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Legal Review: Telemarketing to Sweepstakes Entrants Raises FTC’s Hackles

9 Apr, 2010 By: Gregory J. Sater, Natasha Shabani Response

Do you use sweepstakes entry forms as a method of harvesting new E-mail addresses and telephone numbers? If you do, be careful about how you do it or else you’ll find yourself in hot water with the Federal Trade Commission (FTC).

The FTC recently went after a company called “All in One Vacation Club,” finding that it was violating Do-Not-Call (DNC) regulations by calling numbers that it had obtained by using a sweepstakes entry form.

The DNC Registry is a list of telephone numbers for consumers who have exercised their right to limit the conditions under which telemarketers may call them. There are two major exemptions that allow telemarketers to contact people whose numbers are on the list.

The first exemption applies when there is an “established business relationship” between the consumer and the seller. A company with such a relationship may call that consumer for up to 18 months after his or her last purchase, delivery or payment, and up to 3 months after any inquiry or application, unless the consumer asks the company not to call again. The “established business relationship” exemption, however, is narrow and must be consistent with “consumer expectations.”

The second exemption permits companies to call consumers if they’ve obtained prior written permission — as evidenced by a signed written agreement stating that the consumer agrees to be contacted and identifying the phone number that may be called. Such an agreement must be “clear and conspicuous” and include the consumer’s signature demonstrating assent to be called for telemarketing purposes by or on behalf of that seller.

The FTC has warned that it is improper to obtain such an “express agreement” through subterfuge. For example, the request cannot be printed in small, pale, or non-contrasting type; hidden on the back or bottom of a document; or buried in unrelated information where nobody would expect it.

How do these principles apply in the case of a sweepstakes entry form? In the FTC’s recent “All In One Vacation Club” case, the telemarketer was promoting a sweepstakes to consumers interested in winning a vacation package. The sweepstakes entry form required name, telephone number, home address and E-mail address. It also required a signature. After getting the entry form, the marketer would call the consumer and try to interest him or her in purchasing a timeshare or other vacation-related offer. However, many of those telephone numbers were on the DNC list.

What was disclosed on the entry form? On the front, it said: “This advertising material is used for the purpose of soliciting sales of a vacation ownership plan.” On the back, the same statement was repeated and in smaller font, the form also said: “By filling out this entrance form you are consenting to be removed from any no call registry for the specific purpose of allowing the sponsor to contact you with a discounted travel opportunity that is separate from the sweepstakes offered above.”

Despite these disclosures, the FTC found that the form failed to qualify as an “express agreement” sufficient to permit the telemarketer to call those consumers. In the FTC’s view, the form failed to advise consumers clearly and conspicuously enough that, by providing their phone number, they were giving the marketer authorization to call them for telemarketing purposes. The FTC also found that the completed form failed to qualify as a “consumer’s inquiry or application regarding a product or service offered by the seller.”

In its view, the form would not lead a reasonable consumer to expect that he or she later would receive a call offering a timeshare or vacation package for sale. Thus, the FTC found that neither of the above legal exceptions applied, and it imposed a civil penalty of $275,000.

If you want to collect telemarketing leads via a sweepstakes entry form, be careful in how you write the disclosure on the form. You must be very clear and conspicuous in disclosing that you will be making telemarketing calls. The disclosure should be in large print on the front of the form, and should solicit a signature or, in the case of an online entry form, should have a consent box that the consumer has to affirmatively check (not a pre-checked consent box). n

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