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2005 Texas Business & Commerce Code CHAPTER 40. CONTESTS AND GIFT GIVEAWAYS
BUSINESS & COMMERCE CODE CHAPTER 40. CONTESTS AND GIFT GIVEAWAYS SUBCHAPTER A. GENERAL PROVISIONS § 40.001. SHORT TITLE. This chapter may be cited as the Contest and Gift Giveaway Act. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.002. CONSTRUCTION OF CHAPTER. This chapter shall be interpreted to provide the maximum disclosure to, and fair treatment of, a person who enters a contest or gift giveaway through which the person is solicited to attend a sales presentation. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.003. DEFINITIONS. (a) In this chapter: (1) "Contest" means a promotional device in which: (A) a person is offered, as an inducement to attend a sales presentation, a chance to win or receive a prize by complying with specified entry requirements; (B) the chance to win any prize is determined by random selection; and (C) all offered prizes are awarded. (2) "Contest period" means the duration of a contest from the beginning date to the ending date. (3) "Drawing" means a contest in which the recipient of a prize is determined from all of the entries received. (4) "Entry form" means a card, letter, entry blank, token, or similar device that identifies a contestant by: (A) name; (B) number, letter, or symbol; or (C) both name and number, letter, or symbol. (5) "Gift" means an item of value that is offered, transferred, or given to a person as an inducement to attend a sales presentation but that is not offered, transferred, or awarded by chance through a contest. The term does not include a manufacturer's rebate or discount available to the public. (6) "Major prize" means a prize that has an actual unit cost to the offeror of at least $250. (7) "Matched contest" means a contest in which: (A) winning numbers are preselected, printed on an entry form, and distributed to the public; and (B) the numbers on the entry form are subsequently matched with the list of winning numbers at a sales location to determine prize eligibility. (8) "Minor prize" means a prize that: (A) has an actual unit cost to the offeror of less than $250; and (B) is transferred to a person who: (i) attends a sales presentation; and (ii) is not the winner of a major prize. (9) "Odds of winning" means a ratio in which: (A) the numerator equals the actual number of units of an identified prize to be given away during a contest period; and (B) the denominator equals the number of entry forms distributed or reasonably anticipated to be distributed during the contest period. (10) "Offeror" means a person who solicits a person to attend a sales presentation. (11) "Person" includes an individual, a corporation, a firm, and an association. (12) "Prize" means an item of value that is offered, awarded, or given to a person through a contest. The term does not include a manufacturer's rebate or discount available to the public. (13) "Sales presentation" means a transaction or occurrence in which a consumer is solicited to execute a contract that obligates the consumer to purchase goods or services as defined by Subchapter E, Chapter 17, including: (A) a "timeshare interest" as defined by Chapter 221, Property Code; and (B) a "membership interest" as defined by Chapter 222, Property Code. (14) "Winning number" includes a letter or other identifying symbol. (b) For purposes of Subsection (a)(1)(B), a determination made by "random selection" does not include the method used by an offeror to identify any person who will be notified of an offer to win a prize. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.004. EXEMPTION. This chapter does not apply to a sales presentation conducted in conjunction with a business seminar, trade show, convention, or other gathering at which representatives of business entities are the only individuals solicited to attend the sales presentation. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.005. DETERMINATION OF RETAIL VALUE OF PRIZE OR GIFT. (a) The retail value of an item offered as a prize or gift is the price at which a substantial number of sales of the exact item of the same manufacturer, brand, model, and type have been made to members of the public by at least two principal retail outlets in this state during the six months preceding the offering of the prize or gift. (b) If a substantial number of sales of a particular item have not been made in this state in the six months preceding the offering of the item described in the solicitation or if the offeror elects, the retail value of the item is the actual cost of the item to the offeror, net of any rebates, plus 200 percent. (c) If a prize or gift involves lodging, airfare, a trip, or a recreational activity, the retail value is the retail sales price of that lodging, airfare, trip, or recreational activity to a member of the public who is not involved in a promotional or other discount transaction. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.006. RAINCHECK REQUIREMENTS. (a) Subject to Subsections (d)-(g), an offeror may not fail: (1) in a gift offer to provide each gift as represented to each person who attends a sales presentation; or (2) in a matched contest to award each prize as represented on the entry form to each person who presents a winning entry. (b) Except as provided by Subsections (d)-(g), an offeror may not provide a coupon book, a discount book, or a certificate or voucher that entitles the holder to redeem the certificate or voucher for a gift or prize required to be available under this section. (c) An offeror shall have available at the sales location a sufficient quantity of: (1) each gift to meet the reasonable anticipated response to the offer; or (2) each prize to meet the reasonable anticipated number of prize winners. (d) If the response to an offer exceeds the number of gifts, or of major or minor prizes, available at the sales location, the offeror, at the time of the visit or, if a sales presentation is required, at the conclusion of the sales presentation, shall tender to the recipient of the offer a raincheck for the gift or prize represented in the offer. The offeror shall send that exact gift or prize to the recipient, without cost to the recipient, not later than the 14th day after the date on which the recipient visits the sales location or attends the sales presentation. The offeror shall obtain a return receipt from the shipper verifying that the gift or prize was delivered to the recipient. (e) If, after the expiration of 14 days from the date of issuance of the raincheck, the offeror has failed to send the gift or minor prize, the offeror, not later than the 15th day after the date of issuance of the raincheck, shall send to the recipient of the raincheck a check or money order in the amount of $100 payable to the recipient. The offeror shall obtain a return receipt from the United States Postal Service that verifies that the check or money order was delivered to the recipient. (f) If the offeror knows at the time the recipient of the offer visits the sales location or attends a sales presentation that the gift or minor prize will not be available within 14 days of the date of the visit or attendance, the offeror shall at the time of the visit or at the conclusion of the sales presentation tender to the recipient, by cash or check, the amount of $100. (g) If the gift or prize involves lodging, airfare, a trip, or a recreational activity, the offeror may give the recipient a certificate that evidences the recipient's right to the gift or prize. The offeror may require a refundable deposit if the requirement of a deposit is fully disclosed. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.007. DEPOSIT REQUIREMENTS. (a) If a gift or prize involves lodging, airfare, a trip, or a recreational activity, the offeror may require a refundable deposit if the requirement of a deposit is fully, clearly, and conspicuously disclosed. (b) For purposes of this section, "refundable deposit" means a deposit that is required to be returned in its entirety to a consumer if: (1) it is paid by the consumer for a reservation that is used by the consumer; or (2) the consumer provides at least five possible reservation dates, none of which can be confirmed. (c) A condition that restricts the refund of the deposit must be clearly and conspicuously disclosed in at least 10-point type on the solicitation. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997.SUBCHAPTER B. GIFT OFFERS § 40.031. APPLICATION OF SUBCHAPTER. This subchapter applies to a person who uses a gift as part of an advertising plan or program. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.032. FULL DISCLOSURE REQUIRED. A gift is not prohibited in a legitimate trade promotion if the advertising regarding the promotion fully discloses any requirement of a purchase to be made or contractual obligation to be assumed to qualify for the gift. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.033. CONSIDERATION TO OFFEROR; LIMITATIONS. (a) An offeror may not notify a person that the person will receive a gift, a condition of receipt of which requires the person to pay consideration of any kind or a charge or expense to a person for the gift, unless the consideration, charge, or expense is fully, clearly, and conspicuously disclosed. (b) An offeror may not charge a redemption fee or shipping fee even if full disclosure of the fee is made. (c) In this section, "redemption or shipping fee" means any kind of consideration paid to the offeror. The term does not include a refundable deposit. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.034. LIMITATION ON REQUIREMENT OF PURCHASE. An offeror may not notify a person that the person will receive a gift, a condition of receipt of which requires the person to purchase a good or service, unless at the time of notification the offeror clearly and conspicuously discloses that purchase of a good or service is required. