HOUSE BILL No. 5216
October 1, 1997, Introduced by Reps. Brown, Kilpatrick, Callahan, Tesanovich, Goschka, LaForge, Brater, Palamara, Schauer, DeHart, Hanley, Martinez and Schermesser and referred to the Committee on Consumer Protection. A bill to regulate certain practices relating to telemarke- ting, sweepstakes promotions, and buying clubs; and to provide for remedies and penalties. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1. As used in this act: 2 (a) "Advertise" means an offer to a specified person that 3 does both of the following by direct communication or through the 4 use of any media, including mail, computer, or telephone: 5 (i) Provides the person with an opportunity to participate 6 in a sweepstakes or a game of skill. 7 (ii) Represents that the person has been awarded or will be 8 awarded a prize. 9 (b) "Buyer" means an actual or prospective purchaser, 10 lessee, or recipient of a good or service offered in a home 11 solicitation sale. 04221'97 DMS 2 1 (c) "Buying club" means an entity that for a fee of $200.00 2 or more offers to consumers the opportunity to purchase consumer 3 goods or services from the entity or exclusively from a catalog. 4 As used in this subdivision, "entity" includes a partnership, 5 corporation, limited liability company, association, trust, or 6 other legal entity. 7 (d) "Consumer" means a person who purchases a consumer good 8 or service for any purpose other than resale. 9 (e) "Consumer goods or services" means goods or services 10 purchased or leased primarily for personal, family, or household 11 purposes. 12 (f) "Financial institution" means a state or federally 13 chartered bank, savings and loan association, savings bank, or 14 credit union. 15 (g) "Fixed location" means a permanent place of business at 16 which the seller offers or exhibits the same goods or services 17 for sale or lease that he or she would offer to sell or lease at 18 the residence of a buyer. 19 (h) "Home solicitation sale" means that term as defined in 20 section 1 of 1971 PA 227, MCL 445.111. 21 (i) "Person" means an individual, partnership, corporation, 22 limited liability company, association, trust, or other legal 23 entity. 24 (j) "Prize" means a tangible or intangible item of value 25 conditionally or unconditionally offered to a buyer without 26 receipt of consideration, and includes an award, gift 27 certificate, or travel coupon. 04221'97 3 1 (k) "Promoter" means a person conducting a sweepstakes. 2 (l) "Seller" means a person in the business of selling or 3 leasing a good or service valued at more than $25.00, and 4 includes that person's agent, employee, or solicitor. 5 (m) "Simulated check" means a document that appears to be a 6 check but is not a negotiable instrument. 7 (n) "Sponsor" means a person on whose behalf a sweepstakes 8 is being conducted. 9 (o) "Sweepstakes" means a legal contest or game in which a 10 prize is distributed by lot or chance and for which a permit or 11 license to operate in this state is not required. 12 (p) "Telemarketer" means a seller who initiates a home 13 solicitation sale by telephone or by any of the following: 14 (i) A television, radio, or printed advertisement. 15 (ii) A postcard or other written notice that requests that a 16 buyer contact the seller by telephone to inquire about a good or 17 service, unless the postcard or other written notice specifies 18 the price of the good or service and accurately describes the 19 good or service. 20 (q) "Verifiable retail value" means any of the following: 21 (i) A price at which a sweepstakes prize item has been regu- 22 larly sold at retail in a local market by persons other than a 23 sweepstakes promoter or sponsor during a 1-year period before 24 advertisement for the sweepstakes is made. 25 (ii) If a sweepstakes prize item is not available in a local 26 market, the retail value of an item substantially similar to the 27 prize item in quality, quantity, grade, and utility. 04221'97 4 1 (iii) If the retail value of a sweepstakes prize item cannot 2 be established under subparagraphs (i) and (ii), a value that is 3 not more than 3 times the cost of the prize to the promoter or 4 sponsor. 5 Sec. 2. (1) Subject to subsection (6), a buyer's oral 6 agreement to buy or lease a good or service from a telemarketer 7 is not binding on the buyer unless the telemarketer provides the 8 buyer with a written contract containing the information speci- 9 fied in subsection (2) and the buyer signs the written contract. 10 (2) A written contract required under this section shall 11 include all of the following: 12 (a) The name, address, and telephone number of the 13 telemarketer. 14 (b) A list of all prices or fees being charged to the buyer, 15 including any shipping, handling, delivery, or other charges. 16 (c) The date of the transaction. 17 (d) A detailed description of the good or service being sold 18 or leased. 