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106th Congress  }                                            { Report
                                  SENATE
 1st Session    }                                            { 106-102
                                                             
_______________________________________________________________________



                     DECEPTIVE MAIL PREVENTION AND

                            ENFORCEMENT ACT

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             together with

                            ADDITIONAL VIEWS

                              to accompany

                                 S. 335

TO AMEND CHAPTER 30 OF TITLE 39, UNITED STATES CODE, TO PROVIDE FOR THE 
NONMAILABILITY OF CERTAIN DECEPTIVE MATTER RELATING TO GAMES OF CHANCE, 
ADMINISTRATIVE PROCEDURES, ORDERS, AND CIVIL PENALTIES RELATING TO SUCH 
                     MATTER, AND FOR OTHER PURPOSES
                     

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                  July 1, 1999.--Ordered to be printed
                  
                            _____________
 
                 U.S. GOVERNMENT PUBLISHING OFFICE
 
69-010 PDF               WASHINGTON : 1999
                  
 For sale by the Superintendent of Documents, U.S. Government Publishing Office
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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire

             Hannah S. Sistare, Staff Director and Counsel
                      Dan G. Blair, Senior Counsel

 Kirk E. Walder, Investigator, Permanent Subcommittee on Investigations
      R. Emmett Mattes, Detailee, U.S. Postal Inspection Service,
                Permanent Subcommittee on Investigations
   Kathy D. Cutler, Congressional Fellow, Permanent Subcommittee on 
                             Investigations
          Michael L. Loesch, Counsel, International Security,
            Proliferation and Federal Services Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
              Laurie R. Rubenstein, Minority Chief Counsel
            Deirdre A. Foley, Minority Congressional Fellow
    Nanci E. Langley, Minority Deputy Staff Director, International 
                               Security,
            Proliferation and Federal Services Subcommittee
 Leslie Bell, Minority Congressional Fellow, Permanent Subcommittee on 
                             Investigations
                 Darla D. Cassell, Administrative Clerk
                 




                                                       Calendar No. 191
                                                       
106th Congress  }                                          {   Report
                                 SENATE
 1st Session    }                                          {  106-102

======================================================================


           TITLEDECEPTIVE MAIL PREVENTION AND ENFORCEMENT ACT

                                _______
                                

                   July 1, 1999.--Ordered to be printed

                                _______
                                

Mr. Thompson, from the Committee on Governmental Affairs, submitted the 
                               following

                                 REPORT

                           CONFERENCE REPORT

                         [To accompany S. 335]

    The Committee on Governmental Affairs, to which was 
referred the bill (S. 335) to amend chapter 30 of title 39, 
United States Code, to provide for the nonmailability of 
certain deceptive matter relating to games of chance, 
administrative procedures, orders, and civil penalties relating 
to such matter, and for other purposes; having considered the 
same, reports favorably thereon with an amendment in the nature 
of a substitute and recommends that the bill as amended do 
pass.

                            C O N T E N T S

                                                                   Page
  I. Purpose..........................................................1
 II. Summary of Legislation...........................................2
III. Background and Need for Legislation..............................3
 IV. Investigations and Findings......................................6
  V. Legislative History.............................................11
          A. Legislation.........................................    11
          B. Hearings............................................    13
          C. Committee Action....................................    15
 VI. Section-by-Section Analysis.....................................16
VII. Regulatory Impact Statement.....................................29
VIII.Congressional Budget Office Cost Estimate.......................29

 IX. Executive Communications........................................32
  X. Additional Views of Senator Edwards.............................33
 XI. Changes In Existing Law.........................................36

                               I. Purpose

    The purpose of this bill is to establish strong consumer 
protections to prevent a number of types of deceptive mailings. 
The legislation will impose various requirements on sweepstakes 
mailings, skill contests, facsimile checks, and mailings made 
to look like government documents. The bill will establish 
strong financial penalties, provide the Postal Service with 
additional authority to investigate and stop deceptive 
mailings, and preserve the ability of states to impose stricter 
requirements on deceptive mailings.

                       II. Summary of Legislation

    S. 335, as amended by the Committee substitute, would 
require sweepstakes mailings to clearly and conspicuously 
display: (1) a statement in the mailing, including the rules 
and order form, that no purchase is necessary to enter the 
contest; (2) a statement that a purchase would not improve the 
recipient's chances of winning; (3) all terms and conditions of 
the sweepstakes promotion, including the rules and entry 
procedures in language that is easy to find, read and 
understand; (4) the sponsor or mailer of the promotion and the 
principal place of business or other contact address of the 
sponsor or mailer; and (5) rules that clearly state the 
estimated odds of winning each prize, the quantity, estimated 
retail value, and nature of each prize, and the schedule of any 
payments made over time. In addition, the bill would prohibit 
sweepstakes mailings from making certain statements, including 
statements that an entry must be accompanied by an order or 
payment for a product previously ordered or that an individual 
is a winner of a prize unless that individual actually has won 
a prize.
    The bill also imposes requirements on skill contest 
mailings. Skill contests are defined as a puzzle, game, 
competition, or other contest in which a prize is awarded based 
on skill, and a purchase, payment, or donation is required. 
Skill contests mailings would be required to follow provisions 
on rules and disclosure of the sponsor similar to sweepstakes 
promotions. Skill contests mailings also must disclose: (1) the 
number of rounds, the cost to enter each round, whether 
subsequent rounds will be more difficult, and the maximum cost 
to enter all rounds; (2) the percentage of entrants who may 
solve correctly the skill contest; (3) the identity of the 
judges and the method used in judging; and (4) the date the 
winner will be determined as well as quantity and estimated 
value of each prize.
    The bill imposes new federal standards on facsimile checks 
sent in any mailing. These checks must include a statement on 
the check itself that it is non-negotiable and has no cash 
value.
    The legislation strengthens existing law on government 
look-alike mailings. Such mailings often come in a brown 
envelope and may use terms that imply a connection with the 
federal government, but actually are solicitations by a private 
sector company for a product or service. To address government 
look-alike mailings, the bill prohibits mailings that imply a 
connection to, approval, or endorsement by the federal 
government through the misleading use of a seal, insignia, 
reference to the Postmaster General, citation to a federal 
statute, trade or brand name, or any other term or symbol, 
unless the mailings carry two disclaimers already contained in 
existing law.
    Additionally, the bill prohibits mailings that contain any 
false representation implying that federal government benefits 
or services will be affected by any purchase or non-purchase. 
Any mailing that offers to provide any product or service 
provided by the federal government without cost must contain a 
notice to that effect.
    In addition to restrictions on the deceptive mailings 
themselves, the bill imposes new obligations on the companies 
sending sweepstakes and skill contests. Any person who uses the 
mail for any covered mailing would be required to adopt 
reasonable practices and procedures to prevent the mailing of 
these materials to any person, who by virtue of a written 
request, including requests made by a conservator, guardian, 
individual with power of attorney or a state attorney general, 
states their intent not to receive such mailings. The bill 
requires these persons or companies to maintain records of such 
requests for five years.
    The bill further requires companies sending sweepstakes or 
skill contests to establish a universal notification system 
which would allow consumers to call one toll-free number to 
learn how to be removed from the mailing lists of such 
companies. All sweepstakes or skill contest mailings would be 
required to contain this telephone number and the address of 
the notification system.
    Under current law, the United States Postal Service 
(``USPS'') has inadequate authority to investigate, penalize, 
and stop deceptive mailings. The USPS does not have subpoena 
authority, is unable to obtain an order to stop deceptive 
mailings nationwide, and may only seek financial penalties when 
a company violates an order previously imposed by the USPS for 
sending deceptive mailings. This legislation addresses these 
weaknesses in current law by granting the USPS subpoena 
authority, nationwide stop mail authority, and the ability to 
impose civil penalties.
    The bill also increases the civil penalties that the USPS 
may impose. The civil penalties for sending mailings that do 
not comply with the bill would be up to $25,000 for each 
mailing of less than 50,000 pieces; $50,000 for each mailing of 
50,000 to 100,000 pieces; with an additional $5,000 for each 
additional 10,000 pieces above 100,000, not to exceed 
$1,000,000. Any person who, through the use of the mail, evades 
or attempts to evade the terms of an order would be liable for 
twice the amount of this civil penalty.
    The bill also recognizes the states' strong role in 
investigating and prosecuting deceptive mailings. The bill 
states that nothing in the Act shall preempt any provision of 
state or local law that imposes more restrictive requirements, 
regulations, damages, costs or penalties. Nothing contained in 
the bill shall be construed to prohibit an authorized state 
official from proceeding in state court on the basis of an 
alleged violation of any civil or criminal statute of such 
state.
    The provisions of the bill would take effect 120 days after 
the date of enactment.

                III. Background and Need for Legislation

    The direct marketing industry has used sweepstakes mailings 
for over 30 years as a method to promote the sale of their 
products. Companies use sweepstakes to sell magazines and other 
merchandise, while other groups use sweepstakes mailings to 
raise funds or promote services.
    While most sweepstakes are legitimate and appropriate 
marketing devices, some of these promotions can be used to 
defraud

and deceive consumers. Four major sweepstakes firms each send 
out hundreds of millions of mailings every year, and there is 
evidence that a significant number of individuals make 
excessive purchases in response to these mailings. In the 
aggregate, the sweepstakes industry has sent over one billion 
mailings per year in recent years. Deceptive mailings include a 
wide variety of promotions, including sweepstakes, skill 
contests, solicitations, and sales of goods or services by 
mail.
    The Magazine Publishers of America estimate that Americans 
annually spend $7 billion on magazine subscriptions, and 12% of 
those sales derive from sweepstakes promotions. Thus, 
sweepstakes companies generate nearly $1 billion of magazine 
revenues per year. Indeed, sweepstakes mailings account for 
nearly one third of all 156 million new magazine subscriptions 
sold each year.
    In the last 20 years, major sweepstakes companies have 
greatly increased their grand prizes and the sophistication of 
their marketing practices. They conduct a variety of contests 
every year, many offering a multi-million dollar prize. 
Companies use many traditional direct marketing principles, 
such as targeting consumers according to recency, frequency and 
monetary value or the dollar amount of the purchases.
    Sweepstakes companies are constantly testing their 
marketing appeals, and have generally concluded that consumers 
make purchases in response to mailings with large prizes, 
``involvement devices'' such as stickers and stamps, and 
certain types of personalized appeals. As with many direct mail 
companies, sweepstakes firms send a large number of mailings to 
the general public that are often followed by targeted mailings 
to specialized lists of, or repeat, customers.
    Mass mailings can be personalized within several places in 
a letter, and can feature symbols, devices, or documents that 
make them look unique. In general, the goal of such mass 
mailings is to distinguish them from ``junk'' mail, enticing 
the consumer to open the envelope. Upon viewing the contents of 
these mass mailings, the consumer finds a personalized mailing 
that offers a message that can convince the consumer to make a 
purchase.
    Those on a target list can be sent even more sophisticated 
mailings, informing them when they became a customer, how many 
purchases they have made recently, and when they last entered a 
contest without making a purchase. Such mailings reinforce the 
concept that purchases are linked with receiving sweepstakes 
mailings and, therefore, with winning a prize. The implication, 
sometimes made by a direct statement, is that if the customer 
does not purchase a product, they may not receive the future 
sweepstakes mailings necessary to win a prize.
    The tactics of sweepstakes mailings have generated 
thousands of consumer complaints, including complaints to state 
Attorneys General, the Federal Trade Commission (``FTC''), the 
USPS, consumer groups, and Members of Congress.
    Skill contests differ from sweepstakes in that the consumer 
must demonstrate skill, such as solving a word puzzle, in order 
to win the prize. The key difference between a skill contest 
and a sweepstakes is that a skill contest does not rely on 
chance, and may require consideration to participate. Winning a 
sweepstakes must be based solely on chance and no purchase can 
be required. Like sweepstakes promotions, skill contests may 
also be used in a deceptive manner to promote unnecessary 
purchases or payments.
    Consumers may be similarly deceived by skill contests 
offering large prizes in return for the payment of a small 
``judging fee.'' Responding to such mailings by sending money 
may only result in the consumer receiving even more mailings 
with additional skill contests that must be completed before 
any prize is awarded. Many skill contests have several levels 
that culminate in a complex contest that is extremely 
difficult. Thus, by the time the consumer is close to actually 
winning a prize, they have invested substantial sums of money 
solving relatively easy puzzles only to be presented with an 
extremely difficult puzzle that they have very little chance of 
solving.
    Facsimile checks are also used in promotional mailings, 
sometimes by operators of sweepstakes or skill contests, to 
catch the eye of the recipient. Mailings may be designed so 
that such facsimile checks are displayed through a window 
envelope, prompting many consumers to open the mailing.
    Envelopes and checks may be designed to resemble government 
mailings, using symbols such as an eagle, the Statue of 
Liberty, or words such as ``Buy U.S. Savings Bonds.'' The 
facsimile check itself may look real in many respects, such as 
having an authorized signature and showing the name of a 
financial institution. Such facsimile checks can deceive 
consumers.
    Mailings may also be deceptive through the use of a variety 
of terms or symbols designed to make the mailing appear to be 
connected or endorsed by the federal government. Some mailings 
may offer to sell a product the government provides for free 
without so indicating.

Federal and state law

    Sweepstakes and skill contests are largely regulated by 
state law. At the federal level, the USPS and FTC possess 
jurisdiction to regulate and investigate sweepstakes and skill 
contests. Current federal laws do not specifically cover 
sweepstakes but address them indirectly by forbidding 
lotteries, false representations, and unfair trade practices.
    Chapter 30 of title 39 contains the civil provisions 
authorizing enforcement actions against deceptive mailings. 
Sweepstakes that obtain money through the mails by means of 
false representations violate 39 U.S.C. 3005. This statute also 
forbids conducting a lottery which, although not expressly 
stated, requires that all sweepstakes must contain an option to 
enter without payment of consideration. A lottery contains 
three elements: prize, chance, and consideration. A free entry 
option excludes the consideration element. No federal statutes 
or regulations enforced by the USPS make specific reference to 
sweepstakes.
    Criminal action can be taken against deceptive mailings 
under 18 U.S.C. Sec. 1341, the federal mail fraud statute. The 
two necessary elements for a violation of this statute are (1) 
formation of a scheme with the intent to defraud, and (2) use 
of the mails in furtherance of that scheme. Parties sending 
deceptive mailings have been prosecuted under this statute, 
albeit infrequently.
    The FTC may also take action against practices that are 
unfair or deceptive. The FTC utilizes several standards to 
determine whether a practice is deceptive. There must be a 
representation, omission, or practice that is likely to mislead 
the consumer. The FTC evaluates the relevant misrepresentation 
statement from the viewpoint of a consumer acting reasonably 
under the circumstances.
    Twenty-seven states have specific statutes which govern 
sweepstakes. State laws cover numerous facets of sweepstakes 
promotions, including general disclosures, odds of winning, 
number and value of prizes awarded, rules, winners list, pre-
contest filing, simulated checks, prize restrictions, and the 
use of certain words.
    States such as New York make it unlawful to represent that 
a person is a ``winner'' or has been ``selected'' or words of 
similar import when all or a substantial number of those 
solicited receive the same ``prize'' or ``opportunity.'' State 
laws which restrict the use of certain terms are directed at 
sweepstakes that suggest to the recipient that he or she is a 
member of a select group when everyone who receives the 
sweepstakes is a member of the same class of contestants.

