This one took some chutzpah — with a capital -CHHH. But there's a message, too, for companies that want to keep their promotions on the up-and-up.
International Award Advisors, Prize Registry Bureau, National Awards Service Advisory, and others sent out millions of personalized mailers identifying people as the "verified and confirmed recipient" of multimillion dollar "guaranteed cash payments.” Claiming to come from official-sounding agencies, the mailers bore legit-looking seals, date stamps, bar codes, government form numbers: the whole nine yards. To claim their cash, people just had to pay the required “processing fee."
But there were no awards, no prizes, no agencies — and as you’ve probably figured out by now, nobody got their millions. According to the FTC’s lawsuit, that’s because the whole thing was a con job. The FTC alleged that the defendants operated the scam through a network of companies with neighboring post office boxes, nearly identical marketing material, and shared vendors. They used a phonebook-full of business names and sent out multiple iterations of the same deceptive mailer.
As part of a settlement filed in federal court, the defendants — the corporations, Tully Lovisa, Steven McClenahan, Geovanni Sorino, and Jorge A. Castro — are permanently banned from the prize promotion business and are prohibited from making misrepresentations about any product or service. To protect people’s privacy, they have to securely dispose of customers’ personal information.
Due to the defendants’ inability to pay the total, the multimillion dollar judgments will be suspended as soon as they turn over cash, money in corporate bank accounts, assets held by others, and proceeds from the sale of a house in Vegas. One defendant will be saying buh-bye to the BMW — and his wife is named as a relief defendant to the tune of $170,000 because she allegedly profited from the scam. Under each order, the full judgments will become due immediately if it turns out they have misrepresented their financial condition.
But what about companies planning legitimate promotions? What messages should they take from cases like this and other law enforcement actions dealing with sweepstakes, giveaways, and the like?
The song remains the same. Regardless of the nature of the promotion, standard truth-in-advertising principles apply. That’s why savvy marketers dial down the hype and stick to the facts when engaging in promotions.
You had me at hello. It may be tempting to get cute on an envelope or with the SUBJECT: line of an email so people will open it. But it’s a mistake to resort to deception, like implying that people have won something when they haven’t or fudging about the identity of the sender. Years ago, the FTC took action against door-to-door sales people who claimed to be conducting educational surveys, but really were peddling encyclopedias. Communications have moved from the front porch to direct mail, email, etc., but the ground rules remains the same. The FTC’s Deception Policy Statement — the touchstone for how the agency approaches ad claims — puts it this way: “When the first contact between a seller and a buyer occurs through a deceptive practice, the law may be violated even if the truth is subsequently made known to the purchaser.” Other statutes may impose additional requirements and disclosures. So using misleading practices to rope people in can tie your company in legal knots with the FTC and other law enforcers.
Seal the deal? Mimicking the look or feel of government communications is a big mistake for businesses. The same goes for the use of seals, pictures, or company names that may convey a misleading government affiliation. The FTC Act and other laws (like the Deceptive Mail Prevention and Enforcement Act) make that illegal.
State of the art. States have specific rules regulating contests, sweepstakes, prize offerings, and other forms of promotion. Make sure to tick those compliance boxes before kicking off your campaign.