19 (e) The following statement, in at least 10-point boldfaced 20 type, in the space immediately preceding the space allotted for 21 the buyer's signature: "YOU ARE NOT OBLIGATED TO PAY ANY MONEY 22 UNLESS YOU SIGN THIS CONTRACT AND RETURN IT TO THE 23 TELEMARKETER'S/SELLER'S ADDRESS SPECIFIED IN THIS CONTRACT.". 24 (3) If a telemarketer fails to obtain a buyer's signature on 25 a written contract described in subsection (2) before delivering 26 a good or service to that buyer, the good or service is an 27 unconditional gift to the buyer. 04221'97 5 1 (4) A telemarketer shall provide a buyer with a duplicate 2 copy of the contract described in subsection (2). 3 (5) A telemarketer shall not accept payment from a buyer, or 4 make or submit any charge to the buyer's credit card account, 5 unless the telemarketer has received from the buyer a written 6 contract signed by the buyer that contains the information speci- 7 fied in subsection (2). If the buyer fails to sign the written 8 contract and submits payment to the telemarketer or allows the 9 telemarketer to charge his or her credit card account for the 10 good or service, the telemarketer shall immediately refund the 11 payment or credit the buyer's credit card account in the amount 12 charged. 13 (6) This section does not apply to any of the following: 14 (a) A transaction between a buyer and a publisher, owner, 15 agent, or employee of a newspaper marketing its own 16 publications. 17 (b) A transaction between a buyer and a financial 18 institution. 19 (c) A transaction arising from prior negotiations between 20 the parties at a business establishment at a fixed location. 21 (d) A transaction arising during the course of a preexisting 22 business relationship between the buyer and telemarketer, if the 23 telemarketer has provided the buyer with the telemarketer's busi- 24 ness location and telephone number. 25 (e) A transaction in which the buyer purchases goods or 26 services on the basis of a telemarketer's printed advertisement, 04221'97 6 1 brochure, catalogue, or other written material that contains all 2 of the following: 3 (i) The name, mailing address, and telephone number of the 4 telemarketer. 5 (ii) A full description of the good or service being 6 purchased. 7 (iii) A statement identifying all charges for the purchase, 8 including any handling, shipping, or delivery charges. 9 (iii) A statement identifying any limitation or condition 10 that applies to the offer. 11 (iv) A statement identifying the refund policy of the 12 telemarketer. 13 (f) A transaction in which the telemarketer is certified by, 14 or providing services under tariffs filed with, the department of 15 utility control of the federal communications commission. 16 (g) A transaction initiated by a telemarketer on its own 17 behalf that is exempt from taxation under the internal revenue 18 code. 19 (h) A transaction in which all of the following conditions 20 are met: 21 (i) The buyer is entitled to a full refund if he or she 22 returns to the telemarketer unused and undamaged goods within 7 23 days after receipt of those undamaged goods or services. 24 (ii) The telemarketer agrees to issue a refund within 30 25 days after the buyer returns unused and undamaged goods or pro- 26 vides a notice of cancellation of a contract for services. 04221'97 7 1 (iii) The buyer is entitled to a pro rata refund for 2 services not performed before cancellation of a contract for 3 services. 4 (iv) The buyer is provided with a clear and conspicuous 5 written statement that identifies the buyer's refund rights 6 described in this subdivision. 7 (i) A transaction exempt from the Michigan consumer protec- 8 tion act, 1976 PA 331, MCL 445.901 to 445.922. 9 (j) A transaction between a buyer and seller if the seller 10 meets all of the following conditions: 11 (i) The seller has continually operated a retail business 12 establishment at a fixed, permanent location for at least 2 13 years. 14 (ii) The seller uses the same name in the telemarketing 15 transaction that he or she uses at the retail business establish- 16 ment at a fixed, permanent location. 17 (iii) The goods or services offered in the telemarketing 18 transaction are also offered for sale or lease at the seller's 19 retail establishment at a fixed, permanent location. 20 (iv) The seller's annual telemarketing-originated sales com- 21 prise less than 50% of annual sales at the seller's retail estab- 22 lishment at a fixed, permanent location. 23 Sec. 3. (1) A person shall not advertise in this state a 24 sweepstakes that conditions or restricts eligibility for the 25 sweepstakes prize, unless the condition or restriction does not 26 require a purchase, payment of a fee, or any other 04221'97 8 1 consideration. As used in this section, "consideration" does not 2 include any of the following: 3 (a) A local telephone call, or a telephone call paid for by 4 the promoter or sponsor. 