                    IV. Investigations and Findings

    The investigation and hearings held by the Permanent 
Subcommittee on Investigations and the Subcommittee on 
International Security, Proliferation, and Federal Services 
revealed that deceptive mailings can take many forms and use a 
variety of techniques. Such practices include:
          1. Misleading promotions suggesting that an 
        individual has won a major sweepstakes, but will only 
        receive the prize if a product is purchased;
          2. Misleading promotions suggesting that purchase of 
        a product is necessary for, or will increase the 
        chances of winning in, future sweepstakes contests;
          3. Confusing promotional copy and official rules that 
        include inconsistences which encourage individuals to 
        make unnecessary purchases in the hope of winning a 
        prize;
          4. Sending multiple sweepstakes promotions with 
        different copy for the same sweepstakes contest, 
        implying that each promotion involves a different 
        sweepstakes;
          5. Targeting customers making purchases with repeated 
        subsequent mailings, which entice consumers to make 
        excessive and unneeded purchases;
          6. Misleading statements seeming to guarantee the 
        award of a large cash prize, and requesting purchase of 
        a product, when most individuals actually receive an 
        insignificant cash award, such as $.50 or $1.00;
          7. Using a deceptively named company, and using 
        envelopes and/or symbols and statements that create the 
        impression that the mailing is official government 
        correspondence;
          8. Offering to sell information that is provided for 
        free by the federal government or enticing a purchase 
        by falsely implying a cut in federal benefits; and
          9. Sending facsimile checks that entice individuals 
        to respond to marketing appeals.
    Companies use these techniques and others to persuade 
consumers to send money or make unnecessary purchases. Many 
companies conduct legitimate sweepstakes and offer worthwhile 
products, but use deceptive mailings to generate excessive and 
unnecessary purchases. This legislation is necessary to protect 
vulnerable consumers from these practices.

Express and implied claims or representations

    The investigation by the Permanent Subcommittee on 
Investigations found that many mailings use deceptive language 
to entice consumers into making purchases of products that they 
neither need nor want. Mailings often suggest that an 
individual has won a large prize or that a purchase is 
necessary or will increase the chances of winning a large 
prize.
    The legislation approved by the Committee addresses this 
problem by declaring as nonmailable any matter that makes 
certain misleading representations. The legislation prohibits 
various practices that mislead consumers, particularly 
consumers who may be more trusting or otherwise vulnerable to a 
computer-generated mass mailing. Through sophisticated mass 
mail techniques, the most vulnerable of consumers can be 
identified and repeatedly targeted for misleading sweepstakes 
solicitations.
    Sweepstakes promotions may contain outright false 
representations. Most promotions contain representations that 
are technically accurate but include implied 
misrepresentations. Under this legislation, a 
``representation'' is prohibited if it is directly false or 
impliedly false. This interpretation is consistent with both 
case law and the FTC's October 14, 1983 Policy Statement on 
Deception which stated:

          In cases of implied claims, the Commission will often 
        be able to determine meaning through an examination of 
        the representation itself, including an evaluation of 
        such factors as the entire document, the juxtaposition 
        of various phrases in the document, the nature of the 
        claim, and the nature of the transaction.

    Sections 3001 (h), (i), and (k) of the bill approved by the 
Committee use the terms ``misrepresents,'' ``represents,'' and 
``representation'' in describing nonmailable matter. For 
purposes of this bill, the Committee intends that 
``misrepresents,'' ``represents,'' and ``representation'' mean 
both express and implied representations.
    Drawing from the experience of the FTC, the Committee 
believes that a mailing can be misleading or deceptive even 
when the representation is suggested or implied. In Thompson 
Medical Company, Inc. v. Federal Trade Commission, 791 F.2d 
189, 197 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987), 
the court stated that ``[t]he tendency of a particular 
advertisement to deceive is determined by the net impression it 
is likely to make upon the viewing public. Consequently, 
literally true statements may nonetheless be found deceptive, 
and advertisements reasonably capable of being interpreted in a 
misleading way are unlawful even though other, non- misleading 
interpretations may also be possible.'' In that case, the court 
held that Aspercreme advertisements were misleading because 
Aspercreme did not contain aspirin as its name suggested and 
the advertisement falsely implied that it was a cure for 
arthritis.
    Case law and the FTC's 1983 Policy Statement on Deception 
also established that representations directed toward a 
particularly vulnerable group of consumers must be interpreted 
from the standpoint of a person from within that group. 
Therefore, where a mailer has successfully identified, through 
its own mailings or list rental, a particularly vulnerable 
group, direct or implied representations must be interpreted as 
they would be interpreted by a member of that group.

Required statements, notices and disclaimers

    Subsection (k)(5) requires that ``any statement, notice, or 
disclaimer required'' with respect to promotional mailings for 
sweepstakes and skill contests (hereinafter, ``statements'') 
must be ``clearly and conspicuously displayed.'' This provision 
ensures that the statements and disclaimers required by the 
bill will be readily apparent and understood by the average 
reader.
    Prior to adopting the ``clear and conspicuous'' standard, 
the Committee reviewed the definitions of ``clear and 
conspicuous'' found in the FTC's opinions and in case law. The 
FTC defines ``clear and conspicuous'' in its 1983 Policy 
Statement as follows:

          [I]n all cases the required or advised disclosures 
        must be effectively communicated to consumers. To 
        achieve this general performance standard, the 
        Commission's rules and guides require that disclosures 
        be ``clear and conspicuous,'' using that term or other 
        conceptually similar articulations. In order to 
        determine whether the disclosure is effectively 
        communicated, the Commission considers the disclosure 
        in the context of all of the elements of the 
        advertisement. Ordinarily, a disclosure is clear and 
        conspicuous, and therefore is effectively communicated, 
        when it is displayed in a manner that is readily 
        noticeable, readable and/or audible (depending on the 
        medium), and understandable to the audience to whom it 
        is disseminated.

63 Fed. Reg. 24996, 25002 (footnotes omitted).
    The Committee also reviewed case law using the ``clear and 
conspicuous'' standard. ``Clear and conspicuous'' is a 
disclosure standard used in laws involving banking, commerce 
and trade issues, customs, and the USPS. Several cases provide 
useful guidance on what is intended by the words ``clear and 
conspicuous.'' In Lowery v. Finance America Corp., 231 S.E.2d 
904, 910 (N.C. App. Ct. 1977), the court explained that the 
``insurance disclosures contained in the Federal Disclosure 
Statement given to the Lowerys are not clear, conspicuous and 
in meaningful sequence.'' The court noted, ``[f]irst, the cost 
of the insurance is neither clearly nor conspicuously revealed. 
The cost is typed in two of many boxes at the top of the page. 
These boxes are designated `Credit Life' and `Credit Dis.' The 
meaning of these words is not clear to laymen for whose 
protection the Act and Regulation are meant.''
    In Channell v. Citicorp National Services, 89 F.3d 379, 382 
(N.D. Ill. 1996), the court found that ``[t]he Act and 
Regulation M do not define `clear and conspicuous,' but the 
words are staples of commercial law.'' Indeed, the Uniform 
Commercial Code defines ``conspicuous'' as so written that a 
reasonable person against whom it is to operate ought to have 
noticed it. Uniform Commercial Code (UCC) Sec. 1-201(10).
    Finally, the United States District Court for the Southern 
District of Florida found ``that the terms `annual percentage 
rate' and `finance charge' [were] displayed in the Disclosure 
Statement more conspicuously than the other terms. Although 
they [were] printed in the same size, style, and boldness of 
some other terms, `annual percentage rate' and `finance charge' 
[were] found at the top of the page, with boxes around them 
which highlight[ed] them in relation to the other terms.'' 
Malfa v. Household Bank, F.S.B., 825 F. Supp. 1018, 1020 (S.D. 
FL 1993).
    These court cases show that the term ``clear and 
conspicuous'' requires language that is readily noticeable and 
readily understandable. In some cases, the standard will 
require typeface sufficiently large in comparison to the 
surrounding typeface to draw the average reader's attention to 
it. In other cases, where typeface is used that is similar in 
size or style to the typeface of other important material on 
the document, the required language must be highlighted in some 
form to make it noticeable. Examples of highlighting include 
using bold letters, surrounding the language with a noticeable 
box, using contrasting ink or background color, and placing the 
language in a very visible location on the relevant page. The 
requirement in the bill that these statements be ``clear and 
conspicuous'' is one of the most important provisions in this 
legislation. In recognition of the endless variety and possible 
combinations of typeface on a page, the Committee declined to 
require explicit typeface styles and size. The bill instead 
relies on the common sense application of the term ``clear and 
conspicuous'' and expects strong enforcement by the USPS. The 
``clear and conspicuous'' standard can only be satisfied if the 
relevant statements and disclaimers are easily noticeable and 
understandable to the average reader of a sweepstakes 
promotion.

Statements concerning purchases

    During the investigation and hearings of the Permanent 
Subcommittee on Investigations, the Subcommittee gathered 
evidence which demonstrated that many individuals purchased 
products that they did not need or want because they thought a 
purchase was necessary to enter the sweepstakes, or that a 
purchase would increase their chances of winning. The American 
Association of Retired Persons (``AARP''), in testimony to the 
Subcommittee, presented survey data that showed forty percent 
of seniors thought a purchase would or might increase their 
chance of winning a prize in a sweepstakes. The Committee 
believes the statements ``no purchase necessary'' and ``a 
purchase will not increase your chances of winning'' are 
essential to provide adequate consumer protection and reduce 
the misperception that a purchase is required or will increase 
an individual's chances of winning a sweepstakes.
    The bill improves existing practices by requiring two 
disclosures, ``no purchase necessary'' and ``a purchase will 
not increase an individual's chance of winning.'' These 
disclosures must be ``in the mailing, in the rules, and on the 
order or entry form.'' The Com-

mittee finds that these two statements are particularly 
important. They communicate to the recipient that buying a 
product is neither necessary nor advantageous with respect to 
the sweepstakes. By requiring these two disclaimers to appear 
in the three locations in a sweepstakes promotion most likely 
to be read by the recipient, the bill makes some effort to 
ensure that this key message reaches consumers who participate 
in sweepstakes. Moreover, the term ``in the mailing'' means a 
location in the sweepstakes promotion other than the rules or 
the order or entry form that is the most likely document to be 
read with respect to promoting the sweepstakes. In most cases, 
this will be the front of the first piece of the mailing. 
Because promotional mailings differ to such a large extent, 
however, it may also be on or inside a brochure in the mailing. 
The Committee cannot anticipate the content and style of each 
promotion, but intends that this third location be a place in 
the mailing that is designed as the centerpiece of the 
sweepstakes promotion.

Rules and entry procedures

    In response to examples of confusing rules and entry 
procedures, the bill requires that the disclosure of the terms 
and conditions of the sweepstakes or skill contests, including 
the rules and entry procedures, be ``easy to find, read, and 
understand.'' This means that the rules cannot be buried in a 
piece of the promotional mailing that is likely to be 
overlooked or ignored. In addition, the rules cannot be written 
in language that would be confusing or unintelligible to the 
average person. The Committee intends that the rules be readily 
available to the average recipient and, once found, be readable 
and simple to understand.

Applicability of requirements imposed by the legislation

    The Committee recognizes that many different companies are 
involved in the creation and mailing of covered matter under 
the bill. This legislation would not make unlawful the normal 
business activities of related industries, such as those in the 
printing and mailing industries, which do not sponsor 
promotional materials but merely print or mail materials at the 
behest of others.
    The critical requirement in section 3005 of title 39, 
relating to false representations, is that a person engage in 
``a scheme or device for obtaining money or property through 
the mail.'' Aninnocent and unknowing person or company, that 
merely prints or mails matter for a sweepstakes or contest sponsor, 
does not engage in a scheme for obtaining money or property through the 
mail unless such person or company originates or mutually assists with 
the creation of the mailing. Therefore, such persons would not fall 
within the ambit of the proposed legislation, including the definition 
of promoter in section 8 of the bill, unless they participate directly 
in the creative development of the mailing. The focus of any inquiry 
should be on the degree to which the individual or company 
substantially developed the contest and layout of the mailing versus 
the simple printing or mailing of matter.

Removal of individuals from mailing lists

    During the course of the hearing by the Permanent 
Subcommittee on Investigations, witnesses testified about the 
difficulties that they encountered when they attempted to 
remove their names or the names of family members from 
sweepstakes mailing lists. The hearings revealed that, 
currently, the only method of removal is to contact each 
individual company. The witnesses testified that it is 
unnecessarily difficult to obtain the correct address to send a 
request for removal. Furthermore, once an individual sends a 
removal request to an individual company, it often takes many 
months for the company to cease all mailings, if they do so at 
all. The Committee believes that it is essential to ensure 
simple and timely cessation of sweepstakes and skill contest 
mailings to vulnerable consumers. For many families, this may 
be the only mechanism to protect their loved ones from 
exploitation. As such, the bill requires companies to 
participate in a uniform notification system that will effect 
removal of names from mailing lists sent by certain companies. 
It was brought to the Committee's attention that it may be 
difficult for some types of companies engaging in third party 
mailings to comply with the requirements of section 8.

Ability of Postal Service, the Federal Trade Commission and state 
        officials to act against deceptive mailings

    In September 1998, the General Accounting Office reported 
that no comprehensive data exists to indicate the full extent 
of the problems consumers have experienced with deceptive 
mailings. The lack of comprehensive data is primarily because 
consumers often do not report their problems with deceptive 
mailings and no centralized database exists from which 
comprehensive data could be obtained.
    The Committee strongly recommends that the USPS and the 
FTC, in consultation with the National Association of Attorneys 
General, the AARP, the Better Business Bureau, the National 
Fraud Information Center, the Direct Marketing Association 
(``DMA''), and other interested parties, take steps to 
implement a centralized database containing comprehensive data 
about reported cases of deceptive mailings.
    Such a database would be a repository of information 
reported by consumers at the local, state, and federal levels. 
Having more access to comprehensive information would enable 
the USPS to more readily identify which deceptive practices are 
most pervasive.

