The amended version of the California Omnibus Sweepstakes Bill (Senate Bill 1400), which will impose new rules and disclosure requirements for sweepstakes, was approved by Governor Schwarzenegger on September 30th and will become effective January 1st, 2009.
Motivation Behind Senate Bill 1400
In 2000, a multi-state inquiry regarding Publishers Clearing House's ("PCH") sweepstakes solicitations and other misleading business practices resulted in a multi-million dollar settlement and specific injunctions against the company. The results of the PCH investigation, as well as deceptive sweepstakes solicitation practices targeting California's senior citizens that have recently surfaced, motivated the California Senate to introduce Senate Bill 1400.
Implications For Clients
Senate Bill 1400 amends Section 17539.15 of the Business and Professions Code, and brings California’s sweepstakes law more in line with certain aspects of the Deceptive Mail Prevention and Enforcement Act (a Federal law) and sweepstakes law in Texas and Colorado – all of which require stringent consumer protection measures and disclosures. The enactment of Senate Bill 1400 will also likely result in heightened scrutiny of sweepstakes promotions in California by the Attorney General.
History Of The Bill
The prior versions of the bill contained several problematic provisions. Of particular concern to industry stakeholders was the “opt-in” consent requirement for selling or sharing the information of sweepstakes participants. In addition, an earlier version of the bill could have been interpreted so that alternate methods of entry would no longer satisfy the “no consideration” requirement, which is one of the big issues looming in the pending premium fee text message sweepstakes lawsuits in California. These provisions were modified or removed to help reduce industry concern.
What Senate Bill 1400 Does
Senate Bill 1400 revises California's existing sweepstakes law and imposes certain requirements for the operation of sweepstakes by requiring disclosures in, and imposing stringent consumer protections for, solicitation materials that contain sweepstakes entry materials or solicitation materials selling information regarding sweepstakes.
- Solicitation materials that contain sweepstakes entry materials or solicitation materials selling information regarding sweepstakes must contain a clear and conspicuous statement indicating that no purchase or payment of any kind is necessary to enter or win the sweepstakes. That statement must be included in a separate paragraph in the official rules, in all capital letters, in contrasting typeface and in no smaller a font than the largest text in the rules. If the official rules do not appear on the solicitation materials, the no-purchase-necessary message must appear on the entry order device included therein.
- Senate Bill 1400 prohibits a sweepstakes sponsor (as defined by the bill) from charging a fee as a condition to obtaining a financial distribution or information about a prize or sweepstakes.
- Senate Bill 1400 prohibits the following representations made in connection with sweepstakes solicitations materials or solicitation materials selling information regarding sweepstakes:
- Representing that a person has been “specially selected” unless that representation is true;
- Representing that the person receiving the solicitation has received any special treatment or personal attention from the sweepstakes sponsor;
- Representing that an entry in the sweepstakes accompanied by an order for products or services will be eligible to receive additional prizes or be more likely to win than an entry not accompanied by an order for products/services; and
- Representing that a prize notice is urgent unless there is a limited time period in which the recipient must take some action to claim, or be eligible to receive, a prize, and the date by which that action is required is clearly and conspicuously disclosed in the body of the solicitation materials.