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Texas Takes Aim at Direct Mail Sweepstakes One of the major goals of the Bill is to fully separate entry into a direct mail sweepstakes from the purchase of goods or services. Ronald R. Urbach Michael Abitbol e-mail this article URL On June 15, 2001, the Governor of Texas signed House Bill 2530 (the "Bill") into law. The Bill amends the Texas Business & Commerce Code and will impose tight restrictions on certain direct mail sweepstakes sent to residents of Texas. This new legislation comes at a time when the federal government and various other states have taken an aggressive stance against direct mail sweepstakes, and the swift enactment of the Bill is clear evidence of Texas' intent to reduce the flow of deceptive direct mail sweepstakes materials. One of the major goals of the Bill is to fully separate entry into a direct mail sweepstakes from the purchase of goods or services. To that end, the Bill prohibits a person from being required to purchase goods or services in order to enter a sweepstakes, from being automatically entered into a sweepstakes because of a purchase or from being solicited for any kind of business through a form that has any part in the operation of a sweepstakes (unless the form is a single sheet, is perforated such that it can be removed from the order form and must be separated and returned to a different address than the order form). The Bill also prohibits a company from allowing an individual to choose a prize (prior to entering the sweepstakes) unless the prize choice is made on the sweepstakes entry form and is not connected, in any way, to a purchasing mechanism. In addition to requiring total separation between sweepstakes entry and the sale of goods or services, the Bill prescribes rigid restrictions regarding the format of the sweepstakes entry form. First, the entry form must be identical for each individual, thereby preventing the ever-popular name-specific direct mail piece. Second, the following language must appear on the sweepstakes entry form: "Buying will not help you win. Your chances of winning without making a purchase are the same as the chances of someone who purchases something. It is illegal to give any advantage to buyers in a sweepstakes." Third, the language must be in a font size that is at least as large as the largest font size on the entry form. This is an onerous requirement since typically this type of language appears in mice-type, however, previous versions of the Bill required the language to appear in a font size 400 percent larger than the next largest font size on the entry form. Fourth, the sweepstakes entry material may not state that the recipient is a winner, may be a winner, will be a winner if events occur, may be among the group from which a winner will be chosen or has a better chance than another entrant of being selected as a winner. Furthermore, if sweepstakes sponsors allow entry by mail, only one address for accepting entries may be established and this address must be used solely for the purpose of receiving sweepstakes entries. Another prohibition present in the Bill is that direct mail sweepstakes sponsors may not offer any new sweepstakes, non-sweepstakes related prizes, premiums or skill contests during the 30-day period following the end date of the last sweepstakes. So, in effect, sponsors are barred from running back-to-back direct mail promotions of most types, until 30 days have elapsed. Additionally, marketers may not ask entrants for any information or action, or simulate any event, that makes it appear like the person has won a sweepstakes prize, unless the person has actually won a prize. Utilizing documents that simulate events connected with winning sweepstakes are also prohibited; thus, the practice of sending consumers mock-checks and similar marketing materials will no longer be acceptable practice in Texas. The Bill provide exemptions for certain sweepstakes, including those conducted through advertisements in catalogs, magazines or newspapers sent through the mail, alcohol- related sweepstakes, drawings related to recreational events such as fishing and hunting, sweepstakes where the only use of the mail is for consumers to return their entry forms, sweepstakes promoting food products regulated by the Federal Food and Drug Administration or the U.S. Department of Agriculture, sweepstakes sponsored by companies whose primary business is the marketing of audiovisual entertainment works or sound recordings (record or movie clubs) and sweepstakes conducted through the mail where the most valuable prize to be awarded is under $50,000. This last exemption would effectively limit the application of the new law to only a small percentage of sweepstakes. The Bill gives the Texas Attorney General the authority to bring an action for the violation of any of the provisions of the Bill, and for each violation the court will award civil penalties as little as $5,000 and as much as $50,000. Each violation of the Bill that is present in material for a particular sweepstakes will be considered a separate violation. House Bill 2530 is clear evidence of Texas' no-nonsense position regarding direct marketing sweepstakes that offer large cash awards or prizes of high value. The Texas Bill is scheduled to become effective on November 1, 2001. © 2001 Davis & Gilbert LLP       Davis & Gilbert LLP • 1740 Broadway • New York, NY 10019 tel: 212.468.4800 • fax: 212.468.4888   Privacy Policy • Terms & Conditions