Proposed Legislation

The Honesty in Sweepstakes Act of 1998 seeks to ensure that groups using sweepstakes and other games of chance or cashier's check "look-alikes" as promotional or marketing tools are as honest and accurate as possible in their dealings with consumers. GAO found that no comprehensive data exist to indicate the full extent of the problems consumers have experienced with mailed sweepstakes and cashier's check look-alikes. The main reasons that officials and representatives gave for the lack of comprehensive data were that (1) consumers often do not report their problems and (2) no centralized database exits from which comprehensive data could be obtained. However, the Federal Trade Commission and the Postal Inspection Service had some data on consumer complaints about deceptive mail marketing practices. This information showed that consumers were often required to send money or purchase products or services before being allowed to enter the sweepstakes. Information about Postal Inspection Service cases largely involved sweepstakes and cash prize promotions for which up-front taxes or insurance or judging or handling fees had to be paid before consumers could participate in the sweepstakes. GAO mentions two recent initiatives to address consumers' problems with deceptive direct mail marketing practices.

GAO noted that: (1) it found that comprehensive data that could indicate the full extent of the problems that consumers experienced with mailed sweepstakes material and cashier's check look-alikes were not available; (2) the main reasons officials and representatives gave for the lack of comprehensive data were that: (a) consumers oftentimes did not report their problems; and (b) no centralized database existed from which comprehensive data could be obtained; (3) although comprehensive data were unavailable, the Federal Trade Commission (FTC) and the Postal Inspection Service were two organizations that GAO identified as having some data on consumers' complaints about deceptive mail marketing practices, which could indicate the nature of these types of problems; (4) much of the consumer complaint information, which GAO obtained in a sample from FTC's Consumer Information System, showed that in many instances, consumers were required to remit money or purchase products or services before being allowed to participate in the sweepstakes; (5) information about Postal Inspection Service cases that had been investigated largely involved sweepstakes and cash prize promotions for which up-front taxes or insurance, judging, or handling fees were required before consumers could participate in sweepstakes promotions; (6) GAO was unable to identify examples of consumers' problems with cashier's check look-alikes similar to those involving mailed sweepstakes material because such information was not readily available; (7) two recent initiatives are intended to address consumers' problems with deceptive direct mail marketing practices; and (8) the initiatives are: (a) Project Mailbox, for which various participating organizations, including FTC, the Postal Inspection Service, and 25 state attorneys general, collectively took steps to target organizations that used such practices; and (b) the establishment of a multi-state sweepstakes committee that, among other things, is designed to facilitate cooperation among various states in dealing effectively with companies that attempt to defraud consumers through the use of mailed sweepstakes material.