                         V. Legislative History


A. Legislation

    During the 105th and 106th Congresses, a number of bills 
have been introduced regarding deceptive mailings and 
sweepstakes.
            S. 301, the Honesty in Sweepstakes Act of 1999
    In 1998, Senator Campbell introduced the Honesty in 
Sweepstakes Act of 1998. This bill was referred to the 
Committee on Governmental Affairs and to the Subcommittee on 
International Security, Proliferation, and Federal Services. 
Senator Campbell reintroduced a modified version of this bill 
in 1999. The bill would amend federal postal law to prohibit 
delivery of any mail constituting a solicitation or offer in 
connection with a sales promotion for a product or service that 
uses any game of chance offering anything of value (including 
any sweepstakes) or anything resembling a negotiable 
instrument, unless specified notices in a specific type size 
are printed on the envelope and enclosed material.
    This legislation would impose new disclosure requirements 
to inform recipients that they are not automatic winners and 
that no purchase is necessary to enter. The disclaimer must be 
in conspicuous and legible type. If the envelope contains 
language suggesting the recipient is a winner, then the 
disclosure must also appear on the envelope. Facsimile checks 
must also state that they are not checks or negotiable 
instruments and have no value.
    Under the bill, civil penalties for deceptive mailings were 
set at up to $50,000 for each mailing of less than 50,000 
pieces, $100,000 for mailings of 50,000 to 100,000 pieces, with 
an additional $10,000 for each additional 10,000 pieces. The 
total fine for a violation could not exceed $2 million. The 
legislation requires the USPS to retain all civil penalties it 
collects to fund programs to increase consumer awareness of 
deceptive mailings.
            S. 335, the Deceptive Mailings Prevention and Enforcement 
                    Improvement Act
    This legislation, introduced by Senator Collins, would 
establish new standards for sweepstakes and other prize 
promotion mailings, including clear disclosures that no 
purchase is necessary to enter the contest, the value and odds 
of winning each prize, the name of the promoter of the contest, 
and an understandable statement of the rules.
    In addition, the legislation would strengthen current laws 
against mailings that mimic government documents. Mailings 
could not use any language or device that gives the appearance 
that the mailing is connected, approved, or endorsed by the 
federal government, or that implies that the mailing is 
afforded any special protection by the federal government. Any 
mailing selling a product the government provides for free must 
include a disclosure that the product is available from the 
government at no cost. Mailings could not contain statements 
implying that federal governmentbenefits or services would be 
affected by any purchase, non-purchase, response, or non-response to a 
mailing.
    The bill also provides strong new financial penalties for 
mailings that do not comply with these standards. Civil 
monetary penalties include fines ranging from $50,000 to $2 
million, depending on the number of mailings at issue.
    The bill makes federal law enforcement efforts more 
effective by giving the USPS additional tools to combat these 
practices. The bill authorizes, in limited cases, 
administrative subpoenas for records and documents during USPS 
investigations of fraudulent mailings. Upon application to a 
district court, the USPS would be authorized to detain mail 
nationwide, instead of in a single judicial district, when 
mailings violate 39 U.S.C. Sec. 3005. Under current law, the 
USPS must file an action in each judicial district in which 
mail is received. These provisions will assist the USPS in 
taking immediate steps to stop deceptive mailings.
    The legislation would also preserve the important role that 
states play in fighting this type of fraud and deception. The 
bill would not preempt state or local laws protecting consumers 
from fraudulent or deceptive mailings.
            S. 336, the Deceptive Games of Chance Mailings Elimination 
                    Act of 1999
    Senator Levin introduced legislation in 1998, and again in 
1999, that would add new requirements to the deceptive mail 
statute. His legislation would declare as nonmailable any 
solicitation or sweepstakes promotion unless it: 1) conforms 
with postal regulations; 2) contains sufficiently large and 
noticeable disclaimers that no purchases are necessary, a 
disclosure of the chances of winning, an advisory that 
purchases do not enhance the chances of winning; 3) is clearly 
labeled as a game of chance and contains no misleading 
statements representing that recipients are guaranteed winners; 
and 4) does not represent that the recipient is a member of a 
selected group whose chances of winning are enhanced as a 
member of that group. The bill allows the Postmaster General to 
use subpoenas for investigations into deceptive mailings and to 
ask the Attorney General to enforce subpoenas. The bill also 
allows the USPS to assess civil penalties in lieu of, or as 
part of, an administrative order.
            S. 975, the Sweepstakes Toll-Free Option Protection Act of 
                    1999
    This bill was introduced by Senator Edwards and would amend 
chapter 30 of title 39, United States Code, to provide for a 
uniform notification system by which individual consumers may 
elect not to receive mailings relating to skill contests or 
sweepstakes.

B. Hearings

    The Subcommittee on International Security, Proliferation, 
and Federal Services, chaired by Senator Thad Cochran, held a 
hearing on deceptive mailings on September 1, 1998. This 
hearing included testimony from Senator Ben Nighthorse 
Campbell; the head of the United States Postal Inspection 
Service (``USPIS''); the Attorney General of Florida; the head 
of the DMA, the trade association representing sweepstakes and 
other direct mail companies; and a professor of gerontology, 
who was conducting a study of the impact of sweepstakes on the 
elderly.
    During the hearing, the USPIS official testified that the 
USPS has been working with FTC, the AARP, and the state 
Attorneys General to combat deceptive mailings. This effort has 
been aimed largely at the most fraudulent contests, usually 
smaller firms that attempt to persuade consumers to pay money 
in connection with entering a sweepstakes. USPS requested 
additional authority to help postal inspectors regulate 
deceptive mailings. The Attorney General of Florida testified 
that his office was investigating allegations of double 
billing, sales of lists of vulnerable consumers to other 
sweepstakes companies, false deadlines, aggressive collection 
practices, and deceptive language in sweepstakes entries.
    The DMA representative testified about sweepstakes 
marketing practices and expressed concern about the fraud that 
currently exists, but also about consumers who respond 
inappropriately to sweepstakes offers. He said that DMA 
supports efforts to strengthen rules against fraudulent 
sweepstakes. DMA also favored increased self-regulation and 
consumer education. According to the DMA representative, DMA 
was preparing to strengthen its sweepstakes guidelines; develop 
programs to identify high activity respondents and inform them 
that no purchase is necessary to enter; improve training for 
customer service agents to identify problem cases; develop a 
consumer information program to educate the public about 
legitimate sweepstakes; serve as a clearinghouse for consumer 
complaints; and work more closely with consumer organizations 
to educate people about avoiding financially risky behavior in 
connection with sweepstakes.
    The Director of Gerontology at Arizona State, Dr. William 
Arnold, had been requested to conduct a study for the AARP on 
the elderly and sweepstakes. He testified that senior citizens 
have a different belief system, and are more trusting of 
mailings that appear to have government connections or other 
authority figure endorsements.
    In 1998, the Permanent Subcommittee on Investigations, 
chaired by Senator Collins, commenced an investigation into 
deceptive mailings. The investigation was prompted by 
constituent complaints and by the initial hearing held by the 
Subcommittee on International Security, Proliferation, and 
Federal Services.
    The inquiry by the Permanent Subcommittee on Investigations 
resulted in two days of hearings entitled ``Deceptive Mailings 
and Sweepstakes Promotions'' on March 8 and 9, 1999. During the 
first day of the hearings, elderly sweepstakes contestants and 
the children of such contestants described the marketing 
practices that deceived them or their family members. The 
witnesses testified that they or their family members believed 
that purchases increased their chances of winning, the wordings 
of the mailings and personalized letters from the sweepstakes 
companies mistakenly implied that they were very likely to win 
a prize, and the ``no purchase necessary'' disclaimers were 
ineffective. The investigation revealed that the volume of 
sweepstakes mailingsexceeded one billion in 1998, and that 
purchase activity resulted in more mailings to an individual. Family 
members also testified about the trusting nature of their relatives and 
that many refused to leave home, attend doctor's appointments, or visit 
other friends and family in anticipation of the big payoff that they 
were promised by the sweepstakes mailings. Evidence at the hearing 
showed that some consumers had spent tens of thousands of dollars, 
depleted savings, and had been forced to seek employment after entering 
retirement. The hearings also examined the companies' billing practices 
and the procedures to remove the names of consumers from mailing lists 
upon request. All the witnesses expressed problems in these areas.
    Also, during the first day, the Attorney General of 
Maryland and a representative from the AARP testified about the 
impact of sweepstakes mailings on the elderly. The Maryland 
Attorney General indicated that some companies utilize 
misleading and confusing marketing tactics, including small 
type, which is often overlooked by consumers with poor 
eyesight. In addition, some sweepstakes mailings mimic 
government documents, contain separate addresses for order and 
non order entries, and appear to ``guarantee'' winning as long 
as the entry is returned.
    Sweepstakes promotions are also a major concern to AARP 
because of the harmful impact on its members. AARP has launched 
public campaigns against charity and telemarketing fraud based 
on its research examining senior citizens' behavior and 
perceptions pertaining to sweepstakes. The National Consumer 
League's Nation Fraud Information Center has for the last four 
years listed sweepstakes as one of the most frequent complaints 
to their consumer hotline. Many of the complaints were about 
mailings that asked consumers to call a number to claim their 
winnings, but invariably they were asked to pay a fee or buy 
something in order to receive their prize. Many consumers also 
called the hotline to complain about repeat solicitations or 
when they were confused by the deceptive practices of major 
sweepstakes companies.
    AARP commissioned a survey to determine what motivates 
elderly people to participate in sweepstakes. The preliminary 
findings, which were discussed at the hearing, showed that 
forty percent of older Americans respond to sweepstakes 
solicitations. Twenty-three percent of those senior citizens 
surveyed believe that purchasing merchandise increases their 
odds of winning, and another seventeen percent believe that 
purchasing a product might increase their chances of winning.
    During the second day of hearings, representatives of 
American Family Enterprises, Publishers Clearing House, Time, 
Inc., and The Reader's Digest Association, Inc., testified 
about their sweepstakes practices. All four companies defended 
their marketing practices as reasonable means to sell products. 
The companies testified that they use sweepstakes to entice 
consumers to open mailings, but all indicated that the vast 
majority of people who enter sweepstakes do not make purchases. 
They testified that the great majority of their customers order 
only occasionally and in quite small amounts. They indicated 
that many consumers like their products, and order them as 
gifts for friends and relatives.
    With respect to their mailings, the four companies 
testified that a ``no purchase necessary'' statement is 
included. The companies acknowledged that only a small minority 
of consumers are confused by the mailings. Some of the 
companies said that they have made changes in their mailings 
and have begun consumer education programs, including the use 
of explanatory letters to repetitive purchasers. The 
sweepstakes companies testified that they are working with 
industry trade associations to encourage the use of non-
promotional or ``no purchase necessary'' letters to ensure that 
their customers understand that it is not necessary to purchase 
a product in order to enter or win their sweepstakes. All four 
companies expressed support for reasonable federal legislation 
to respond to this growing problem.

C. Committee action

    S. 335 was introduced by Senator Collins on February 1, 
1999, and on that day the bill was referred to the Committee on 
Governmental Affairs. On March 8, 1999, the bill was referred 
to the Subcommittee on International Security, Proliferation 
and Federal Services, and on April 12, 1999, the Subcommittee 
favorably reported by polling letter the legislation for 
consideration by the full Committee.
    On May 20, 1999, Chairman Thompson held a business meeting 
at which S. 335 was considered. Senator Collins offered an 
amendment in the nature of a substitute, which was approved by 
voice vote.
    With no other amendments offered, Chairman Thompson moved 
adoption of S. 335, as amended. The Committee bill ordered the 
bill reported by unanimous voice vote.

                    VI. Section-by-Section Analysis


Section 1: Short title

    This section cites the title of the bill as the ``Deceptive 
Mail Prevention and Enforcement Act.''

Section 2: Restrictions on mailings using misleading references to the 
        United States government

    This section amends existing law, section 3001 (h) and (i) 
of title 39 of the U.S.C. and adds a new paragraph (j). This 
section adds to existing law preventing mailings from 
deceptively appearing to be connected to the federal 
government.
    Paragraph (1) amends subsection (h) of existing law to 
broaden the types of mailings which are subject to the 
requirements of this subsection. The bill adds new terms to the 
list of those that would trigger the existing disclaimer 
requirements for solicitations by a nongovernmental entity for 
the purchase of, or payment for, a product or service. In 
addition, paragraph (1)(C) imposes a new requirement which 
prohibits mailings covered under subsection (h) from containing 
a falserepresentation implying that federal government benefits 
or services will be affected by any purchase or nonpurchase.
    The new terms provide that any mailing which reasonably 
could be interpreted or construed as implying any endorsement, 
approval, or connection to the federal government through a 
reference to the Postmaster General, or name of a federal 
agency, department, commission, or program would be considered 
nonmailable matter unless it satisfied the requirements of 
section 3001(h) (1), (2), or (3). In addition, mailings 
containing any reference to the Postmaster General or a 
citation to a federal statute that misrepresents either the 
identity of the mailer or the protection afforded such matter 
by the federal government would be considered nonmailable 
matter unless it met the requirements of section 3001(h) (1), 
(2), or (3).
    The Committee made these changes to existing law because of 
concern that the terms used to establish a government 
connection were unduly limited. By expanding the coverage of 
this subsection to include use of a reference to the Postmaster 
General, or name of a federal agency, department, commission, 
or program the Committee intends to broaden the coverage of 
this subsection. The Committee believes that mailings should 
not use references to the Postmaster General or a Postmaster, 
the name of a federal agency, department, or commission, or the 
name of a federal program, in an effort to deceive consumers 
into believing the mailing or offer is connected to the federal 
government.
    In addition, the Committee is concerned that mailings which 
sell products or services may contain false representations 
implying that an individual's federal benefits or services will 
be impacted if that individual does not make a purchase or 
agree to pay for a service. While companies and organizations 
may use accurate information about federal benefits or 
services, this section will prohibit mailings that appear to be 
connected to the government from soliciting funds through false 
representations implying that a reduction in an individual's 
government benefits may result if a product or service is not 
purchased. This provision is intended to prohibit the 
personalized representation in a mailing that an individual's 
own benefits, or those of a family member, will be affected, as 
opposed to a false representation about federal benefits in 
general. Advocacy mailings that solicit funds and discuss the 
general status of federal benefits or programs are not covered 
by the bill.
    Paragraph (2) amends subsection (i) of existing law to 
broaden the types of mailings which are subject to the 
requirements of this subsection. In a manner identical to 
paragraph (1), this paragraph adds new terms to the list of 
those that would trigger the existing disclaimer requirements 
for solicitations by a nongovernmental entity for information 
or the contribution of funds or membership fees. In addition, 
paragraph (2)(C) imposes a new requirement which prohibits 
mailings covered under subsection (i) from containing a false 
representation implying that federal government benefits or 
services will be affected by any purchase or nonpurchase.
    As in paragraph (1), paragraph (2) adds new terms to 
existing law to restrict the use of terms implying any 
endorsement, approval, or connection to the federal government. 
The Committee made these changes to existing law for the same 
reasons it modified subsection (h).
    Paragraph (3) redesignates subsections (j) and (k) of 
existing law as subsections (m) and (o). The Committee believes 
that any regulations necessary to implement the provisions of 
this bill shall be provided with appropriate notice and 
opportunity for comment. Since provisions of this bill relate 
to the mailability of matter under the existing Chapter 30, 
which is titled Nonmailable Matter, the Committee notes the 
applicability of existing subsection 3001 (j), which is 
redesignated as (m), to any regulations issued to implement 
provisions of this Act.
    Paragraph (4) adds a new subsection (j) that declares as 
nonmailable any matter that constitutes a solicitation for the 
purchase of any product or service that is provided without 
cost by the federal government if it does not contain a clear 
and conspicuous statement that the product or service is 
provided without cost by the federal government. The Committee 
has reviewed mailings that offer to sell services the 
government provides for free. Such mailings may use a corporate 
name that implies a connection to the federal government, and 
may refer to certain federal laws or requirements. A mailing, 
for example, may offer to complete a form to obtain a Social 
Security number for an individual for a $15 fee. Under the 
provisions of the bill, such a mailing must contain a

statement indicating that such information is provided by the 
federal government and can be obtained without cost from the 
federal government.
    The Committee recognizes that there may be instances where 
a company makes use of government forms or services that are 
provided for free, but adds value to these forms or services by 
providing an additional service or additional expertise. For 
example, a tax preparer may obtain and provide to a client 
government tax form and, in doing so, also provides tax advice. 
In such instances where an individual is paying for the 
expertise of a company, and the mere acquisition of a 
government form is incidental to the service, this subsection 
shall not apply.
    Similarly, a company may offer to sell a service that the 
federal government provides for free on a limited or qualified 
basis. For example, the federal government may offer certain 
individuals limited tax preparation services. If such a service 
is not provided for free to the public in general, then it 
would be permissible under this provision to mail solicitations 
offering such a service without the required disclaimer.

