Sweepstake Pitches: A Look at State Laws

By Cuevas, Dennis | Consumers' Research Magazine, December 1998 | Go to article overview

Sweepstake Pitches: A Look at State Laws


Cuevas, Dennis, Consumers' Research Magazine


About four months ago, an elderly woman stopped Officer Anthony Cesino inside the Tampa Airport. She showed him a paper with a Tampa address. "Do you know where this address is?" she asked him. Cesino recognized the sweepstakes letter. He asked the woman why she was looking for the address. "I'm here to claim my money," she said. Cesino asked her how she knew she was a winner. She showed him, according to the St. Petersburg Times, the letter from American Family Publishers, which is based in the area. When Cesino finally convinced her that she had not won any money, the woman broke down in tears. Over the past few years, Tampa Airport police have reported at least eight such incidents.

For years, companies have relied on sweepstakes to lure consumers into ordering their products and services. Increasing attention has focused on the sweepstakes industry. A 1992 Harris Survey showed that 92% of all American adults have at one time or another received a postcard or letter in the mail informing then that they have won a prize and nearly one-third, or 53.6 million people, responded. Further, a 1995 American Association of Retired Persons survey of telemarketing fraud victims confirmed that prize and sweepstakes schemes appear to be the criminals' weapon of choice. In July 1998, the National Association of Attorneys General established a new subcommittee, chaired by Indiana Attorney General Jeffrey Modisett, to study whether further specific legislative initiatives or safeguards are needed to protect consumers from abusive and deceptive practices. This article examines the various state laws that are often applied to deceptive and fraudulent sweepstake activities.

* State Sweepstakes Statutes and Prize Promotions Statutes. State laws vary greatly in their regulation of contest promotions. Generally, sweepstakes must comply with the prize promotion statutes in the states where the promotion is conducted. If a company is conducting a national sweepstakes, then the promotion must comply with all states' laws.

Approximately half of the states have prize promotion statutes that regulate sweepstakes promotions. Of those states that have prize promotion statutes, there are a few states that require a sponsor or promoter to register with the state prior to conducting a contest.

For example, in Florida, if the total value of the prizes exceeds $5,000, the operator of a game promotion must file a copy of the rules and regulations of the game promotion and a list of all prizes and prize categories with the Florida Department of State at least seven days before the commencement of the game. Violation of the filing requirement is a class B misdemeanor which results in a fine of up to $1,000.

In New York, if the total value of the prizes exceeds $5,000, the sweepstakes operator must file with the New York Secretary of State a registration statement containing the minimum number of prizes to be awarded, the minimum number of prize-winning game pieces, the odds of winning, the minimum value of the prizes, the rules of the contest, and the duration of the contest. Failure to register in New York is a class B misdemeanor.

Lastly, in Rhode Island, retailers proposing to engage in any game, contest, or other promotion or advertising scheme that offers the opportunity to receive gifts, prizes, or gratuities, as determined by chance, must file with the Rhode Island Secretary. of State a statement disclosing the number and value of prizes and the rules and regulations pertaining to the promotion or advertising scheme. Failure to file in Rhode Island is a misdemeanor resulting in a fine of not more than $500.

Although pre-contest registration exists in several states' prize promotion statutes, most prize promotion statutes have similar disclosure requirements. General]y, prize promotion statutes require the promoter to disclose the name and address of the sponsor/promoter; the odds of winning a prize; the number and verifiable retail value of the prizes; and the rules and eligibility requirements to enter the promotion. …

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