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.035. LIMITATION ON REQUIRED ATTENDANCE AT SALES PRESENTATION. (a) An offeror may not notify a person that the person will receive a gift unless at the time of the notification the offeror clearly and conspicuously discloses: (1) that attendance at the sales presentation is required; (2) a description of the product or service being sold; and (3) the approximate duration of the sales presentation. (b) An item of value offered as an inducement to a person to attend a sales presentation constitutes a gift unless the item qualifies as a prize offered, transferred, or given through a contest. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.036. GIFT OFFERS; PROHIBITED ACTS. A person may not: (1) use the term "gift" or a similar term in a false, misleading, or deceptive manner; (2) directly represent or imply that a gift promotion is a contest; (3) in a gift promotion, use the term: (A) "finalist," "major award winner," "grand prize recipient," "winner," "won," "will win," or "will be awarded" or use words or phrases of similar meaning that imply that a person is being solicited to enter or participate in a contest; or (B) "sweepstakes" or "contest" or use words or phrases of similar meaning that imply that the respondent is being solicited to enter or has won a contest; (4) fail to disclose the retail value of a gift; (5) fail to disclose clearly and conspicuously in at least 10-point type that airfare, lodging, or both are not included as part of a prize that is a trip or recreational activity to the extent that either or both are not included; (6) represent that a gift has a sponsor, approval, characteristic, ingredient, use, benefit, quantity, status, affiliation, connection, or identity that the gift does not have; (7) represent that a gift is of a particular standard, quality, grade, style, or model if the gift is of another; or (8) use a word or phrase that simulates or causes confusion with: (A) a document issued by an officer of a court of any jurisdiction or that implies the offeror is sending a court or legal document; or (B) the seal or name of a governmental entity, whether real or fictitious, or that implies that the offeror is a governmental entity. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997.SUBCHAPTER C. MATCHED CONTESTS AND DRAWINGS § 40.061. APPLICATION OF SUBCHAPTER. This subchapter applies to a person who uses a contest as part of an advertising plan or program. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.062. CONSIDERATION TO OFFEROR; LIMITATIONS. An offeror may not notify a person that the person has won a prize, will receive a prize, or has a chance to win or receive a prize, a condition of receipt of which requires the person to pay consideration of any kind or a charge or expense to a person for the prize except for: (1) expenses incurred for travel to and from the sales location; or (2) a refundable deposit authorized under Section 40.007. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.063. LIMITATION ON REQUIREMENT OF PURCHASE. An offeror may not notify a person that the person has won a prize, will receive a prize, or has a chance to win or receive a prize, a condition of receipt of which requires the person to purchase a good or service unrelated to the prize. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.064. LIMITATION ON REQUIRED ATTENDANCE AT SALES PRESENTATION. An offeror may not notify a person that the person has won a prize, will receive a prize, or has a chance to win or receive a prize unless at the time of the notification the offeror clearly and conspicuously discloses: (1) that attendance at the sales presentation is required; (2) a description of the product or service being sold; and (3) the approximate duration of the sales presentation. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.065. MATCHED CONTEST REQUIREMENTS. (a) The identity and number of the major prizes to be awarded in a matched contest shall be determined before the contest begins. That information shall be disclosed on each entry form distributed. (b) Each major prize identified on an entry form shall be awarded. (c) The contest period may not exceed 12 calendar months. (d) If, during the contest period, a winning number is not presented or matched for a major prize, the offeror shall conduct a drawing from the names of those individuals who have attended a sales presentation during the contest period. The offeror shall conduct the drawing not later than the 60th day after the date on which the contest period ends. Each major prize identified on the entry forms distributed during the contest period that was not previously awarded shall be awarded at the time of the drawing. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.066. MATCHED CONTEST; PROHIBITED ACTS. (a) A person engaged in the preparation, promotion, sale, distribution, or use of a matched contest may not: (1) use the term "prize" or another similar term in a false, misleading, or deceptive manner; (2) fail to disclose the retail value of the prize; (3) fail to disclose clearly and conspicuously in at least 10-point type that airfare, lodging, or both are not included as part of a prize that is a trip or recreational activity to the extent that either or both are not included; (4) represent that a person solicited to enter a contest is a "finalist," "major award winner," "grand prize recipient," or "winner" or that a person has "won," "will win," or "will be awarded" or use words or phrases of similar meaning when a person is being solicited to enter or participate in a contest, unless the representation is true; (5) represent that a prize has a sponsor, approval, characteristic, ingredient, use, benefit, quantity, status, affiliation, connection, or identity that the prize does not have; (6) represent that a prize is of a particular standard, quality, grade, style, or model if the prize is of another; (7) misrepresent the odds of winning a prize; (8) misrepresent the rules or terms of participation in a contest; (9) represent that: (A) any number, ticket, coupon, symbol, or entry form confers or will confer an advantage on a person that another person does not have; (B) a person is more likely to win a prize than another person; or (C) a number, ticket, coupon, symbol, or entry form has some value that other entries do not have; (10) fail to obtain a person's express written consent before using that person's name for a promotional purpose; (11) use or distribute simulated checks or currency or other simulated items of value unless the words "SPECIMEN--NON-NEGOTIABLE" are clearly and conspicuously printed on those items in at least 18-point type; (12) use a word or phrase that simulates or causes confusion with: (A) a document issued by an officer of a court of any jurisdiction or that implies the offeror is sending a court or legal document; or (B) the seal or name of a real or fictitious governmental entity or that implies that the offeror is a governmental entity. (b) A person may not use a matched contest unless the person clearly and conspicuously discloses in writing in the offer: (1) the fact that attendance at a sales presentation is required; (2) the name and street address of the person who is soliciting attendance at a sales presentation; (3) a description of the product or service being sold; (4) each requirement, restriction, qualification, and other condition that must be satisfied for a person to enter a contest, including: (A) any deadline by which the person must visit the location or attend the sales presentation to qualify to receive a prize; and (B) the approximate duration of the sales presentation; (5) a statement of the odds of winning each prize offered, expressed as a ratio in Arabic numerals; (6) the geographical area or states in which the contest will be conducted; (7) the beginning and ending dates of the contest period; (8) the identity and address of each person responsible for the awarding of the prizes; (9) the fact that all unclaimed prizes will be awarded by a drawing and the date of the drawing; and (10) all other rules and terms of the contest. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.067. DRAWINGS; PROHIBITED ACTS. (a) A person may not use a drawing unless the offeror clearly and conspicuously discloses in writing in the offer: (1) a statement of the odds of winning each prize offered, expressed as a ratio in Arabic numerals; (2) the exact prizes to be awarded in the contest; (3) the beginning and ending dates of the contest period; (4) the date on which the drawing will take place; and (5) the location of the drawing. (b) A person engaged in the preparation, promotion, sale, distribution, or use of a drawing may not: (1) use the term "prize" or a similar term in a false, misleading, or deceptive manner; (2) fail to provide the prize as represented at the conclusion of the drawing; (3) fail to disclose the retail value of the prize; (4) fail to disclose clearly and conspicuously in at least 10-point type that airfare, lodging, or both are not included in a prize that is a trip or recreational activity to the extent that either or both are not included; (5) represent that a prize has a sponsor, approval, characteristic, ingredient, use, benefit, quantity, status, affiliation, connection, or identity that the prize does not have; (6) represent that a prize is of a particular standard, quality, grade, style, or model if the prize is of another; (7) misrepresent the odds of winning a prize; or (8) misrepresent the rules or terms of participation in a contest. (c) If the odds of winning cannot be determined because the total number of entries is not known, the offeror shall make a statement to the effect that the odds of winning depend on the total number of entries received. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997.SUBCHAPTER D. CONTEST RECORDS § 40.091. APPLICATION OF SUBCHAPTER. This subchapter applies to a person who uses a contest as part of an advertising plan or program. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.092. GENERAL CONTEST RECORDS; LIST OF WINNERS. (a) For each contest other than a drawing, the offeror shall maintain until the second anniversary of the date on which all prizes have been awarded: (1) a record of the identity and address of each person who is responsible for developing, creating, sponsoring, or implementing any part of the advertising plan or program; (2) records that show that the winning numbers have been deposited in the mail or otherwise made available to recipients in accordance with the odds statement provided under Section 40.066(b); (3) a copy of each contest solicitation; (4) records adequate to disclose: (A) the name and address of each contestant; (B) the approximate date on which each contestant was sent the solicitation used in the contest; (C) the number of major prizes awarded; (D) the date on which each major prize was awarded; (E) the name, brand, type, model number, and manufacturer of each prize offered; (F) the method of computing the retail value of each prize; (G) the method of selecting major prize winners; (H) the name and address of each major prize winner; and (I) the facts on which each representation or disclosure made in connection with the contest is based and from which the validity of the representation or disclosure can be determined. (b) Postal receipt records, affidavits of mailing, and a list of winners or recipients of the major prizes satisfy the requirements of Subsection (a)(2). Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.093. DRAWING RECORDS; LIST OF WINNERS. (a) For each drawing, the offeror shall maintain until the second anniversary of the date on which all major prizes have been awarded: (1) a record of the identity and address of each person who is responsible for developing, creating, sponsoring, or implementing any part of the advertising plan or program; (2) records that show that the winning entry for each major prize was selected entirely at random from all of the entries received; (3) a copy of each contest solicitation; and (4) records adequate to disclose: (A) the total number of entries; (B) the number of major prizes awarded; (C) the date on which each major prize was awarded; (D) the name, brand, type, model number, and manufacturer of each prize offered; (E) the method of computing the retail value of each prize; (F) the method of selecting winners; and (G) the names and addresses of the winners. (b) An affidavit from the person who conducted the drawing and a list of winners or recipients of the major prizes satisfies the requirements of Subsection (a)(2). Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.094. DISCLOSURE ON REQUEST. At the end of the contest period, each person who conducts a contest shall provide to any person requesting the information: (1) the names of all major prize winners; and (2) the prizes won by each winner. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.095. RECORDS AVAILABLE TO ATTORNEY GENERAL. The records required under this subchapter shall be made available to the attorney general not later than the 30th day after the date on which a written request for the records is received. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997.SUBCHAPTER E. ENFORCEMENT § 40.121. CRIMINAL PENALTY. (a) A person commits an offense if the person knowingly violates this chapter. (b) Except as provided by Subsection (c), an offense under this section is a Class B misdemeanor. (c) An offense under this section is a: (1) Class A misdemeanor if it is shown at the trial of the defendant that the violation occurred not later than the fifth anniversary of the date of a previous conviction under this section; or (2) third degree felony if the violation was intentional and it is shown at the trial of the defendant that the violation occurred not later than the fifth anniversary of the earlier of the dates of two previous convictions under this section. (d) Subsection (c)(2) does not apply to a violation of Subchapter D. (e) A person may not be prosecuted for more than one offense involving the same promotion, even if that promotion is mailed or distributed to more than one person or is used at more than one location. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997. § 40.122. DECEPTIVE TRADE PRACTICE. A violation of this chapter is a deceptive trade practice in addition to the practices described by Subchapter E, Chapter 17, and is actionable under that subchapter. Added by Acts 1997, 75th Leg., ch. 1008, § 4, eff. Sept. 1, 1997.
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