Section 3: Restrictions on sweepstakes and deceptive mailings

    This section establishes a number of consumer protections 
by making sweepstakes, skill contests, and facsimile checks 
nonmailable under certain circumstances.
    Section 3001 of existing law is amended by adding a new 
subsection (k) which details the requirements for sweepstakes, 
skill contests, and facsimile checks. Subsection (k)(1)(A) 
defines a facsimile check as any matter designed to resemble a 
check or other negotiable instrument that is notnegotiable. 
Subsection (k)(1)(B) defines a skill contest as a puzzle, game, 
competition, or other contest in which (i) a prize is awarded or 
offered; (ii) the outcome depends predominately on the skill of the 
contestant; and (iii) a purchase, payment, or donation is required or 
implied to be required to enter the contest. In such mailings, the 
payment of consideration may be described in any of a number of 
methods, including but not limited to the purchase of a product, 
payment of a judging or other fee, or making of a contribution or 
donation.
    Subsection (k)(1)(C) defines a sweepstakes as a game of 
chance for which no consideration is required to enter. 
Subsection (k)(2) directs the USPS not to deliver, and dispose 
of, any mail declared nonmailable by paragraph (3). Subsection 
(k)(3) sets forth the conditions by which the USPS shall 
determine if sweepstakes, skill contests, and facsimile checks 
are nonmailable.
    Subsection (k)(3)(A)(i) limits the requirements on 
sweepstakes mailings to those mailings that include entry 
materials for a sweepstakes. The Committee notes that some 
mailings may contain information about a particular 
sweepstakes, but not offer an individual the opportunity to 
enter the sweepstakes or purchase a product. Such mailings 
might announce a future sweepstakes or respond to the inquiry 
of an individual about an ongoing sweepstakes. The Committee 
believes that, since such mailings do not offer the opportunity 
to make a purchase, there is no direct link between placing an 
order and entering a sweepstakes. While this subsection does 
not impose requirements on sweepstakes mailings that do not 
include entry materials, the Committee cautions those sending 
such sweepstakes mailings to avoid marketing practices designed 
to circumvent the consumer safeguards provided in this section.
    Subsection (k)(3)(A)(ii) contains a number of requirements 
for sweepstakes mailings. Subsections (k)(3)(A)(ii)(I) and (II) 
require all sweepstakes mailings to contain a statement in the 
mailing, in the rules, and on the order form that no purchase 
is necessary to enter the sweepstakes and that a purchase will 
not improve the chances of winning with that entry.
    The Committee recognizes the wide variety of formats used 
in sweepstakes mailings, and should a mailing not contain a 
separate solicitation, rules and entry or order form, these 
statements need only appear in the rules and on the order form. 
Should mailings contain the rules and order form on the same 
document or on separate sides of a document, the statements 
required by these subsections shall appear in both places.
    Subsection (k)(3)(A)(ii)(III) requires the terms and 
conditions of sweepstakes mailings, including the rules and 
entry procedures, to be written in language that is easy to 
find, read, and understand.
    Subsection (k)(3)(A)(ii)(IV) requires each sweepstakes 
mailing to state the name of the sponsor or mailer and their 
principal place of business or the address at which they may be 
contacted. The Committee is concerned that many sweepstakes 
mailings use the name of fictitious companies or identities 
intended to hide the true name of the company responsible for 
the sweepstakes mailing. The use of fictitious company names, 
combined with the use of Post Office Boxes or addresses of 
Commercial Mail Receiving Agencies (``CMRAs'') makes it 
difficult for consumers and enforcement agencies to identify 
the actual name and address of the party responsible for the 
mailing. The Committee expects those sending sweepstakes 
mailings to disclose on each mailing a name and address where 
the sponsor of the sweepstakes may be contacted.
    Subsection (k)(3)(A)(ii)(V)(aa) requires the rules in each 
sweepstakes mailing to list the estimated odds of winning each 
prize, and the odds should be stated in clear terms. For 
example, the odds of winning the grand prize of $1,000,000 are 
1 in 1,000,000. If the odds of winning a particular prize or 
all prizes are dependant on the number of entries received, the 
rules should state the estimated odds based on the number of 
expected entries.
    Subsection (k)(3)(A)(ii)(V)(bb) requires the rules in each 
sweepstakes mailing to clearly state the quantity, estimated 
retail value, and nature of each prize.
    Subsection (k)(3)(A)(ii)(V)(cc) requires the rules in each 
sweepstakes mailing to clearly state the schedule of any 
payments made over time. For example, if a $1,000,000 prize is 
to be awarded over 20 years, the rules should indicate that the 
$1,000,000 shall be paid in equal amounts of $50,000 per year 
for 20 years starting in 1999.
    Subsection (k)(3)(A)(ii)(VI) prohibits sweepstakes mailings 
from representing that individuals not purchasing products may 
be disqualified from receiving future sweepstakes mailings. The 
Committee is concerned that some sweepstakes mailings link 
ordering products with entering the contests, and may give the 
impression that not purchasing a product will prevent an 
individual from receiving future contest entries.
    Subsection (k)(3)(A)(ii)(VII) prohibits sweepstakes 
mailings from requiring that an entry be accompanied by an 
order or payment for a product previously ordered. This 
subsection outlaws ``prompt pay'' sweepstakes, which offer the 
opportunity to enter a sweepstakes only to those making or 
paying for a purchase. The Committee believes that such 
sweepstakes inappropriately link the purchase of a product with 
entering a sweepstakes.
    Subsection (k)(3)(A)(ii)(VIII) prohibits sweepstakes 
mailings from representing that an individual is a winner of a 
prize unless that individual has actually won a prize.
    Subsection (k)(3)(A)(ii)(IX) prohibits sweepstakes mailings 
from containing any representation that contradicts or is 
inconsistent with the sweepstakes rules or with any other 
disclosure required under this subsection. Sweepstakes mailings 
are prohibited from including any statement qualifying, 
limiting, or explaining the rules or disclosures in a manner 
inconsistent with the rules or disclosures.
    Subsection (k)(3)(A)(ii)(X) prohibits sweepstakes from 
representing that the purchase of a product will allow a 
sweepstakes entry to receive an advantage in the winner 
selection process. This subsection also prohibits sweepstakes 
from representing that the purchase of a product will allowan 
entry to be eligible for additional prizes in that sweepstakes, or 
provide an entry submitted in a future sweepstakes to have a better 
chance of winning. The Committee is concerned that some sweepstakes 
mailings suggest that the purchase of a product will improve the 
chances of winning. Sweepstakes mailings should not contain statements 
or references to special treatment for sweepstakes entries that include 
a purchase; nor should sweepstakes mailings offer additional prizes 
only to those making a purchase. Sweepstakes mailings should treat all 
sweepstakes entries in the same manner, whether or not they are 
accompanied by the purchase of a product.
    Subsection (k)(3)(B)(i) establishes requirements for 
mailings, including entry materials for skill contests or 
promotions that purport to be a skill contest. Subsection 
(k)(3)(B)(ii)(I) requires skill contests to state all terms and 
conditions, including the rules and entry procedures, in 
language that is easy to find, read, and understand. Subsection 
(k)(3)(B)(ii)(II) requires each skill contest mailing to state 
the name of the sponsor or mailer and their principal place of 
business or the address at which they may be contacted.
    Subsection (k)(3)(B)(ii)(III) lists the requirements for 
the rules of skill contests. These include: (aa) the number of 
rounds or levels of the contest and the cost to enter each 
round or level; (bb) if subsequent rounds or levels of the 
contest will be more difficult to solve; (cc) the maximum cost 
to enter all rounds or levels of the contest; (dd) the 
estimated number or percentage of entrants who may correctly 
solve the skill contest or the approximate number or percentage 
of entrants correctly solving the past three skill contests 
conducted by the sponsor; (ee) the identity or description of 
the qualifications of the judges if the contest is judged by 
other than the sponsor; (ff) the method used in judging; (gg) 
the date by which the winner or winners will be determined and 
the date or process by which prizes will be awarded; (hh) the 
quantity, estimated retail value, and nature of each prize; and 
(ii) the schedule of any payments made over time.
    Subsection (k)(3)(C) requires any facsimile check to 
contain a statement on the check itself that it is not a 
negotiable instrument and has no cash value. The Committee has 
reviewed a number of promotional mailings containing documents 
that appear to be checks. These documents seek to attract the 
attention of consumers, often by portraying a device that 
resembles a check. Such facsimile checks may include a bank 
name, the name of the recipient of the letter listed as the 
payee, a dollar amount, and an authorized signature. Facsimile 
checks may create consumer confusion, increasing the impression 
that an individual has actually won a large amount of money or 
is eligible to receive the payment listed on the facsimile 
check. The Committee believes that, including a clear and 
conspicuous disclaimer on the face of the facsimile check which 
states that the check is not a negotiable instrument and has no 
cash value, will decrease the consumers confusion over the 
nature of the facsimile check.
    Subsection (k)(4) provides an exemption from the 
nonmailability provisions of the bill for magazines, 
newspapers, and other periodicals containing sweepstakes, skill 
contests, and facsimile checks if the sweepstakes, skill 
contest, or facsimile check, contained therein (A) is not 
directed to a named individual, or (B) does not include an 
opportunity to make a payment or order a product or service.
    The Committee does not intend that magazines, newspapers, 
and other periodicals be judged as nonmailable simply because 
they contain an advertisement publicizing a sweepstakes or 
skill contest, or contain a facsimile check. An advertisement 
alone does not present the same potential for abuse or 
deception as direct mail promotions unless such advertisement 
contains personalization and offers the opportunity to make a 
purchase. Advertisements including those elements would make 
the publication similar to a promotional mailing soliciting a 
purchase from an individual and, thus, would be required to 
adhere to the provisions of subsection (k)(3)(A), (B), and (C).
    Subsection (k)(5) requires any statement, notice, or 
disclaimer required under paragraph (3) to be clearly and 
conspicuously displayed. This provision ensures that the 
statements required by the bill are readily apparent and 
understood by the average reader.
    Subsection (k)(6) directs the USPS, when enforcing 
paragraph (3), to consider all the materials included in the 
mailing and language on and visible through the envelope. The 
Committee believes that mailings should be judged based upon 
their overall impression and that all elements of a mailing 
should be reviewed to determine mailability. A mailing may be 
designed so that some portions comply with the requirements of 
paragraph (3), even though other aspects of the mailing are 
deceptive and misleading. In such cases, the USPS shall 
consider the disclosures in the context of all the elements of 
the advertisement and, if such disclosures are ineffective in 
correcting the overall deceptive representation of the mail 
piece, it should be declared nonmailable.
    Subsection (l)(1) requires any person who uses the mails 
for any mailings covered under subsections (h), (i), (j), or 
(k) to adopt reasonable practices and procedures to allow 
individuals to request that they no longer receive such 
mailings. An individual may make such a request personally, or 
through a conservator, guardian, or individual with power of 
attorney. Subsection (l)(1)(A) requires such a request to be in 
writing to the mailer of such matter. Subsection (l)(1)(B) 
allows a written request to be submitted to an attorney general 
(or any state government official who transmits the request to 
that attorney general) for submission to the mailer of such 
matter.
    The Committee has received numerous reports of individuals 
who encountered great difficulty removing their names or the 
names of their family members from mailing lists. The Committee 
believes that companies sending promotional mailings covered by 
the bill should implement a system to remove from their mailing 
lists the names of individuals who do not wish to receive such 
mailings. Companies may elect to establish their own toll-free 
telephone number to provide consumers with information about 
how they may be removed from mailing lists or where an 
appropriately authorized individual may write to request the 
removal of an individual. Companies may satisfy the 
requirements of this subsection by participating in the system 
established by section 8 of the bill, but shall also allow 
individuals identified in subsection (l)(1) to request the 
removal of individuals from their own mailing lists.
    Subsection (l)(2) requires any person who uses the mails 
for any mailings covered under subsections (h), (i), (j), or 
(k) to maintain or cause to be maintained a record of all 
requests made under paragraph 1. The records shall be 
maintained in a form to permit the suppression of anapplicable 
name at the applicable address for five years from the time a mailer 
receives the request to remove the name.

Section 4: Postal Service orders to prohibit deceptive mailings

    This section amends section 3005 of existing law to allow 
the USPS to impose orders prohibiting the delivery and receipt 
of mail by those found to be mailing nonmailable matter under 
subsections (j) and (k), as added by sections 2 and 3 of the 
bill. The bill simply adds subsections (j) and (k) to those 
already included in section 3005.
    Under existing law, such an order allows the Postmaster to 
return mail delivered to a company found in violation of the 
law, forbids the payment by a postmaster of any money order or 
postal note drawn to such a company, provides for return to the 
customer of the sum in such postal note, and requires the 
person in violation to cease and desist from engaging in the 
deceptive activities.

