1-1 By: Junell, et al. (Senate Sponsor - Ellis) H.B. No. 2530 1-2 (In the Senate - Received from the House April 26, 2001; 1-3 May 1, 2001, read first time and referred to Committee on Business 1-4 and Commerce; May 10, 2001, reported favorably, as amended, by the 1-5 following vote: Yeas 4, Nays 3; May 10, 2001, sent to printer.) 1-6 COMMITTEE AMENDMENT NO. 1 1-7 Amend C.S.H.B. 2530, engrossed printing, as follows: 1-8 (1) On page 2, between lines 53 and 54 insert the following: 1-9 (4) "Direct marketing" means using the United States 1-10 mail, facsimiles, electronic mail, or other methods for mass 1-11 distribution to individuals. 1-12 (5) "Conducting" a sweepstakes means distributing any 1-13 material that promotes a sweepstakes, that describes the prize or 1-14 prizes, that states one or more of the sweepstakes rules, that 1-15 includes any current or future opportunity to enter the 1-16 sweepstakes, or that provides any method for the recipient of the 1-17 material to obtain additional information about the sweepstakes. 1-18 (6) "Magazines" and "newspapers" means publications 1-19 that 1-20 (i) sell advertising space to companies other 1-21 than the publisher, its affiliates and the vendors for any of them, 1-22 and 1-23 (ii) more than 75% of the total number of copies 1-24 distributed of each issue go to paid subscribers. 1-25 (7) "Catalogues" means promotional booklets listing 1-26 merchandise for sale that either 1-27 (i) require customers to go to a physical 1-28 location to purchase the advertised items, or 1-29 (ii) are published by a company that derives 1-30 more than 65% of its total gross revenue from sales occurring at 1-31 physical locations. 1-32 (2) On page 2, line 54 through line 56, strike "offering a 1-33 sweepstakes primarily through the mail, exclusive of mailed 1-34 newspapers and magazines," and substitute "conducting a sweepstakes 1-35 through direct marketing". 1-36 (3) On page 3, line 21 through line 30, strike proposed 1-37 sections 43.002(a)(6) and 43.002(a)(7) and substitute the following 1-38 and renumber subsequent subdivisions appropriately: 1-39 (6) offer through direct marketing any non-sweepstakes 1-40 prize, gift, premium, giveaway, skill contest, coupon, rebate, or 1-41 other incentive or promotion of any kind, other than a competitive 1-42 price on goods or services, during the 12 month period immediately 1-43 following the last date on which the person conducted a sweepstakes 1-44 through direct marketing; 1-45 (4) On page 4, line 39 through line 43, strike proposed 1-46 section 43.003 and substitute the following: 1-47 Sec. 43.003. APPLICATION OF CHAPTER; ACTS NOT PROHIBITED. 1-48 (a) This chapter does not apply to any sweepstakes that is 1-49 conducted through advertisements or inserts in magazines, 1-50 newspapers or catalogues sent through the mail. 1-51 (b) This chapter does not apply to any charitable raffle 1-52 regulated by chapter 2002 of the Texas Occupations Code. 1-53 (c) This chapter does not apply to any sweepstakes regulated 1-54 by the Alcoholic Beverage Code. 1-55 (d) This chapter does not apply to any company that is an 1-56 air carrier subject to Title 49 of the United States Code. 1-57 (e) This chapter does not apply to a drawing for the 1-58 opportunity to participate in a hunting, fishing, or other 1-59 recreational event conducted by the Parks and Wildlife Department. 1-60 (f) If the one and only use of mail, facsimile, or 1-61 electronic mail is for consumers to return their entry forms to the 1-62 sponsor of the contest, then this chapter does not apply to that 1-63 sweepstakes. 1-64 (g) This chapter does not prohibit a sweepstakes sponsor 1-65 from making a statement in the official rules of the sweepstakes 2-1 describing the method to be used in choosing a winner, and this 2-2 chapter does not prohibit a sweepstakes sponsor from notifying the 2-3 winner after she or he has been selected. 2-4 (h) This chapter does not prohibit a sweepstakes sponsor, 2-5 after determining the winner, from obtaining an affidavit from the 2-6 person selected to verify that she or he is eligible to win the 2-7 prize and has complied with the rules of the sweepstakes. 2-8 (i) This chapter never prohibits any person from offering a 2-9 non-sweepstakes prize, gift, premium, giveaway, skill contest, 2-10 coupon, rebate, or other incentive or promotion of any kind so long 2-11 as that non-sweepstakes incentive or promotion is not conducted 2-12 through direct marketing. 2-13 (j) This chapter does not apply to a sweepstakes if the most 2-14 valuable prize to be awarded is less than $20,000.00. The value of 2-15 a prize is measured by the highest number among its face value, its 2-16 fair market value and its financial present value. 2-17 (5) On page 4, line 60 through line 69, strike proposed 2-18 section 43.004(d) and substitute as follows: 2-19 (d) If any person either 2-20 (i) provides names, addresses, fax numbers or 2-21 electronic mail addresses of any residents of this state so that 2-22 such information can be used in conducting a sweepstakes in 2-23 violation of this chapter, or 2-24 (ii) provides any services connected with mailing, 2-25 sending by facsimile, electronic mail, or other similar mass 2-26 distribution any materials connected with a sweepstakes that 2-27 violates this chapter, and if such person knew or should have known 2-28 that the sweepstakes was in violation of this chapter, then each 2-29 such person is jointly and severally liable for that portion of the 2-30 cumulative civil penalties that resulted from their conduct. 