The Committee on
April -- November 1996
The Committee on Ethical Business Practice, comprised of 15 executives from DMA member companies, investigates and examines mailings and offerings made throughout the direct marketing field, based on complaints and inquiries received. The Committee, which meets ten times a year, works with both member and non-member companies to gain voluntary cooperation in adhering to the association's self-regulatory guidelines. This is done in an effort to increase good business practices for the industry and to increase consumer protection and confidence in the marketplace.
This report is issued three times yearly to inform and educate DMA members and other companies about practices that are considered contrary to DMA's ethical business practice guidelines. The report's purpose is also to inform regulators and others interested in consumer protection issues of DMA's self-regulatory guidelines and specific actions taken to gain compliance with these guidelines.
Beginning in 1997, reports will be issued in April (covering January, February, and March complaints), August (covering April, May, June, and July), and December (covering September, October, and November).
For more information about DMA's Committee on Ethical Business Practice, and other ethics and consumer affairs department programs, or to submit a promotion for Committee review, please contact Marsha Goldberger, director, ethics and consumer affairs, or Pat Faley, vice president, consumer affairs, in DMA's Washington office, 1111 19th Street, NW, Suite 1100, Washington, D.C. 20036 (telephone: 202 955-5030; fax: 202 955-0085).
During this period, direct marketing promotions and practices of 21 companies were reviewed by DMA's Committee on Ethical Business Practice for potential violation of DMA's voluntary self-regulatory Guidelines for Ethical Business Practice.
The cases handled required an examination of company practices in relation to the following guidelines:
Sweepstakes and Prize Promotions page 2
Data Collection page 3
Solicitation in the Guise of an page 4
Invoice or Governmental Notification
General Advertising Issues page 5
Sweepstakes and Prize Promotions
The Committee reviewed four cases relating to sweepstakes and prize promotions. The issues under review included the following: inadequate descriptions of details of the offers, such as prizes, costs that could be incurred, and restrictions that might apply; the use of different addresses for consumers who order merchandise versus those who do not order merchandise when entering the sweepstakes; an overemphasis that orders should accompany sweepstakes entries; and the use of non-negotiable checks where consumers are urged to call 900#s to learn what awards were won.
The relevant DMA guidelines (Articles #1 - Honesty; #2 - Clarity; #4 - Actual Conditions; #15 - Use of the Term "Sweepstakes"; #16 - No Purchase Option; #17 - Prizes; #18 - Premiums; and #19 - Chances of Winning) state in summary that offers must be clear, honest, and complete so that they will be easily understood by consumers, and that all promises should be in keeping with the actual conditions of the promotions. Sweepstakes promotions should clearly state that no purchase is required and the chances of winning should not be misrepresented.
In three of the cases, the Committee contacted the companies in writing, asking for their review of the potential guidelines violations. In response, the Committee received further details and an explanation of the promotion. One case was closed as it was deemed responsive to the Committee's concerns; two other matters were pending further discussion after the time period of this report. The Committee did not question the use of different addresses for orders versus non-orders where there was no evidence that they affected the chance of winning but were used only to facilitate order processing.
Sweepstakes and prize offers that misrepresent to consumers the chance that they won a major prize are an ongoing Committee concern. Legitimate sweepstakes offers do not require that consumers make any purchase in order to be eligible for a prize, and sweepstakes promotions should clearly state that no purchase is required. The chance of winning should be stated clearly and should not be misrepresented.
Data Collection and List Rental Practices
Five cases were reviewed relating to data collection, list rental practices, and/or personal information. The issues raised in one of the cases included the gathering and usage of state voter registration data, the gathering and usage of consumer survey data, and the gathering of data related to children. The issues raised in the other cases included: making credit card numbers available as part of a list offering; consumers who had filed for bankruptcy being targeted in an insensitive fashion as prospects for various offers; non-compliance with a consumer's name-removal request; and the use of Social Security numbers on a mailing piece.
The relevant DMA guidelines (Articles #32 - Data Collection and List Rental Practices; #33 - Personal Information; and #34 List Usage Agreements) generally state that consumers should be informed about a company's information gathering and usage and be given the opportunity to opt-out of the marketing process. Only those data appropriate for marketing purposes should be used for direct marketing. Also, the exact nature of a list's intended usage prior to each sale or rental should be established.
The Committee contacted the companies in writing with its concerns. After review of the materials provided to it regarding the first case, the Committee wrote to the company asking for its response. In addition to written correspondence, in-person meetings were conducted with company principals and general counsel. The Committee found that the guidelines were not violated pertaining to public or survey data, but that the guidelines were violated with respect to the collection of children's data. DMA issued a public release regarding the company's violations and the specifics of the case as well as actions taken by the company to prevent a recurrence of the violation.