Section 5: Temporary restraining order

    This section authorizes a district court, upon a proper 
showing, to issue an order to detain incoming and outgoing mail 
which is the subject of a proceeding under sections 3005 or 
3006. A proper showing shall require proof of a likelihood of 
success on the merits. When mail is sent or received in more 
than one district, the order may be sought in a single district 
but will be applicable in all relevant districts.
    Section 3007 of existing law is amended by redesignating 
subsection (b) as (c) and striking existing subsection (a) and 
inserting new subsection (a) and (b). Subsection (a)(1) 
authorizes the USPS, in preparation for or during the pendency 
of proceedings under sections 3005 and 3006, to request from a 
district court in any district in which mail is sent or 
received, or in any district in which the defendant is located, 
a temporary restraining order and preliminary injunction. 
Proceedings must follow the requirements of Rule 65 of the 
Federal Rules of Civil Procedure.
    Subsection (a)(2)(A) establishes that, upon a proper 
showing, the court shall enter an order which shall remain in 
effect during the pendency of any statutory proceedings and any 
judicial review of such proceedings, or any action to enforce 
orders issued under the proceedings. The order shall direct the 
Postmaster, in any and all districts, to detain the defendant's 
incoming and outgoing mail that is the subject of proceedings 
under sections 3005 and 3006. Currently, the USPS must apply to 
each district in which a defendant receives mail in order to 
obtain an injunction detaining the incoming mail. The Committee 
found numerous instances where a promoter used several 
addresses in multiple districts under a variety of names, 
requiring the USPS to bring an action in each judicial district 
to detain all incoming mail. This provision promotes the 
efficient use of judicial and investigative resources.
    Subsection (a)(2)(B) states that a proper showing shall 
require proof of a likelihood of success on the merits of the 
proceedings under sections 3005 or 3006. The standard for 
issuing a temporary restraining order under existing section 
3007 is probable cause. This provision changes the standard to 
bring the standard in line with that of other statutory 
injunction provisions. A proper showing shall only require 
proof of a likelihood of success on the merits. Where Congress 
has created a statutory injunction remedy, it is the sense of 
the Committee that no finding of irreparable harm would be 
necessary if the government has shown a likelihood of success 
on the merits of the statutory based action.
    Subsection (a)(3) requires that mail detained pursuant to 
the statute be made available for examination by the defendant. 
The Committee expects that the USPS will give timely 
notification of the detention and of the mail's location and 
availability for examination. Any mail clearly shown not to be 
the subject of proceedings under sections 3005 and 3006 shall 
be delivered as addressed. The Committee expects the USPS to 
promptly deliver any of the defendant's mail that has no 
relationship to the detention. It shall carefully review such 
mail so as not to impose an undue burden or unfair restriction 
on the defendant's receipt of other mail.
    Subsection (a)(4) states that no finding of intent to make 
a false representation or to conduct a lottery is required to 
support the issuance of an order under this section.
    The new subsection (b) states that any judicial review of 
the proceedings under sections 3005 and 3006 shall be in the 
district in which the order under subsection (a) was issued. 
Thus, the decision made in the administrative forum would be 
appealed to the district court which granted the temporary 
restraining order.

Section 6: Civil penalties and costs

    During the hearings held in the 105th Congress, the USPIS 
testified that mailers routinely change their promotions in 
order to comply with an issued stop order but the new 
promotions often violate the law in a different way. To combat 
this practice, section 3012 is amended to give the USPS the 
authority to impose a fine without having to first obtain a 
stop order. Under current law, the USPS cannot impose a fine on 
the mailer until it has been issued a stop order and then 
subsequently violated that order.
    At the same time, this section increases the civil fine 
available for failure to comply with a stop order. The bill 
uses two different penalty structures for these violations.
    Subsection (a) of existing law is amended by increasing the 
civil penalty for violating or evading a stop order from 
$10,000 per day to a sliding scale based on the quantity of 
pieces mailed. The penalty scale is $50,000 for each mailing of 
less than 50,000 pieces; $100,000 for each mailing of 50,000 to 
100,000 pieces; and an additional $10,000 for each additional 
10,000 pieces above 100,000, not to exceed $2,000,000.
    Subsection (c), as amended, provides for a civil penalty 
without a stop order. This penalty also is calculated on a 
sliding scale based on the quantity of pieces mailed. The 
penalty scale is $25,000 for each mailing of less than 50,000 
pieces; $50,000 for each mailing of 50,000 to 100,000 pieces; 
and an additional $5,000 for each additional 10,000 pieces 
above 100,000, not to exceed $1,000,000.
    Under current law, the civil penalty imposed by subsection 
(a) takes into account certain factors such as the nature, 
circumstances, extent, and gravity of the violation. With 
respect to the violator, current law also considers the 
defendant's ability to pay the penalty, the effect of the 
penalty on the ability of the violator to conduct lawful 
business, any history of prior violations of such section, the 
degree of culpability and other such matters as justice may 
require. The civil penalty imposed in subsection (c) also takes 
these factors into account.
    Subsection (d), as amended, provides for a separate penalty 
if a company fails to comply with the requirement to adopt 
reasonable practices and procedures to prevent unwanted 
mailings to consumers who have requested cessation of such 
mailings. Violations of this provision can result in a civil 
penalty of $10,000 for each improper mailing.
    Subsection (e) is amended to give the USPS the authority to 
enforce the collection of new civil penalties. Current law 
provides that the USPS shall pay to the General Fund of the 
United States Treasury any civil penalties it recovers. 
However, the Committee believes that the USPS, which is charged 
with enforcing the provisions of this bill, is entitled to 
recover its administrative and judicial expenses incurred while 
enforcing this Act. Thus, subsection (e) provides that the USPS 
shall recover its administrative and judicial costs up to 
$500,000 each year, payable into the Postal Service Fund. These 
costs are to be paid from the civil penalties collected by the 
USPS, with the balance of the penalties being paid to the 
General Fund of the United States Treasury.

Section 7: Additional authority for the postal inspection service

    Section 7 adds a new section 3016 to authorize the use of 
subpoenas in investigations conducted under Chapter 30 of title 
39.
    Subsection (a) of section 3016 authorizes the use of 
subpoenas in any investigation conducted under this chapter. 
The subpoena authority allows for the production of any 
records, including books, papers, documents, and other tangible 
things which constitute or contain evidence that the Postmaster 
General finds relevant or material to the investigation. The 
Committee recognizes that subpoena authority will provide an 
additional investigative tool necessary in investigations under 
this chapter. The subpoena authority should assist the USPS in 
establishing violations of Chapter 30 of title 39 and in the 
assessment of penalties.
    Subsection (b) of section 3016 designates the method of 
service of process within the United States and abroad. The 
section also differentiates the service of process upon natural 
persons versus businesses along with the proof of such service.
    Subsection (c) of section 3016 prescribes the procedure for 
the Postmaster General to seek enforcement of a subpoena. 
Although the subpoenas are not self enforcing, they can be 
enforced by a federal district court pursuant to these 
regulations.
    Subsection (b) of the bill authorizes the USPS to 
promulgate regulations setting forth the procedures it will use 
to implement section 3016. These regulations are to be 
promulgated no later than 120 days after the enactment of this 
section.

Section 8: Requirements of promoters of skill contests or sweepstakes 
        mailings

    Section 8 creates a new section 3017 entitled ``Nonmailable 
skill contests or sweepstakes matter; notification to prohibit 
mailings.''
    In general, section 8 creates a new, uniform notification 
system by which a person or their legal guardian, such as a 
relative with power of attorney, can have their name and 
address removed from all sweepstakes mailings lists at one 
time. Upon appropriate notification, promoters have 45 business 
days to remove the names and addresses from their mailing 
lists. Any subsequent mailings sent after the 45 day period to 
people who have requested removal from mailing lists are 
considered nonmailable matter, and the promoter may be held 
liable for civil penalties for sending such nonmailable matter.
    Subsection (a)(1) defines who must comply with section 8. 
Promoter is defined as any person who originates sweepstakes 
and/or games of chance mailings. The Committee does not intend 
to cover under this section the person who merely prints or 
mails matter for a skill contest or sweepstakes unless that 
printer or mailer also originates or materially assists with 
creating the sweepstakes or contest. Only the originator of the 
sweepstakes or contest that is the subject of the mailing must 
comply with section 8 to ensure that the person responsible for 
the creation and promotion of the sweepstakes is covered rather 
than the middleman who simply prints or sends the mailing.
    Promoter is further defined under this subsection as a 
person who originates and mails more than 500,000 pieces of 
mail per year. Therefore, promoters who mail 500,000 or fewer 
pieces of mail need not comply with section 8. The Committee 
did not want to require the smallest promoters to participate 
in the uniform notification system. These smaller entities 
rarely send repeated and/or personally targeted mailings to 
individuals. However, the Committee believes that these 
promoters should still engage in reasonable practices that will 
effectively cease mailings to an individual who specifically 
requests that the mailings stop. As such, these small promoters 
must still adopt the reasonable practices and procedures 
required by subsection (l) of section 3.
    A second exemption from compliance with Section 8 is 
available for promoters who send mailings that do not include 
an opportunity to make a payment or buy a product or service. 
Because these mailings do not encourage an individual to make a 
purchase in connection with the mailing, these types of 
mailings are of much less concern to the Committee.
    Subsection (a)(2) defines a removal request as a written 
request stating that an individual elects to have their name 
and address removed from sweepstakes mailing lists. The 
Committee intends that submission of this removal request will 
indicate an individual's choice to be removed from all 
sweepstakes and skill contest mailing lists. This subsection, 
however, does not require specific language to state such an 
intent.
    Subsections (a)(3) and (a)(4) define skill contests and 
sweepstakes, respectively. These definitions are identical to 
the definitions of these terms previously used in section 3 of 
the bill.
    Subsection (b) describes nonmailable material as any matter 
that (i) is a skill contest or sweepstakes; (ii) is addressed 
to an individual who made an election to be excluded from 
mailing lists by using the uniform notification system; and 
(iii) does not comply with the requirements of subsection 
(c)(1).
    Promoters of skill contests or sweepstakes must provide in 
each mailing a clear and conspicuous statement that includes 
the toll-free number and address of the notification system as 
required by subsection (c)(1)(A). Under subsection (c)(1)(B), 
promoters must also state how a person can use the system to 
prohibit promoters from sending any further mailings. The 
Committee believes that these requirements are essential to 
inform consumers of the option to halt all further sweepstakes 
and skill contest mailings. Placing the toll-free number 
directly on all mailings with a description of the specific 
steps a person must take to stop all mailings ensures that the 
removal process is easily understandable.
    Subsection (c)(2) requires promoters covered by section 8 
to participate in the establishment and maintenance of the 
notification system. Obviously, there will be promoters whose 
businesses are created after the system has been established. 
These promoters will be unable to comply with the establishment 
requirement and the Committee does not expect them to do so. 
However, section 8 requires that they contribute to the 
maintenance of the system.
    The Committee deliberately did not specify how the system 
is to be created and maintained, as promoters are in the best 
position to make these determinations. The Committee defers to 
their judgment about how the system should be constructed and 
maintained, and has confidence in the industry's ability to do 
so.
    Subsection (d) delineates the information that the 
notification system must provide to an individual who contacts 
the system in order to prohibit future mailings. Subsection 
(d)(1) states that at the time of the phone call the system 
must inform the individual that they must write to a specified 
address in order to have their name and address removed from 
all sweepstakes and games of skill mailing lists. Subsection 
(d)(2) requires that the system inform the individual that 
their request will take effect 45 business days after the 
system receives the written removal request. This message 
should be concise and easily understood, and not left at the 
end of a very long message filled with other information. 
Indeed, only factual information should be given to the 
individual: a short, simple statement on how to remove a 
person's name and address; the address of where to send the 
written request; and when the request will take effect.
    Subsection (e)(1) specifies that an individual must mail a 
removal request to the notification system in order for their 
name and address to be excluded from future mailings. Merely 
calling a toll-free number is not enough to have one's name and 
address excluded. The individual must take the step of writing 
to the notification system. Although it would be preferable to 
have a system where the toll-free call would be sufficient by 
itself to effectuate removal of one's name and address, such a 
system would be difficult to maintain, since it would be very 
difficult to verify the identity of the person calling the 
number. The mailing requirement will help alleviate this 
concern and would also create a paper trail for use as evidence 
that a removal request had been made.
    Subsection (e)(2) states that promoters must remove an 
individual's name and address from skill contests and 
sweepstakes mailings lists no later than 45 business days after 
the notification system receives an individual's removal 
request. Promoters shall not send any sweepstakes or skills 
contest mailings to the individual after the 45 business day 
period has elapsed.
    The Committee believes that 45 business days is a 
sufficient period of time to allow promoters to check the 
system and remove individuals from their mailing lists. The 
goal is to keep the amount of time promoters have to remove 
names to a reasonable minimum, so that months and months will 
not elapse while numerous additional mailings flood mailboxes.
    Subsection (e)(3)(A) establishes the foundation of the 
single, uniform notification system. This section states that 
an individual's election to exclude his or her name and address 
from skill contests and sweepstakes mailing lists shall be 
effective with respect to every promoter.
    Subsection (e)(3)(B) states that, in order for an 
individual to change their election to be removed from all 
sweepstakes and skills contest mailing lists, the individual 
must advise the notification system in writing that they wish 
to receive such mailings again. During the time that an 
individual has been removed from all mailing lists, promoters 
should not flood such individuals with mailings or phone calls 
urging them to change their election.
    Subsection (f) states that promoters will not be subject to 
civil liability if they exclude an individual's name and 
address from their mailing lists, so long as (i) a removal 
request is received by the notification system; (ii) the 
promoter or person maintaining the system has a good faith 
belief that the request is from the individual whose name and 
address is to be excluded or is from another duly authorized 
person. In other words, promoters should not be held liable for 
removing someone from their mailing lists if they have a good 
faith belief that the person wished to be dropped from the 
lists, even though it is subsequently discovered that the 
person making the request was not actually the individual or 
the person with the legal authority to request removal.
    A major concern of the Committee is misuse of the removal 
list. The list could be interpreted as a roll call of those 
individuals who have been the most victimized by misleading 
sweepstakesmailings and who are particularly vulnerable to 
future deception. The Committee believes that protection of these names 
is of the utmost importance. Therefore, under subsection (g)(1)(A), no 
person may provide any information, including the sale or rental of 
names or addresses contained in these lists, for commercial purposes. 
Subsection (g)(1)(B) defines ``list'' as any roster of names and 
addresses or other related information used, maintained, or created by 
the uniform notification system. These subsections do not preclude the 
system from sharing information with promoters who are using that 
information to remove an individual from their mailing lists.
    Penalties for violation of subsection (g)(1) are 
significant. Subsection (g)(2) states that any person who 
violates subsection (g)(1) shall be assessed a civil penalty by 
the USPS of up to $2,000,000 per violation. Strong civil 
penalties are necessary in order to deter non-compliance with 
subsection (g)(1).
    Under subsection (h)(1)(A), any promoter who recklessly 
mails sweepstakes or skills contest mailings (beyond the 45 day 
period, which begins on the day the notification system 
receives the written request) to an individual who has sent in 
a proper removal request is liable to the United States for 
$10,000 per mailing. This strong penalty is also necessary. It 
will deter promoters from violating the requirement that they 
remove an individual from their mailing lists and will 
encourage promoters to regularly check the notification system 
for the addition of new individuals.
    Failure to substantially comply with the requirement that 
promoters establish and maintain the notification system will 
also subject these promoters to civil penalties under 
subsection (h)(1)(B). The Committee did not indicate specific 
amounts and believes the USPS can determine this on a case by-
case basis.
    Subsection (h)(2) states that the USPS shall assess civil 
penalties under section 8. Subsection (c) states that section 8 
will take effect one year after the date of enactment of the 
Act.

