(i) has changed the election; and
(ii) elects to receive skill contest
or sweepstakes mailings.
(f) Promoter Nonliability.--A promoter, or any other person
maintaining the notification system established under this
section, shall not be subject to civil liability for the
exclusion of an individual's name or address from any mailing
list maintained by a promoter for mailing skill contests or
sweepstakes, if--
(1) a removal request is received by the notification
system; and
(2) the promoter or person maintaining the system 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) in a list described under
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) used,
maintained, or created by the system
established under this section.
(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 of nonmailable
matter; or
(B) who fails to substantially comply with
the requirements of subsection (c)(2) shall be
liable to the United States.
(2) Enforcement.--The Postal Service shall assess
civil penalties under this section.
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.