Regarding the other investigations, it turned out that credit card numbers were not made available to other marketers and the company under review revised its promotion to make that clear. Although another company, in response to the Committee, asserted that the DMA guidelines were not violated, the Committee pointed out the need for sensitivity and self-restraint in view of the nature of privacy concerns among legislators and regulators. Another company stated that it maintains an in-house suppression file and removed the consumer's name upon request; and the last inquiry, regarding the use of Social Security numbers, is pending further review.
DMA guidelines relating to privacy protection are routinely cited by the Committee. How consumer data should be collected and used is one of the most important issues direct marketers face, and the DMA encourages all companies to use information responsibly, according to the guidelines. This involves ensuring that companies disclose data gathering and use practices, give consumers the opportunity to opt-out, and honor such requests. The importance of these principles is understood when dealing with data relating to children. Personal information, such as credit card and checking account numbers, and other financial data, and health-related data, should not be made available to other marketers when there is a reasonable expectation by the consumer that it will remain confidential.
It is also essential that list professionals establish the exact purpose for which a list will be used, prior to its rental. This protects marketers from misuse of their lists, and protects consumers from receiving promotions which might violate other ethical guidelines.
Solicitations in the Guise of Invoices
The Committee reviewed five complaints relating to promotions designed to look like invoices, some even appearing to be "official" government documents. The issues raised included that the solicitations, by their overall appearance and wording, appeared to be invoices for publications or for an Internet directory service, whereas no such publications or services were ordered. Complainants were concerned that such "invoices" could be paid inadvertently.
The relevant DMA guideline (Article #11 - Solicitation in the Guise of an Invoice or Governmental Notification) states that offers likely to be mistaken for invoices or notices from government agencies should not be used.
The Committee wrote to the companies, also noting postal regulations prohibiting solicitations in the guise of invoices, and asked for their responses to the issues raised.
Responses included an explanation that the company was refining its Internet marketing techniques; a description of the magazine subscription offer and verification that the order was actually placed by the consumer; and mail returned undeliverable from the post office. The Committee recommended that two of the cases be referred to law enforcement agencies for their review.
Over the years, the Committee has seen a number of misleading business directory publications. Recipients frequently assume the "invoice" is for an ongoing listing in an established publication, whereas it is really a solicitation for a listing in a directory, perhaps one that has not yet been published. Companies may be unaware of DMA's guidelines or the postal regulations that exist which specify disclosures that must be made on such solicitations.
General Advertising Issues
Seven complaints the Committee received did not fit into one of the previously discussed categories, but involved general advertising. Such issues included allegations that advertising for a compact disc did not accurately describe the well-known singer; misleading promises of a company's service to reduce or increase mail and telephone calls received by consumers; questionable claims about consumers being paid for compiling mailing lists; an inaccurate business-to-business list rental promotion; and a pre-approved credit card solicitation for a "gold" card which notifies the consumer in small print at the end of the promotion that a regular card may be received instead of the "gold" card.
The relevant DMA guidelines (Articles #1 - Honesty and #4 - Actual Conditions), which are among the most frequently cited by the Committee, state in general that all offers should be clear, honest, and complete so that the consumer knows the exact nature of what is being offered; misleading or deceptive offers should not be used; marketers should be able to substantiate claims made; and all descriptions and promises should be in accordance with actual conditions existing at the time the offer is made.
The Committee wrote to most of the companies, expressing its concerns and requesting company responses and substantiation of claims made. The company promoting a selective name-removal service agreed to modify its promotion as a result of discussions with DMA. The other companies explained details of their promotions to the Committee, and, in the case of the list rental, discontinued managing the list. In regard to the inquiry about pre-approved credit cards, the Committee believed regulations regarding pre-approved credit offers were not violated, but still expressed concerns about the promotion. The inquiry regarding the compact disc and its featured singer was not viewed as misleading, so that company was not contacted.
Satisfying consumers who do not want to receive unsolicited mail and telephone calls is a high priority for the DMA, and the Committee viewed overpromising a service to remove consumers' names by types of business to be of serious concern to the industry. Also, the DMA's Mail and Telephone Preference Services are free consumer services which will remove consumer names and telephone numbers from national marketing lists; the services do not accept consumer names from any third parties because of the inability to verify the consumer's request, making any claims that names will be accepted by MPS and TPS inaccurate. In regard to the credit card solicitation, the Committee recommended that the DMA educate industry members as to the necessity of avoiding consumer misunderstandings of pre-approved credit card offers.