Section 9: State laws not preempted

    Subsection (a) states that nothing in this bill shall be 
construed to preempt any provision of state or local law that 
imposes more restrictive requirements, regulations, damages, 
costs or penalties. The Committee believes that states and 
localities should be able to impose and enforce laws that also 
seek to prevent deceptive mailings. The Committee notes that 
other agencies may take actions against deceptive mailings 
under other federal laws, and does not intend that the 
provisions of this bill restrict or preempt any federal law or 
limit any civil penalties that may be imposed under other 
federal laws.
    Subsection (b) states that nothing contained in this 
section shall be construed to prohibit an authorized state 
official from proceeding in state court on the basis of an 
alleged violation of any civil or criminal statute of such 
state.

Section 10: Effective date

    The provisions of the bill will take effect 120 days after 
the date of enactment.

                    VII. Regulatory Impact Statement

    Enactment of S. 335 should result in no significant 
regulatory impact. S. 335 contains no intergovernmental 
mandates, as defined by the Unfunded Mandates Reform Act 
(``UMRA''), and would impose no costs on state, local, or 
tribal governments. Although S. 335 contains several private-
sector mandates, the Congressional Budget Office (``CBO'') has 
determined that the cost of these mandates to the private 
sector would be well below the threshold specified in UMRA.

            VIII. Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 15, 1999.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 335, the Deceptive 
Mail Prevention and Enforcement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark 
Grabowicz (for federal costs) and John Harris (for the private-
sector impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 335--Deceptive Mail Prevention and Enforcement Act

    Summary: S. 335 would establish a number of new federal 
crimes and restrictions relating to deceptive mailings and 
sweepstakes and would increase the penalties for such offenses. 
CBO estimates that implementing this legislation would not 
result in any significant impact on the federal budget. Because 
enactment of S. 335 could affect direct spending and receipts, 
pay-a-you-go procedures would apply to the bill. However, CBO 
estimates that any impact on direct spending and receipts would 
not be significant.
    S. 335 contains several private-sector mandates as defined 
in the Unfunded Mandates Reform Act (UMRA), but the costs 
imposed by these mandates would not exceed the statutory 
threshold established in UMRA ($100 million in 1996, adjusted 
annually for inflation). This legislation contains no 
intergovernmental mandates as defined in UMRA and would impose 
no costs on state, local, or tribal governments.
    Estimated cost to the Federal government: Because S. 335 
would establish new federal crimes relating to deceptive 
mailings and sweepstakes, the federal government would be able 
to pursue cases that it otherwise would not be able to 
prosecute. CBO expects that any increase in federal costs for 
law enforcement by the Postal Service or court proceedings 
would not be significant, however, because of the small number 
of additional cases likely to be involved. Any additional costs 
to the Postal Service would be classified as off-budget, while 
any increased costs to the federal judiciary would be subject 
to appropriation.
    Because those prosecuted and convicted under S. 335 could 
be subject to civil penalties, the federal government might 
collect additional fines if the bill is enacted. Collections of 
such fines are recorded in the budget as governmental receipts 
(revenues). CBO expects that any additional receipts would be 
less than $500,000 annually.
    This legislation also would provide that any civil 
penalties collected from enforcement of laws relating to 
``nonmailable matter'' (mainly deceptive mailings) would be 
paid to the Postal Service to cover administrative and related 
costs, up to $500,000 a year. Any such payments would be direct 
spending, but CBO estimates that these amounts would be less 
than $500,000 a year because we do not expect collections of 
fines to exceed that amount.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. Enacting 
S. 335 could affect both direct spending and receipts, but CBO 
estimates that any such effects would be less than $500,000 a 
year.
    Estimated impact on state, local, and tribal governments: 
S. 335 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments.
    Estimated impact on the private sector: S. 335 would create 
several new private-sector mandates. Firms that use the postal 
system to distribute unsolicited advertisements would be 
required to remove references to the Postmaster General from 
those advertisements. Firms that operate sweepstakes or 
contests through the mail would face multiple requirements. 
They would be required to include a number of prominent 
disclosures in their mailings and to honor requests from 
individuals to be omitted from future mailings. Based on 
information from the Direct Marketing Association, CBO 
estimates that the total costs of these mandates to the private 
sector would be well below the threshold specified in UMRA.
    In order to keep firms from implying that their products or 
services are endorsed or approved by the federal government, 
federal law already prohibits most use of federal symbols or 
the names and titles of federal agencies and officers in mailed 
advertisements. S. 335 would specifically extend that 
prohibition to the name and title of the Postmaster General. In 
order to comply with the mandate, firms would need to remove 
references to the Postmaster General from their existing 
advertisements. Because printing and postage constitute the 
bulk of firms' expenses in producing and distributing 
advertisements through the mail and the newprohibition would do 
little to affect either, CBO expects that this mandate would not have a 
significant impact on firms' costs of doing business.
    The disclosures that sweepstakes and contest operators 
would be required to make include: an explanation that purchase 
of the firm's products affects neither the odds of winning nor 
inclusion in future mailings; a clearly-written, 
understandable, and easily found statement of rules, 
conditions, fees, and entry procedures; and a description for 
each prize, giving the quantity, the retail value, and a 
numerical statement of the odds of winning. Firms would also be 
required to put disclaimers on facsimile checks and to refrain 
from representing a person as a winner unless that person has 
won a prize. The largest sweepstakes firms already make the 
vast majority of these disclosures. To comply with the mandate, 
some firms might have to do no more than add a single 
disclosure, such as a numerical statement of odds. Other firms 
might have to do considerably more. The costs of redrafting and 
redesigning mailings would thus vary from firm to firm, but 
would not, in general, be substantial. CBO anticipates that 
sweepstakes and contest operators would endeavor to keep the 
number of pages of their mailings constant in order to avoid 
increases in printing and postage costs. Consequently, although 
variation within the industry makes a precise estimate 
difficult, the cost to firms of adding additional disclosures 
would probably be small.
    S. 335 would require sweepstakes operators to honor direct 
written requests from individuals to be excluded from future 
mailings. The firms would be required to store and to honor the 
requests for five years. Many firms already honor such 
requests, and, because there is little reason to believe that 
the number of requests firms receive would increase 
significantly in the future, it is unlikely that firms' costs 
would increase significantly because of this mandate. Seventy 
to eighty percent of all recipients do not respond to mailings 
from major sweepstakes operators, but only a small number of 
people request to be excluded from future mailings. The 
majority of individuals just discard unwanted mailings.
    Sweepstakes and contest operators that send more than 
500,000 mailings per year would also be required to participate 
in the creation of a national notification system that would 
allow individuals to make a single request that their names be 
removed from the mailing lists of all sweepstakes and contest 
operators. The notification system would have to forward 
written requests from individuals to participating firms within 
45 business days. Such firms would be required to include 
information about the notification system in their mailings. 
Most sweepstakes firms already participate in the Direct 
Marketing Association's Mail Preference Service, which is 
similar to the notification system required by S. 335. The Mail 
Preference Service, however, deals with all forms of direct 
mail, including catalogs, coupons, and other advertisements. In 
order to comply with the mandate, sweepstakes and contest 
operators would need to establish a system limited to 
sweepstakes and contest mailings. The Direct Marketing 
Association budgets approximately $500,000 per year to operate 
the Mail Preference Service. CBO expects that it would cost 
sweepstakes and contest operators a similar amount each year to 
operate the notification system. Startup costs would increase 
the amount required in the first year.
    Estimate prepared by: Federal costs: Mark Grabowicz; impact 
on the private sector: John Harris.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                      IX. Executive Communications

                              United States Postal Service,
                                     Washington, DC, June 11, 1999.
Hon. Fred Thompson,
Chairman, Senate Committee on Governmental Affairs,
Washington, DC.
    Dear Chairman Thompson: I would like to express my 
appreciation for the work you and the members and staff of the 
Committee on Governmental Affairs have done in the development 
of meaningful legislation to address problems posed by 
deceptive mailings. We are following the issue very closely and 
feel the legislation as approved by the committee will enhance 
consumer protection and at the same time be fair to businesses 
that rely on the use of the mail to promote their products and 
services.
    We have reviewed all current legislation regarding 
deceptive mailings and consider S. 335, the Deceptive Mail 
Prevention and Enforcement Act, to be the most comprehensive. 
The bill includes several provisions that will enhance the 
ability of the Postal Inspection Service to protect the 
American public from deceptive mailings. These include civil 
penalties, administrative subpoena authority, multi-district 
temporary restraining orders, clarification of government look-
alike provisions and clear standards for mailings containing 
sweepstakes, games of skill, and facsimile checks.
    We are proud of our accomplishments in protecting the 
consumer and welcome any assistance Congress can provide. 
Effective statutes will not only help us protect the consumer, 
but will also maintain the American public's confidence in the 
mail that many thousands of legitimate businesses rely on to 
market their products and services.
    I look forward to working with you to help maintain the 
mail as an efficient, reliable, and secure service for the 
public.
            Sincerely,
                                      William J. Henderson,
                                           Postmaster General, CEO.

                 X. Additional Views of Senator Edwards

    In my office, I have a large box brimming with the 
sweepstakes mailings that a 92-year-old woman received during 
the course of the past several months. This woman's daughter 
sent it to me to help illustrate the anxiety and distress 
caused to her family by sweepstakes mailings. It seems her 
mother has purchased many items, believing that they will 
increase her chances of winning a major prize.
    This distraught woman watched witnesses tell similar 
stories at the hearings held by the Permanent Subcommittee on 
Investigations. When the daughter sent me the box of mailings, 
she also wrote me a letter, saying ``Please, please, what more 
can you do to put an end to all of this injustice? It is a slap 
in my mother's face. An affront to her dignity. We, her own 
family, are helpless to keep her from continuing.''
    I write separately to discuss a provision of this 
legislation that I helped author. I believe that it is an 
important provision that could help prevent many of the abuses 
that we learned about during the course of our hearings on this 
issue.
    As summarized by the Committee's report, Section 8 of S. 
335 requires that companies mailing games of chance or 
sweepstakes solicitations must participate in a single 
notification system that individuals can contact to have their 
name and address removed from all sweepstakes mailing lists. 
Currently, there is only one way to stop all of these 
mailings--each and every sweepstakes company must be contacted 
individually. Finding the correct address is extremely 
difficult and time consuming. And the stories I have heard from 
hearing panelists indicate that contacting the companies 
directly is ineffective due to the fact that the requestor 
often gets passed from one representative to the next. It is 
essential that we provide a way for people who want to prevent 
these mailings to do so simply and effectively.
    I personally have had some experiences with the current 
system. It all started when my office got in touch with Pamela 
Bagwell, the daughter-in-law of an elderly man who had spent 
thousands of dollars buying things from sweepstakes companies. 
One day, Pamela Bagwell went to visit her father-in-law, Bobby. 
When she arrived at Bobby's home, Pamela found stacks and 
stacks of solicitations from sweepstakes companies. She asked 
Bobby about them and found out that he had made numerous 
purchases thinking that buying products would increase his 
chances of winning a prize. He was so convinced he would win a 
prize that he even invited his neighbors to his house on the 
day that the Publishers Clearing House prize patrol was 
supposed to deliver the grand prize check.
    Pamela estimates that Bobby spent more than $20,000 in 10 
months on products he thought would help his chance of winning. 
Now as I mentioned before, Bobby is an elderly man. But this is 
not the worst part of this story. Bobby also has dementia. 
Pamela, who has power of attorney for Bobby, contacted 
Publishers Clearing House at least 6 times in October last year 
to demand that the company stop sending Bobby solicitations. 
She even went so far as to send the company a doctor's 
certification that Bobby has dementia. And yet, the sweepstakes 
mailings continued to flood Bobby's mailbox. Pamela said that 
sometimes Bobby was receiving up to twenty per day, from many 
different companies.
    I wrote to several of these companies, including American 
Family Publishers, Reader's Digest, Time, and Publishers 
Clearing House. I asked them to remove Mr. Bagwell's name from 
their lists. To their credit, all of the companies quickly 
contacted my office in writing to indicate they were taking 
steps to take the name off their mailing lists and to settle 
his many accounts. I appreciate this response. But I still 
think it is a sad day when people need a U.S. Senator to 
intervene in order to get this type of response. People should 
be able to quickly and effectively stop sweepstakes mailings 
without the aid of their Senator. Unfortunately, Pamela and 
Bobby Bagwell's situation is not unique. Since the hearings, my 
office has received numerous calls and letters, not just from 
North Carolinians, but from people all over the country who 
tell similar, alarming stories about their experiences with 
sweepstakes companies.
    More recently, I have written letters on behalf of another 
constituent. His daughter came to speak to me in Charlotte, 
N.C. After we met, she contacted these companies several times 
to sort out the numerous accounts her elderly father had 
opened, to no avail. So again, I wrote a letter, and again, all 
of the companies (except American Family Publishers) notified 
me to say they would honor my request to remove my 
constituent's information from their mailing lists and to 
settle his accounts.
    I believe that people should have the right to easily put a 
stop to these mailings without the assistance of their Senator. 
And sweepstakes promoters should be legally required to honor 
such a request.
    My colleagues on the Permanent Subcommittee on 
Investigations, and I suspect other Congressional offices, have 
heard similar disturbing stories and had similar frustrating 
experiences. I appreciate the efforts of the companies to 
develop new standards to educate people about sweepstakes 
promotions. But people continue to be deceived by the mailings. 
Some of these people have spent hundreds or thousands of 
dollars, and since many of them are elderly, they are spending 
the money they need to live on. Strong legislative efforts, 
such as S. 335, the Deceptive Mail Prevention and Enforcement 
Act, are necessary to prevent these situations.
    I believe that the legislation should include a system that 
makes it easy for consumers to remove their names from 
sweepstakes mailing lists. When the only way a consumer can get 
their name off the lists and settle their accounts is to have 
their Senator write a letter on their behalf, it is time for us 
to help devise an efficient system for preventing harm. I 
believe that the single notification system created by this 
legislation will do that.
    Michael Pashby, Executive Vice President of Consumer 
Marketing for Magazine Publishers of America, told the National 
Asso

ciation of Attorneys General that ``Allowing consumers to make 
a choice is how our industry operates.'' I agree that consumers 
should be able to make a choice and that one of those choices 
should be to stop receiving solicitations.
    The use of sweepstakes solicitations is considered a 
legitimate marketing tool. However, we have witnessed the 
abuses that have been occurring as a result of this marketing 
technique. Senators Collins and Levin should be commended for 
their efforts to curb harassing, deceptive mailings. By voting 
unanimously to send the Deceptive Mail Prevention and 
Enforcement Act on to the full Senate for consideration, I 
believe my colleagues on the Governmental Affairs Committee 
have demonstrated their commitment to this goal. And I also 
believe that the creation of a single notification system will 
empower our constituents to add to these efforts.