2-31 COMMITTEE AMENDMENT NO. 2 2-32 Amend H.B. 2530 as follows: 2-33 (1) On page 2, line 51, strike lines 51 through 53. 2-34 (2) On page 4, line 31, strike lines 31 through 38. 2-35 A BILL TO BE ENTITLED 2-36 AN ACT 2-37 relating to certain prohibitions applicable to a person offering a 2-38 sweepstakes or operating a video sweepstakes; providing a civil 2-39 penalty. 2-40 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 2-41 SECTION 1. Title 4, Business & Commerce Code, is amended by 2-42 adding Chapter 43 to read as follows: 2-43 CHAPTER 43. SWEEPSTAKES 2-44 Sec. 43.001. DEFINITIONS. In this chapter: 2-45 (1) "Imply" means all methods and means by which an 2-46 implication can be conveyed, including a statement, a question, a 2-47 request, conduct, a graphic, a symbol, lettering, coloring, font 2-48 size, font style, or formatting. 2-49 (2) "Sweepstakes" means a contest that awards one or 2-50 more prizes based on chance or the random selection of entries. 2-51 (3) "Video sweepstakes" means a coin-operated machine 2-52 with a video interface operated for pleasure that dispenses as a 2-53 reward for play money or items redeemable for money or merchandise. 2-54 Sec. 43.002. OFFENSES. (a) A person offering a sweepstakes 2-55 primarily through the mail, exclusive of mailed newspapers and 2-56 magazines, may not: 2-57 (1) require an individual to order or purchase a good 2-58 or service, or promise to purchase a good or service in the future, 2-59 to enter a sweepstakes; 2-60 (2) automatically enter an individual in a sweepstakes 2-61 because the individual ordered or purchased a good or service or 2-62 because the individual promised to order or purchase a good or 2-63 service; 2-64 (3) solicit business using an order form or purchasing 2-65 mechanism that has any role in the operation of a sweepstakes; 3-1 (4) use a mechanism for entering a sweepstakes that: 3-2 (A) has any connection to ordering or purchasing 3-3 a good or service; 3-4 (B) is not identical for all individuals 3-5 entering the sweepstakes; and 3-6 (C) does not have printed on the front and back 3-7 of the entry form in a font size not less than 400 percent larger 3-8 than the next largest font size used on the entry form the 3-9 following language: "Buying Will Not Help You Win. Your chances of 3-10 winning without making a purchase are the same as the chances of 3-11 someone who purchases something. It is illegal to give any 3-12 advantage to buyers in a sweepstakes."; 3-13 (5) solicit an individual to enter a sweepstakes by 3-14 invitation or other opportunity and allow the individual to choose 3-15 or indicate the preferred characteristics of a prize to be awarded 3-16 in the sweepstakes, unless those choices: 3-17 (A) are made on the sweepstakes entering 3-18 mechanism; and 3-19 (B) do not appear on and are not connected in 3-20 any way to an order form or other purchasing mechanism; 3-21 (6) offer any non-sweepstakes prize, gift, premium, 3-22 giveaway, skill contest, coupon, rebate, or other incentive of any 3-23 kind, other than a competitive price on goods or services, during 3-24 the same calendar year in which the person offered an opportunity 3-25 to enter a sweepstakes; 3-26 (7) offer any opportunity to enter a sweepstakes 3-27 during the same calendar year in which the person offered a 3-28 non-sweepstakes prize, gift, premium, giveaway, skill contest, 3-29 coupon, rebate, or other incentive of any kind other than a 3-30 competitive price on goods or services; 3-31 (8) ask an individual for any information or any 3-32 action by that individual that would be consistent with the 3-33 individual winning a sweepstakes prize, unless the individual has 3-34 won a sweepstakes prize; 3-35 (9) provide an individual who has not yet won the 3-36 sweepstakes with any document or other item that simulates any 3-37 event, circumstance, or condition connected with being the winner 3-38 of the sweepstakes; 3-39 (10) send material accompanying or relating to a 3-40 sweepstakes or an offer to enter a sweepstakes that states or 3-41 implies that an individual must comply with a restriction or 3-42 condition to enter the sweepstakes, unless all individuals entering 3-43 the sweepstakes are required to comply with the identical 3-44 restriction or condition; 3-45 (11) use a scratch-off device or any other game piece 3-46 that suggests an element of chance or luck to convey information 3-47 about a sweepstakes or an offer to enter a sweepstakes; 3-48 (12) send material accompanying or relating to a 3-49 sweepstakes or an offer to enter a sweepstakes that: 3-50 (A) states or implies that an individual's 3-51 chances of winning a prize in the sweepstakes are raised, lowered, 3-52 or different in any way because of a factor or circumstance that 3-53 has no relation to the manner in which a winner of the sweepstakes 3-54 is selected; 3-55 (B) states or implies that a winner of a 3-56 sweepstakes prize will be selected at a time or place or in a 3-57 manner that is different from the actual time or place at which or 3-58 manner in which a winner is selected; 3-59 (C) states or implies falsely that the 3-60 individual receiving the advertisement has received any special 3-61 treatment or personal attention from the offeror of the sweepstakes 3-62 or any officer, employee, or agent of the offeror of the 3-63 sweepstakes; 3-64 (D) states or implies that an individual who 3-65 orders or purchases a good or service will receive a benefit in the 3-66 sweepstakes or be treated differently in the sweepstakes compared 3-67 with an individual who did not order or purchase a good or service; 3-68 (E) states or implies that an individual who 3-69 does not order or purchase a good or service will suffer a 4-1 disadvantage in the sweepstakes or be treated differently in the 4-2 sweepstakes compared with an individual who ordered or purchased a 4-3 good or service; or 4-4 (F) states or implies that the recipient of the 4-5 material: 4-6 (i) is a winner if the recipient is not a 4-7 winner; 4-8 (ii) may be a winner; 4-9 (iii) will be a winner if certain 4-10 conditions are met or if certain events occur in the future; 4-11 (iv) is, may be, or will be among the 4-12 group from which a winner will be selected; or 4-13 (v) has in any way a better chance than 4-14 another individual of being chosen as a winner; 4-15 (13) publish or cause to be published different 4-16 advertisements for the same sweepstakes that contain inconsistent 4-17 descriptions of the grand prize awarded through the sweepstakes; 4-18 (14) offer more than one sweepstakes at the same time; 4-19 (15) award multiple prizes in a sweepstakes unless all 4-20 prizes are awarded on the same date and through the same selection 4-21 process; 4-22 (16) publish or cause to be published official rules 4-23 of a sweepstakes that do not uniquely identify the prizes to be 4-24 awarded and the date they will be awarded; or 4-25 (17) provide for entry in a sweepstakes by mail and 4-26 use: 4-27 (A) more than one address to accept entries in 4-28 the sweepstakes; or 4-29 (B) the address for entry in the sweepstakes for 4-30 any purpose other than entry in the sweepstakes. 4-31 (b) A person may not operate a video sweepstakes in this 4-32 state. 4-33 (c) The prohibition of operating a video sweepstakes as set 4-34 out in Subsection (b): 4-35 (1) does not authorize any otherwise illegal activity; 4-36 and 4-37 (2) does not apply to a facility operated by a 4-38 nonprofit organization of military veterans. 4-39 Sec. 43.003. ACTS NOT PROHIBITED. Section 43.002(a)(12) does 4-40 not prohibit a person from making a statement in the official rules 4-41 of the sweepstakes describing the method to be used in choosing a 4-42 winner or prohibit a person from notifying the winner after the 4-43 sweepstakes has ended. 4-44 Sec. 43.004. CIVIL PENALTY. (a) The attorney general may 4-45 initiate an action under this section by filing suit in a district 4-46 court in Travis County or in any county in which a violation 4-47 occurred. 4-48 (b) For each violation found, the court shall award the 4-49 plaintiff a civil penalty of not less than $5,000 or more than 4-50 $50,000. 4-51 (c) If the material accompanying or relating to a 4-52 sweepstakes or an offer to enter a sweepstakes contains multiple 4-53 statements, implications, representations, or offers that are 4-54 prohibited by this chapter, each statement, implication, 4-55 representation, or offer is a separate violation and shall result 4-56 in a separate civil penalty. If the material is sent by mail, 4-57 facsimile, electronic mail, or other similar mass distribution, 4-58 each individual who receives the material constitutes an additional 4-59 and separate group of violations of this chapter. 4-60 (d) If another person knew or should have known that a 4-61 person was offering a sweepstakes in violation of this chapter, and 4-62 if that other person provided names and addresses of residents of 4-63 this state to the person offering the sweepstakes or provided any 4-64 services connected with the mailing, sending by facsimile, 4-65 electronic mail, or other similar mass distribution of information 4-66 about the sweepstakes or an opportunity to enter the sweepstakes, 4-67 the other party is jointly and severally liable with the person 4-68 offering the sweepstakes for the cumulative civil penalties that 4-69 result from providing those names and addresses or services. 5-1 (e) If the attorney general substantially prevails, the 5-2 court shall award the attorney general reasonable expenses incurred 5-3 in recovering a civil penalty under this section, including court 5-4 costs, reasonable attorney's fees, reasonable investigative costs, 5-5 witness fees, and deposition expenses. 5-6 (f) A civil penalty recovered under this section shall be 5-7 deposited in the state treasury. 5-8 (g) A court may also award injunctive relief or other 5-9 equitable or ancillary relief that is reasonably necessary to 5-10 prevent future violations of this chapter. 5-11 SECTION 2. This Act takes effect September 1, 2001. 5-12 * * * * *