I commend Senator Collins for holding these hearings on deceptive and fraudulent mailings. As the ranking Democrat on the subcommittee with legislative jurisdiction over postal issues, I am proud to associate myself with this subcommittee's active investigation of sweepstakes and other promotions that have defrauded and deceived Americans out of millions of dollars every year. I am also pleased to be a cosponsor of our Chair's bill, S. 335, and S. 336, introduced by this subcommittee's ranking Democrat, Senator Levin.
In my own state of Hawaii, one direct mail scam netted $1 million by offering a gift that could only be received through calling a 900-telephone number. Each call cost $30. Assuming a person called only once, there were nearly 35,000 people from Hawaii who spent $30 apiece to receive a "free" gift valued by the state Office of Consumer Protection at one dollar.
I also want to point to a constituent from Hawaii, who believing he won an American Family Publisher's sweepstakes, flew to Florida to collect his prize. In the aftermath of his 5,000 mile journey, he was interviewed extensively by individuals in the Florida State Attorney General's office, who were quite interested in his story. Apparently the gentleman was one of nearly two dozen people who travelled to Florida to claim their money.
We heard yesterday from a number of witnesses whose personal stories detailed the financial and emotional toll taken by dealing with one specific type of mailing: magazine subscriptions and other consumer products. Each and every witness pointed to the mistaken belief that in order to win or increase the chances of winning a sweepstake, a purchase would help. We also learned that there are equally strong feelings that a customer's purchasing history, including prior purchases, frequency of purchases, and dollar amounts, added the chances of winning.
The companies represented here today are the leaders in direct marketing of magazine subscription services. I know from their printed statements that they believe they act in a responsible manner. While I do not dispute the legitimacy of their business, I am concerned that there are far too many Americans who would not agree with them.
Nearly one-third of all 156 million new magazine subscription sold annually in the United States are through sweepstakes mailings. This represents one-third of a $7 billion business, which in many instances, provides a convenient means for consumers to subscribe to magazines and buy consumer products, in order to win prizes. Unfortunately, as we heard yesterday, there is a minority of subscribers who do not understand that the mailings are merely games of chances whose underlying purpose is to sell products.
I am interested in hearing from American Family Publishers, Publishers Clearinghouse, Time, Inc., and Reader's Digest about the monies awarded throughout the U.S. and Canada; how their solicitations are developed and how consumers are targeted; and most importantly, what steps are taken to ensure that customers know--in plain English--that no purchase is ever necessary to win.
What troubles me deeply is the assertion by these companies that a reasonable person knows that these sweepstakes promotions do not require a purchase and that repeated purchases do not increase the chances of winning the grand prize. I know from speaking with constituents that there is a strong and unwavering belief among too many Americans that a purchase is necessary to win and that multiple and or repeat orders enhance the potential of winning.
A study conducted in behalf of AARP found that 23 percent of individuals participating in sweepstakes felt that buying a solicited product would increase their chances of winning. They did not believe that they did not need to buy to win. Another 17 percent in the survey felt that a purchase might increase their chances of winning, which meant that four out of 10 respondents in the AARP study believed that a purchase would or could increase the opportunity to win.
It is critical to pay attention to the AARP study because the participants are senior citizens who, as the subcommittee learned through hearings yesterday and last year, are the most vulnerable targets of deceptive or fraudulent direct mailings. It is a population, that in many instances, is separated from families. The desire to interact with others is thrilling, and the receipt of personalized sweepstakes letters are enticing, as they are meant to be.
A staff member's relative has boxes of solicitations from the companies represented here today. Although he has not entered any of the sweepstakes nor subscribed to any magazine, he keeps the letters because they are addressed to him.
Individuals who believe that their chances of winning are increased by ordering products are impressed that a company knows their names. They do not always understand how easy it is to manipulate computerized correspondence. Added to the personal nature of these mailings are the multiple inserts that include coupons for products, sheets of paper providing the chance to win more money than the "guaranteed" amount, and stickers to win cars and houses.
What is missing from these mailings are clear, easily read advisories that ordering a product does not ensure winning and that multiple and or repeated orders do not ensure winning. For those who do not wish to order, there are generally no easy instructions on how to enter.
I am proud to be a cosponsor of Senator Collins' legislation, S. 335, which creates new standards for sweepstakes and other prize promotion mailings. This legislation would prevent fraud and deception by requiring companies to be more honest when using sweepstakes and other promotional mailings. It would establish new standards for such 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.
S. 335 would also strengthen the laws against mailings that mimic government documents, thus prohibiting mailings using language or devices that give the impression that the mailing is either connected, approved, or endorsed by the federal government. Any mailing selling a product that the government provides at no cost would have to include a disclosure that the product is available for free from the government.
An additional and important aspect of the bill would be the imposition of civil penalties that includes fines ranging from $50,000 to $2 million, based on the number of mailings. Moreover, the bill would give the U.S. Postal Inspection Service new tools to combat deceptive and fraudulent postal practices. Administrative subpoenas for records and documents would be available in limited cases. The bill would not preempt state or local laws protecting consumers from fraudulent or deceptive mailings.
Every state has unique problems with deceptive mailings and every Senator has his or her own story to tell about the horrors constituents have faced. Deceptive mailings take many forms, and I am pleased that Chairman Collins' bill is broadly drafted to correct many of these abuses.
As we move toward markup on this bill, I will explore with my colleagues a problem unrelated to today's hearing, but equally important and unique to Hawaii. Exotic plants, animals, and insects that are illegally brought into the state many times arrive by U.S. mail. Although federal law prohibits such mailings, many of which are deceptively marked, the law is not working well. I intend to offer amendments relating to this problem at markup.
Again, I look forward to hearing from today's witnesses. What we heard yesterday proves that there are many folks out there who believe they have to enter a sweepstakes to win. Their stories were not isolated examples. They responded to what they believed were declarations of winning or invitations to win by companies and spokespersons they trust. American consumers deserve more than this and must be better informed when playing these games of chance.
