Prize Notice Advertising
Many dealers try to stimulate sales by holding “events” pitched to them by promotional companies. Often these promotions involve tens of thousands of mailers advising recipients that they have, or may have won prizes ranging from a small gift card, to expensive consumer products such as a flat screen television, and even large cash prizes. All the recipient needs to do is show up at the “event” to determine what prize he/she has won.
Frequently, we are called upon to represent dealers who receive Civil Investigative Demands (CIDs) from the Department of Agriculture Trade and Consumer protection (DATCP) relating to such events. CIDs are essentially subpoenas for records and information relating to the content and number of notices sent. CIDs are the start of an investigative process that can lead to substantial forfeitures if the notices do not meet exact form and content requirements of Wisconsin law.
While advertising using prize notices is technically legal, it is strictly regulated under sec. 100.171, Wis. Statutes, and DATCP has jurisdiction to enforce the statute. Under sec. 100.171, a “prize notice” is a notice given to an individual that:
- Is or contains a representation that the individual has been selected or may be eligible to receive a prize. [and]
- Conditions receipt of a prize on a payment from the individual or invites the individual to make a contact to learn how to receive the prize or to receive other information related to the notice. [Emphasis added.]
If the above definition is applicable, sec. 100.171 sets forth a number of strict requirements that must be complied with in the notice including, but not limited to:
- Name and address of the solicitor and sponsor;
- Verifiable retail value of each prize;
- Statement of odds for receiving each prize in a format and location set forth in the statute;
- Any requirement that the individual hear or attend a sales presentation to claim a prize;
- Any restrictions conditioning receipt of the prize;
- Font and type size of prizes and disclosures.
Penalties for violations of sec. 100.171 can range from forfeitures of $100 to $5,000 per violation, and each individual mailer sent can be a separate violation. Typical forfeitures imposed in an investigation are well into five figures.
Before holding any event involving prize advertising it is extremely important to have the promotion reviewed by an attorney well versed in Wisconsin advertising laws. Third parties pitching such promotions are often out of state companies and have little knowledge of Wisconsin specific laws. Further, the promotional companies offer little protection if forfeitures are imposed. As sponsors of events, dealers are expected to know Wisconsin law and monitor their advertising for legal compliance. If you receive a CID for a promotion you have sent out, take it seriously and seek legal counsel.
The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.