                      XI. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
material is printed in italic, existing law in which no change 
is proposed is shown in roman):

SECTION 3001. NONMAILABLE MATTER.

    (h) Matter otherwise legally acceptable in the mails which 
constitutes a solicitation by a nongovernmental entity for the 
purchase of or payment for a product or service and [contains a 
seal, insignia, trade or brand name, or any other term or 
symbol that reasonably could be interpreted or construed as 
implying any Federal Government connection, approval or 
endorsement] which reasonably could be interpreted or construed 
as implying any Federal Government connection, approval, or 
endorsement through the use of a seal, insignia, reference to 
the Postmaster General, citation to a Federal statute, name of 
a Federal agency, department, commission, or program, trade or 
brand name, or any other term or symbol; or contains any 
reference to the Postmaster General or a citation to a Federal 
statute that misrepresents either the identity of the mailer or 
the protection or status afforded such matter by the Federal 
Government is nonmailable matter and shall not be carried or 
delivered by mail, and shall be disposed of as the Postal 
Service directs, unless--
          (1) such nongovernmental entity has such expressed 
        connection, approval or endorsement;
          (2)(A) such matter bears on its face, in conspicuous 
        and legible type in contrast by typography, layout, or 
        color with other printing on its face, in accordance 
        with regulations which the Postal Service shall 
        prescribe, the following notice: ``THIS PRODUCT OR 
        SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY THE 
        FEDERAL GOVERNMENT, AND THIS OFFER IS NOT BEING MADE BY 
        AN AGENCY OF THE FEDERAL GOVERNMENT.'', or a notice to 
        the same effect in words which the Postal Service may 
        prescribe; [and]
          (B) the envelope or outside cover or wrapper in which 
        such matter is mailed bears on its face in capital 
        letters and in conspicuous and legible type, in 
        accordance with regulations which the Postal Service 
        shall prescribe, the following notice: ``THIS IS NOT A 
        GOVERNMENT DOCUMENT.'', or a notice to the same effect 
        in words which the Postal Service may prescribe; [or] 
        and
          (C) does not contain a false representation implying 
        that Federal Government benefits or services will be 
        affected by any purchase or nonpurchase; or
          (3) such matter is contained in a publication for 
        which the addressee has paid or promised to pay a 
        consideration or which he has otherwise indicated he 
        desires to receive, except that this paragraph shall 
        not apply if the solicitation is on behalf of the 
        publisher of the publication.
    (i) Matter otherwise legally acceptable in the mails which 
constitutes a solicitation by a nongovernmental entity for 
information or the contribution of funds or membership fees and 
[contains a seal, insignia, trade or brand name, or any other 
term or symbol that reasonably could be interpreted or 
construed as implying any Federal Government connection, 
approval or endorsement] which reasonably could be interpreted 
or construed as implying any Federal Government connection, 
approval, or endorsement through the use of a seal, insignia, 
reference to the Postmaster General, citation to a Federal 
statute, name of a Federal agency, department, commission, or 
program, trade or brand name, or any other term or symbol; or 
contains any reference to the Postmaster General or a citation 
to a Federal statute that misrepresents either the identity of 
the mailer or the protection or status afforded such matter by 
the Federal Government is nonmailable matter and shall not be 
carried or delivered by mail, and shall be disposed of as the 
Postal Service directs, unless--
          (1) such nongovernmental entity has such expressed 
        connection, approval or endorsement;
          (2)(A) such matter bears on its face, in conspicuous 
        and legible type in contrast by typography, layout, or 
        color with other printing on its face, in accordance 
        with regulations which the Postal Service shall 
        prescribe, the following notice: ``THIS ORGANIZATION 
        HAS NOT BEEN APPROVED OR ENDORSED BY THE FEDERAL 
        GOVERNMENT, AND THIS OFFER IS NOT BEING MADE BY AN 
        AGENCY OF THE FEDERAL GOVERNMENT.'', or a notice to the 
        same effect in words which the Postal Service may 
        prescribe; [and]
          (B) the envelope or outside cover or wrapper in which 
        such matter is mailed bears on its face in capital 
        letters and in conspicuous and legible type, in 
        accordance with regulations which the Postal Service 
        shall prescribe, the following notice: ``THIS IS NOT A 
        GOVERNMENT DOCUMENT.'', or a notice to the same effect 
        in words which the Postal Service may prescribe; [or] 
        and
          (C) does not contain a false representation implying 
        that Federal Government benefits or services will be 
        affected by any purchase or nonpurchase; or
          (3) such matter is contained in a publication for 
        which the addressee has paid or promised to pay a 
        consideration or which he has otherwise indicated he 
        desires to receive, except that this paragraph shall 
        not apply if the solicitation is on behalf of the 
        publisher of the publication.
    (j)(1) Matter otherwise legally acceptable in the mails 
described under paragraph (2)--
          (A) is nonmailable matter;
          (B) shall not be carried or delivered by mail; and
          (C) shall be disposed of as the Postal Service 
        directs.
      (2) Matter that is nonmailable matter referred to under 
paragraph (1) is any matter that--
          (A) constitutes a solicitation for the purchase of 
        any product or service that--
                  (i) is provided by the Federal Government; 
                and
                  (ii) may be obtained without cost from the 
                Federal Government; and
          (B) does not contain a clear and conspicuous 
        statement giving notice of the information under 
        subparagraph (A) (i) and (ii).
    (k)(1) In this subsection, the term--
          (A) ``facsimile check'' means any matter designed to 
        resemble a check or other negotiable instrument that is 
        not negotiable;
          (B) ``skill contest'' means a puzzle, game, 
        competition, or other contest in which--
                  (i) a prize is awarded or offered;
                  (ii) the outcome depends predominately on the 
                skill of the contestant; and
                  (iii) a purchase, payment, or donation is 
                required or implied to be required to enter the 
                contest; and
          (C) ``sweepstakes'' means a game of chance for which 
        no consideration is required to enter.
    (2) Matter otherwise legally acceptable in the mails that 
is nonmailable matter described under paragraph (3) shall not 
be carried or delivered by mail and may be disposed of as the 
Postal Service directs.
    (3) Matter that is nonmailable matter referred to under 
paragraph (2) is any matter (except matter as provided under 
paragraph (4)) that--
          (A)(i) includes entry materials for a sweepstakes or 
        a promotion that purports to be a sweepstakes; and
          (ii)(I) does not contain a statement that discloses 
        in the mailing, in the rules, and on the order or entry 
        form, that no purchase is necessary to enter such 
        sweepstakes;
          (II) does not contain a statement that discloses in 
        the mailing, in the rules, and on the order or entry 
        form, that a purchase will not improve an individual's 
        chances of winning with an entry from such materials;
          (III) does not state all terms and conditions of the 
        sweepstakes promotion, including the rules and entry 
        procedures for the sweepstakes, in language that is 
        easy to find, read, and understand;
          (IV) does not disclose the sponsor or mailer of such 
        matter and the principal place of business or an 
        address at which the sponsor or mailer may be 
        contacted;
          (V) does not contain sweepstakes rules that clearly 
        state--
                  (aa) the estimated odds of winning each 
                prize;
                  (bb) the quantity, estimated retail value, 
                and nature of each prize; and
                  (cc) the schedule of any payments made over 
                time;
          (VI) represents that individuals not purchasing 
        products may be disqualified from receiving future 
        sweepstakes mailings;
          (VII) requires that a sweepstakes entry be 
        accompanied by an order or payment for a product 
        previously ordered;
          (VIII) represents that an individual is a winner of a 
        prize unless that individual has won a prize;
          (IX) contains a representation that contradicts, or 
        is inconsistent with sweepstakes rules or any other 
        disclosure required to be made under this subsection, 
        including any statement qualifying, limiting, or 
        explaining the rules or disclosures in a manner 
        inconsistent with such rules or disclosures; or
          (X) represents that the purchase of a product will 
        allow a sweepstakes entry to receive an advantage in 
        the winner selection process, to be eligible for 
        additional prizes in that sweepstakes, or for an entry 
        submitted in a future sweepstakes to have a better 
        chance of winning;
          (B)(i) includes entry materials for a skill contest 
        or a promotion that purports to be a skill contest; and
          (ii)(I) does not state all terms and conditions of 
        the skill contest, including the rules and entry 
        procedures for the skill contest, in language that is 
        easy to find, read and understand;
          (II) does not clearly and conspicuously disclose the 
        sponsor or mailer of the skill contest and the 
        principal place of business or an address at which the 
        sponsor or mailer may be contacted; or
          (III) does not contain skill contest rules that 
        clearly state, as applicable--
                  (aa) the number of rounds or levels of the 
                contest and the cost to enter each round or 
                level;
                  (bb) that subsequent rounds or levels will be 
                more difficult to solve;
                  (cc) the maximum cost to enter all rounds or 
                levels;
                  (dd) the estimated number or percentage of 
                entrants who may correctly solve the skill 
                contest or the approximate number or percentage 
                of entrants correctly solving the past 3 skill 
                contests conducted by the sponsor;
                  (ee) the identity or description of the 
                qualifications of the judges if the contest is 
                judged by other than the sponsor;
                  (ff) the method used in judging;
                  (gg) the date by which the winner or winners 
                will be determined and the date or process by 
                which prizes will be awarded;
                  (hh) the quantity, estimated retail value, 
                and nature of each prize; and
                  (ii) the schedule of any payments made over 
                time; or
          (C) includes any facsimile check that does not 
        contain a statement on the check itself that such check 
        is not a negotiable instrument and has no cash value.
    (4) Matter that appears in a magazine, newspaper, or other 
periodical and contains materials that are a facsimile check, 
skill contest, or sweepstakes is exempt from paragraph (3), if 
the matter--
          (A) is not directed to a named individual; or
          (B) does not include an opportunity to make a payment 
        or order a product or service.
    (5) Any statement, notice, or disclaimer required under 
paragraph (3) shall be clearly and conspicuously displayed.
    (6) In the enforcement of paragraph (3), the Postal Service 
shall consider all of the materials included in the mailing and 
the material and language on and visible through the envelope.
    (l)(1) Any person who uses the mails for any matter to 
which subsection (h), (i), (j), or (k) applies shall adopt 
reasonable practices and procedures to prevent the mailing of 
such matter to any person who, personally or through a 
conservator, guardian, individual with power of attorney--
          (A) submits to the mailer of such matter a written 
        request that such matter should not be mailed to such 
        person; or
          (B)(i) submits such a written request to the attorney 
        general of the appropriate State (or any State 
        government officer who transmits the request to that 
        attorney general); and
          (ii) that attorney general transmits such request to 
        the mailer.
    (2) Any person who mails matter to which subsection (h), 
(i), (j), or (k) applies shall maintain or cause to be 
maintained a record of all requests made under paragraph (1). 
The records shall be maintained in a form to permit the 
suppression of an applicable name at the applicable address for 
a 5-year period beginning on the date the written request under 
paragraph (1) is submitted to the mailer.
    [(j)] (l) Except as otherwise provided by law, proceedings 
concerning the mailability of matter under this chapter and 
chapters 71 and 83 of title 18 shall be conducted in accordance 
with chapters 5 and 7 of title 5.
    [(k)] (m) The district courts, together with the District 
Court of the Virgin Islands and the District Court of Guam, 
shall have jurisdiction, upon cause shown, to enjoin violations 
of section 1716 of title 18.

SECTION 3005. FALSE REPRESENTATIONS; LOTTERIES.

    (a) Upon evidence satisfactory to the Postal Service that 
any person is engaged in conducting a scheme or device for 
obtaining money or property through the mail by means of false 
representations, including the mailing of matter which is 
nonmailable under section 3001(d), (h) [or] (i), (j), or (k) of 
this title, or is engaged in conducting a lottery, gift, 
enterprise, or scheme for the distribution of money or of real 
or personal property, by lottery, chance, or drawing of any 
kind, the Postal Service may issue an order which--
          (1) directs the postmaster of the post office at 
        which mail arrives, addressed to such a person or to 
        his representative, to return such mail to the sender 
        appropriately marked as in violation of this section, 
        if the person, or his representative, is first notified 
        and given reasonable opportunity to be present at the 
        receiving post office notified and given reasonable 
        opportunity to be present at the receiving post office 
        to survey the mail before the postmaster returns the 
        mail to the sender;
          (2) forbids the payment by a postmaster to the person 
        or his representative of any money order or postal note 
        drawn to the order of either and provides for the 
        return to the remitterof the sum named in the money 
order or postal; and return to the remitter of the sum named in the 
money order or postal note; and
          (3) requires the person or his representative to 
        cease and desist from engaging in any such scheme, 
        device, lottery, or gift enterprise.
For purposes of the preceding sentence, the mailing of matter 
which is nonmailable under section 3001(d), (h), [or] (i), (j) 
or (k) by any person shall constitute prima facie evidence that 
such person is engaged in conducting a scheme or device for 
obtaining money or property through the mail by false 
representations.

SECTION 3007. DETENTION OF MAIL FOR TEMPORARY PERIODS.

