Advertising Law Alerts

April 28th, 2011

Collecting Names Through Sweepstakes Entry Leads to FTC Action

The Federal Trade Commission (“FTC”) announced last week that Electric Mobile Corporation (“EMC”), the manufacturer of Rascal Scooters, used by disabled and senior consumers, and its owner, will pay $100,000 to settle FTC charges that it illegally called millions of consumers who had listed their phone numbers on the national Do Not Call Registry (the “Registry”).

The FTC’s Telemarketing Sales Rule (the “Rule”) allows a seller or telemarketer to call a consumer on the Registry (even in the absence of an established business relationship) if it can prove that the seller has the “express agreement, in writing” of the consumer to make calls to that number. This written agreement must be “clear and conspicuous” and “authorization” obtained through subterfuge will not constitute express consent under the Rule.

The FTC alleges that EMC made more than three million illegal sales calls since 2003 to consumers on the Registry who had entered the company’s “Win a Free Rascal” sweepstakes. EMC encouraged consumers to enter its sweepstakes through direct mail, newspapers, and television advertisements. In small print under the part of the sweepstakes entry form provided for the entrant’s phone number, EMC asked consumers to list their numbers so the company could contact them if they were “the next lucky winner.” According to the FTC, the entry forms did not advise consumers clearly and conspicuously that supplying a telephone number on the entry form would authorize EMC to use the telephone number for telemarketing purposes and, as such, did not constitute express written consent. This settlement is a reminder of the importance of clear and conspicuous disclosure when obtaining consumers’ consent for telemarketing purposes.

The consent order settling the FTC’s charges bars EMC from using sweepstakes entries as the basis for obtaining consumer authorization for placing calls. The order imposed civil penalties of $2 million against EMC and $100,000 against its owner, but the FTC suspended the $2 million penalty due to the company’s inability to pay.

Read full case - "United States of America, v. Electric Mobility Corporation".

If you have any questions about the FTC’s announcement, please contact Terri J. Seligman at (212) 826-5580 or tseligman@fkks.com, or any other member of the Frankfurt Kurnit Advertising Group. For more alerts and general announcements from our firm, follow us on Twitter.
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