Is a Sweepstakes a Valid Telemarketing Opt-In Mechanism?

The manufacturer of Rascal Scooters recently settled charges brought by the Federal Trade Commission that it illegally called millions of consumers whose numbers were registered on the national Do Not Call Registry.   The Electric Mobility Corporation (EMC) agreed to pay a $100,000.00 fine and to cease calling numbers on the DNC that it gathered through its online “Win a Free Rascal” sweepstakes.

Sweepstakes, contests, and similar promotional tools are commonly used to compile lists of prospective customers.   In EMC’s case, it heavily promoted its sweepstakes through direct mail, print ads, and television commercials, which drew millions of consumers to complete an entry form.  The entry form required consumers to provide their phone number, so the company could contact them if they were “the next lucky winner.”

Armed with this list of numbers, over the past several years EMC made millions of telemarketing calls to consumers who entered the sweepstakes, many of whom were registered on the DNC.   When the FTC came knocking, EMC had an excuse.

The FTC’s Telemarketing Sales Rule allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an “established business relationship” with the consumer and he or she has not asked the firm to stop calling.  EMC argued that the consumer’s submission of a completed entry form, and EMC’s acceptance of the entry, created an “established business relationship,” and that the calls in question were therefore exempt from the DNC restrictions.

Unfortunately for EMC, a sweepstakes entry by itself is not sufficient to establish a business relationship to qualify for the DNC exemption.  In fact, the FTC has consistently maintained the position that simply obtaining a consumer’s phone number – without anything more— does not establish a relationship that would exempt a marketer from the Do Not Call rules.

What EMC could have done was to create a different entry mechanism for its sweepstakes to enable it to rely on the “Written Permission to Call” exemption to the Telemarketing Sales Rule.

The Written Permission exemption permits sellers to call any consumer who expressly agrees to receive calls by or on behalf of the seller, even if the consumer’s number is on the DNC.  The consumer’s express agreement must be in writing and must include the number to which calls may be made and the consumer’s signature. The signature may be a valid electronic signature, if the agreement is reached online.

Obtaining a consumer’s express written consent to receive a telemarketing call can be a challenge, because to comply with the rule, any request to call must be “clear and conspicuous,” and the consumer’s assent must be affirmative.

In order to be “clear and conspicuous,” language granting a seller permission to call consumers cannot be buried in a dense jungle of words in the middle of a confusing website privacy policy, or otherwise printed in small, difficult to read type.  In order for the consent to be “affirmative,” it is necessary for the seller to require the consumer to do something (such as check a box), in order to demonstrate their agreement.

So EMC could have altered its entry format in a manner sufficient to claim an exemption based on Written Permission, but the language it would have needed to include in order to be absolutely certain that its exemption claim would hold up would have scared off a significant number of consumers, which diminishes the effectiveness of the sweepstakes as a promotional tool.

So if you’re seeking to call consumers on the DNC and want to rely on the Written Permission exemption, you need to decide which side of the line you’re most comfortable being on.  Should you roll the dice to get as many opt-ins as possible, or err on the side of caution and wind up with a tiny list?   That’s a call that only you can make, but take this into consideration:  the FTC carefully scrutinizes any use of sweepstakes entry forms as a way to get a consumer’s permission to place telemarketing calls.  Therefore, if you’re using sweepstakes as an opt-in mechanism, you should probably stay on the safe side of the line.





Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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