    [(a) In preparation for or during the pendency of 
proceedings under sections 3005 and 3006 of this title, the 
United States district court in the district in which the 
defendant receives his mail shall, upon application therefor by 
the Postal Service and upon a showing of probable cause to 
believe either section is being violated, enter a temporary 
restraining order and preliminary injunction pursuant to rule 
65 of the Federal Rules of Civil Procedure directing the 
detention of the defendant's incoming mail by the postmaster 
pending the conclusion of the statutory proceedings and any 
appeal therefrom. The district court may provide in the order 
that the detained mail be open to examination by the defendant 
and such mail be delivered as is clearly not connected with the 
alleged unlawful activity. An action taken by a court hereunder 
does not affect or determine any fact at issue in the statutory 
proceedings.] (a)(1) In preparation for or during the pendency 
of proceedings under sections 3005 and 3006, the Postal 
Service, in accordance with section 409(d), may apply to the 
district court in any district in which mail is sent or 
received as part of the alleged scheme, device, lottery, gift 
enterprise, sweepstakes, skill contest, or facsimile check or 
in any district in which the defendant is found, for a 
temporary restraining order and preliminary injunction under 
the procedural requirements of rule 65 of the Federal Rules of 
Civil Procedure.
    (2)(A) Upon a proper showing, the court shall enter an 
order which shall--
          (i) remain in effect during pendency of the statutory 
        proceedings, any judicial review of such proceedings, 
        or any action to enforce orders issued under the 
        proceedings; and
          (ii) direct the detention by the postmaster, in any 
        and all districts, of the defendant's incoming mail and 
        outgoing mail, which is the subject of the proceedings 
        under sections 3005 and 3006.
    (B) A proper showing under this paragraph shall require 
proof of a likelihood of success on the merits of the 
proceedings under section 3005 or 3006.
    (3) Mail detained under paragraph (2) shall--
          (A) be made available at the post office of mailing 
        or delivery for examination by the defendant in the 
        presence of a postal employee; and
          (B) be delivered as addressed if such mail is clearly 
        shown not to be the subject of proceedings under 
        sections 3005 and 3006.
    (4) No finding of the defendant's intent to make a false 
representation or to conduct a lottery is required to support 
the issuance of an order under this section.
    (b) If any order is issued under subsection (a) and the 
proceedings under section 3005 or 3006 are concluded with the 
issuance of an order under that section, any judicial review of 
the matter shall be in the district in which the order under 
subsection (a) was issued.
    [(b)] (c) This section does not apply to mail addressed to 
publishers of newspapers and other periodical publications 
entitled to a periodical publication rate or to mail addressed 
to the agents of the publishers.

SECTION 3012. CIVIL PENALTIES.

    (a) Any person--
          (1) who, through the use of the mail, evades or 
        attempts to evade the effect of an order issued under 
        the section 3005(a)(1) or 3005(a)(2) of this title;
          (2) who fails to comply with an order issued under 
        section 3005(a)(3) of this title; or
          (3) who (other than a publisher described by section 
        3007(b) of this title) has actual knowledge of any such 
        order, is in privity with any person described by 
        paragraph (1) or (2) of this subsection, and engages in 
        conduct to assist any such person to evade, attempt to 
        evade, or fail to comply with any such order, as the 
        case may be, through the use of the mail;
shall be liable to the United States for a civil penalty in an 
amount not to exceed [$10,000 for each day that such person 
engages in conduct described by paragraph (1), (2), or (3) of 
this subsection. A separate penalty may be assessed under this 
subsection with respect to the conduct described in each such 
paragraph.] $50,000 for each mailing of less than 50,000 
pieces; $100,000 for each mailing of 50,000 to 100,000 pieces; 
with an additional $10,000 for each additional 10,000 pieces 
above 100,000, not to exceed $2,000,000.
    (b)(1) Whenever, on the basis of any information available 
to it, the Postal Service finds that any person has engaged, or 
is engaging, in conduct described by paragraph (1), (2), or (3) 
of subsection (a), (c), or (d), the Postal Service may, under 
the provisions of section 409(d) of this title, commence a 
civil action to enforce the civil penalties established by such 
subsection. Any such action shall be brought in the district 
court of the United States for the district in which the 
defendant resides or receives mail.
    (2) If the district court determines that a person has 
engaged, or is engaging, in conduct described by paragraph (1), 
(2), or (3) of subsection (a), (c), or (d), the court shall 
determine the civilpenalty, if any under this section, taking 
into account the nature, circumstances, extent, and gravity of the 
violations of such subsection, and, with respect to the violator, the 
ability to pay the penalty, the effect of the penalty on the ability of 
the violator to conduct lawful business, any history of prior 
violations of such subsection, the degree of culpability, and such 
other matters as justice may require.
    (c)(1) In any proceeding in which the Postal Service may 
issue an order under section 3005(a), the Postal Service may in 
lieu of that order or as part of that order assess civil 
penalties in an amount not to exceed $25,000 for each mailing 
of less than 50,000 pieces; $50,000 for each mailing of 50,000 
to 100,000 pieces; with an additional $5,000 for each 
additional 10,000 pieces above 100,000, not to exceed 
$1,000,000.
    (2) In any proceeding in which the Postal Service assesses 
penalties under this subsection the Postal Service shall 
determine the civil penalty taking into account the nature, 
circumstances, extent, and gravity of the violation or 
violations of section 3005(a), and with respect to the 
violator, the ability to pay the penalty, the effect of the 
penalty on the ability of the violator to conduct lawful 
business, any history of prior violations of such section, the 
degree of culpability and other such matters as justice may 
require.
    (d) Any person who violates section 3001(l) shall be liable 
to the United States for a civil penalty not to exceed $10,000 
for each mailing to an individual.
    [(c) All penalties collected under the authority of this 
section shall be paid into the Treasury of the United States.] 
(e)(1) From all civil penalties collected in the administrative 
and judicial enforcement of this chapter, an amount equal to 
the administrative and judicial costs incurred by the Postal 
Service in such enforcement, not to equal or exceed $500,000 in 
each year, shall be--
          (A) deposited in the Postal Service Fund established 
        under section 2003; and
          (B) available for payment of such costs.
    (2) Except for amounts deposited in the Postal Service Fund 
under paragraph (1), all civil penalties collected in the 
administrative and judicial enforcement of this chapter shall 
be deposited in the General Fund of the Treasury.
    [(d)] (f) In any proceeding at any time under this section, 
the defendant shall be entitled as a defense or counterclaim to 
seek judicial review, if not already had, pursuant to chapter 7 
of title 5, of the order issued under section 3005 of this 
title. However, nothing in this section shall be construed to 
preclude independent judicial review otherwise available to 
chapter 7 of title 5 of an order issued under section 3005 of 
this title.

SECTION 3016. ADMINISTRATIVE SUBPOENAS.

    (a) Authorization of Use of Subpoenas by Postmaster 
General.--In any investigation conducted under this chapter, 
the Postmaster General may require by subpoena the production 
of any records (including books, papers, documents, and other 
tangible things which constitute or contain evidence) which the 
Postmaster General finds relevant or material to the 
investigation.
    (b) Service.--
    (1) Service within the united states.-- A subpoena issued 
under this section may be served by a person designated under 
section 3061 of title 18 at any place within the territorial 
jurisdiction of any court of the United States.
          (2) Foreign service.--Any such subpoena may be served 
        upon any person who is not to be found within the 
        territorial jurisdiction of any court of the United 
        States, in such manner as the Federal Rules of Civil 
        Procedure prescribe for service in a foreign country. 
        To the extent that the courts of the United States may 
        assert jurisdiction over such person consistent with 
        due process, the United States District Court for the 
        District of Columbia shall have the same jurisdiction 
        to take any action respecting compliance with this 
        section by such person that such court would have if 
        such person were personally within the jurisdiction of 
        such court.
          (3) Service on business persons.--Service of any such 
        subpoena may be made by a Postal Inspector upon a 
        partnership, corporation, association, or other legal 
        entity by--
                  (A) delivering a duly executed copy thereof 
                to any partner, executive officer, managing 
                agent, or general agent thereof, or to any 
                agent thereof authorized by appointment or by 
                law to receive service of process on behalf of 
                such partnership, corporation, association, or 
                entity;
                  (B) delivering a duly executed copy thereof 
                to the principal office or place of business of 
                the partnership, corporation, association, or 
                entity; or
                  (C) depositing such copy in the United States 
                mails, by registered or certified mail, return 
                receipt requested, duly addressed to such 
                partnership, corporation, association, or 
                entity at its principal office or place of 
                business.
          (4) Service on natural persons.--Service of any 
        subpoena may be made upon any natural person by--
                  (A) delivering a duly executed copy to the 
                person to be served; or
                  (B) depositing such copy in the United States 
                mails, by registered or certified mail, return 
                receipt requested, duly addressed to such 
                person at his residence or principal office or 
                place of business.
          (5) Verified return.--A verified return by the 
        individual serving any such subpoena setting forth the 
        manner of such service shall be proof of such service. 
        In the case of service by registered or certified mail, 
        such return shall be accompanied by the return post 
        office receipt of delivery of such subpoena.
    (c) Enforcement.--
          (1) In general.--Whenever any person, partnership, 
        corporation, association, or entity fails to comply 
        with any subpoena duly served upon him, the Postmaster 
        General may request that the Attorney General seek 
        enforcement of the subpoena in the district court of 
        the United States for any judicial district in which 
        such person resides, is found, or transacts business, 
        and serve upon such person a petition for an order of 
        such court for the enforcement of this section.
          (2) Jurisdiction.--Whenever any petition is filed in 
        any district court of the United States under this 
        section, such court shall have jurisdiction to hear and 
        determine the matter so presented, and to enter such 
        order or orders as may be required to carry into effect 
        the provisions of this section. Any final order entered 
        shall be subject to appeal under section 1291 of title 
        28. Any disobedience of any final order entered under 
        this section by any court may be punished as contempt.
    (d) Disclosure.--Any documentary material provided pursuant 
to any subpoena issued under this section shall be exempt from 
disclosure under section 552 of title 5.
    The table of sections for chapter 30 of title 39, United 
States Code, is amended by adding at the end the following:

3016. Administrative subpoenas.

SECTION 3017. NONMAILABLE SKILL CONTESTS OR SWEEPSTAKES MATTER; 
                    NOTIFICATION TO PROHIBIT MAILINGS

    (a) Definitions.--In this section, the term--
          (1) ``promoter'' means any person who originates and 
        causes to be mailed more than 500,000 mailings in any 
        calendar year of any skill contest or sweepstakes, 
        except for mailings that do not include an opportunity 
        to make a payment or order a product or service;
          (2) ``removal request'' means a written request 
        stating that an individual elects to have the name and 
        address of such individual excluded from any list used 
        by a promoter for mailing skill contests or 
        sweepstakes;
          (3) ``skill contest'' means a puzzle, game, 
        competition, or other contest in which--
                  (A) a prize is awarded or offered;
                  (B) the outcome depends predominately on the 
                skill of the contestant; and
                  (C) a purchase, payment, or donation is 
                required or implied to be required to enter the 
                contest; and
          (4) ``sweepstakes'' means a game of chance for which 
        no consideration is required to enter.
    (b) Nonmailable Matter.--
          (1) In general.--Matter otherwise legally acceptable 
        in the mails described under paragraph (2)--
                  (A) is nonmailable matter;
                  (B) shall not be carried or delivered by 
                mail; and
                  (C) shall be disposed of as the Postal 
                Service directs.
          (2) Nonmailable matter described.--Matter that is 
        nonmailable matter referred to under paragraph (1) is 
        any matter that--
                  (A) is a skill contest or sweepstakes; and
                  (B)(i) is addressed to an individual who made 
                an election to be excluded from lists under 
                subsection (e); or
                  (ii) does not comply with subsection (c)(1).
    (c) Requirements of Promoters.--
          (1) Notice to individuals.--Any promoter who mails a 
        skill contest or sweepstakes shall provide with each 
        mailing a clear and conspicuous statement that--
                  (A) includes the address and toll-free 
                telephone number of the notification system 
                established under paragraph (2); and
                  (B) states how the notification system may be 
                used to prohibit the mailing of any skill 
                contest or sweepstakes to such individual.
          (2) Notification system.--Any promoter that mails a 
        skill contest or sweepstakes shall participate in the 
        establishment and maintenance of a single notification 
        system that provides for any individual (or other duly 
        authorized person) to notify the system of the 
        individual's election to have the name and address of 
        the individual excluded from all lists of names and 
        addresses used by all promoters to mail any skill 
        contest or sweepstakes.
    (d) Notification System.--If an individual contacts the 
notification system through use of the toll-free telephone 
number provided under subsection (c)(1)(A), the system shall--
          (1) inform the individual of the information 
        described under subsection (c)(1)(B); and
          (2) inform the individual that the election to 
        prohibit mailings of skill contests or sweepstakes to 
        that individual shall take effect 45 business days 
        after receipt by the system of the signed removal 
        request by the individual.
    (e) Election To Be Excluded From Lists.--
          (1) In general.--An individual may elect to exclude 
        the name and address of such individual from all 
        mailing lists used by promoters of skill contests or 
        sweepstakes by mailing a removal request to the 
        notification system established under subsection (c).
          (2) Response after mailing removal request to the 
        notification system.--Not later than 45 business days 
        after receipt of a removal request, all promoters who 
        maintain lists containing the individual's name or 
        address for purposes of mailing skill contests or 
        sweepstakes shall exclude such individual's name and 
        address from all such lists.
          (3) Effectiveness of election.--An election under 
        paragraph (1) shall--
                  (A) be effective with respect to every 
                promoter; and
                  (B) remain in effect, unless an individual 
                notifies the system in writing that such 
                individual--
                          (i) has changed the election; and
                          (ii) elects to receive skill contest 
                        or sweepstakes mailings.
    (f) Promoter Nonliability.--A promoter, or any other person 
maintaining the notification system established under this 
section, shall not be subject to civil liability for the 
exclusion of an individual's name or address from any mailing 
list maintained by a promoter for mailing skill contests or 
sweepstakes, if--
          (1) a removal request is received by the notification 
        system; and
          (2) the promoter or person maintaining the system has 
        a good faith belief that the request is from--
                  (A) the individual whose name and address is 
                to be excluded; or
                  (B) another duly authorized person.
    (g) Prohibition on Commercial Use of Lists.--
          (1) In general.--
                  (A) Prohibition.--No person may provide any 
                information (including the sale or rental of 
                any name or address) in a list described under 
                subparagraph (B) to another person for 
                commercial use.
                  (B) Lists.--A list referred to under 
                subparagraph (A) is any list of names and 
                addresses (or other related information) used, 
                maintained, or created by the system 
                established under this section.
          (2) Civil penalty.--Any person who violates paragraph 
        (1) shall be assessed a civil penalty by the Postal 
        Service not to exceed $2,000,000 per violation.
    (h) Civil Penalties.--
          (1) In general.--Any promoter--
                  (A) who recklessly mails nonmailable matter 
                in violation of subsection (b) shall be liable 
                to the United States in an amount of $10,000 
                per violation for each mailing of nonmailable 
                matter; or
                  (B) who fails to substantially comply with 
                the requirements of subsection (c)(2) shall be 
                liable to the United States.
          (2) Enforcement.--The Postal Service shall assess 
        civil penalties under this section.
    The table of sections for chapter 30 of title 39, United 
States Code, is amended by adding after the item relating to 
section 3016 the following:
3017. Nonmailable skill contests or sweepstakes matter; notification to 
          prohibit mailings.