5 (b) A visit to a local retail establishment, unless that 6 visit includes a requirement that the participant attend a sales 7 presentation. 8 (c) A publicity or liability release. 9 (d) An eligibility affidavit. 10 (e) An assumption of liability for federal, state, or local 11 taxes on a prize. 12 (f) Federal, state, or local license or registration fees, 13 or similar costs. 14 (2) A person advertising a sweepstakes in this state shall 15 do all of the following: 16 (a) Include each of the following in immediate proximity to 17 each prize description contained in the advertisement, in at 18 least the same size and face type of the description: 19 (i) The verifiable retail value of the prize. 20 (ii) If the sweepstakes involves an element of chance that 21 is not dependent on the number of entries received, the odds of 22 winning the prize, expressed in Arabic numerals as a fraction or 23 ratio. 24 (iii) If the sweepstakes involves an element of chance that 25 depends on the number of entries received, a statement that the 26 chance of winning depends on the number of entries received. 04221'97 9 1 (iv) A statement identifying any restriction or limitation 2 on the use, availability, or receipt of the prize. This 3 subparagraph may be satisfied by providing a statement substan- 4 tially similar to the following: "Major restrictions may apply 5 to the use, availability, or receipt of this prize" accompanied 6 by a separate document that specifies the restrictions or 7 limitations. 8 (b) Clearly and conspicuously disclose all of the 9 following: 10 (i) The name and address of each promoter and sponsor of the 11 sweepstakes. 12 (ii) Each condition or restriction on eligibility to receive 13 the prize. 14 (3) A person shall not advertise a game of skill that offers 15 a prize with a verifiable retail value of more than $200.00 if 16 participants are required to pay an entry or judging fee or are 17 solicited to purchase a good or service designed to assist par- 18 ticipants in winning the game of skill. However, if a game of 19 skill is designed primarily to promote a specific good or serv- 20 ice, the participant may be required to purchase that specific 21 good or service as a condition of participation. 22 Sec. 4. A person shall not distribute or transfer a simu- 23 lated check in connection with a sweepstakes in this state unless 24 the simulated check clearly and conspicuously bears the phrase 25 "THIS IS NOT A CHECK" diagonally printed on its face. 26 Sec. 5. An agreement between a consumer and a buying club 27 is not effective unless the agreement is in a writing that 04221'97 10 1 contains a conspicuous statement, in at least 10-point type, that 2 provides the following in substantially the following form: 3 "YOU THE BUYER MAY CANCEL THIS TRANSACTION AT ANY TIME BEFORE 4 MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS 5 TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FOR AN 6 EXPLANATION OF THIS RIGHT.". 7 Sec. 6. At the time a consumer agrees to become a member of 8 a buying club, the buying club shall provide the consumer with a 9 completed form in duplicate that is attached to the written 10 agreement described in section 5 and easily detachable from that 11 agreement. The form shall contain substantially the following in 12 at least 10-point boldfaced type: 13 "NOTICE OF CANCELLATION 14 [date of transaction] 15 YOU MAY CANCEL THIS TRANSACTION WITHOUT PENALTY OR OBLIGATION 16 WITHIN 3 BUSINESS DAYS AFTER THE DATE AT THE TOP OF THIS FORM. 17 IF YOU CANCEL, ANY PAYMENTS YOU MAKE UNDER THE TRANSACTION WILL 18 BE RETURNED TO YOU WITHIN 10 BUSINESS DAYS AFTER THE DATE [insert 19 the name of the buying club] RECEIVES YOUR CANCELLATION NOTICE. 20 TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED 21 COPY OF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE OF 22 CANCELLATION TO [insert the name and address of the buying club] 23 NOT LATER THAN 3 BUSINESS DAYS AFTER THE DATE AT THE TOP OF THIS 24 FORM. 25 I CANCEL THIS TRANSACTION. 26 [insert date] 04221'97 11 1 ______________________________ 2 [consumer's signature]". 3 Sec. 7. A buying club shall orally advise a consumer of the 4 consumer's right to cancel a buying club membership transaction 5 at the time the consumer is asked to sign the transaction. A 6 buying club shall honor a cancellation timely delivered to the 7 buying club under this act, and refund all payments made under 8 the canceled transaction within 10 business days after receipt of 9 the notice of cancellation. 10 Sec. 8. A person who violates this act is subject to the 11 penalties and damages described in the Michigan consumer protec- 12 tion act, 1976 PA 331, MCL 445.901 to 445.922, for an unfair, 13 unconscionable, or deceptive method, act, or practice in the con- 14 duct of trade or commerce. 04221'97 Final page. DMS