N.M. Code R. § 12.2.3.8

Current through Register Vol. 35, No. 11, June 11, 2024

Section 12.2.3.8 - STATEMENT OF BASIS

A. The attorney general's office is concerned about sweepstakes and giveaway promotions conducted in the course of the sale of subdivided land, condominiums, time-share interests and campground memberships. Since 1984, the attorney general's office has received numerous telephone calls and letters concerning the promotion of time-shares. Indeed, the complaints and questions have come in daily. They have reflected consumer dissatisfaction in a number of areas. For example, consumers have not received complete disclosure of the nature of promotions; to claim an offered gift, consumers have had to attend sales presentations of which they were not advised, including some where high-pressure sales tactics were reportedly employed; consumers have not understood the real odds of winning various gifts; the conditions placed on receiving gifts have not been adequately disclosed; consumers have reported that promised gifts were not available, or that gifts that were available did not have the characteristics described in the original promotional mailing or phone solicitation. It is precisely such concerns that these regulations address.

B. These regulations do not expressly or impliedly authorize any lottery prohibited by statute, including but not limited to Section 30-19-1 NMSA 1978. Neither do these regulations prohibit any otherwise lawful sweepstakes and giveaway promotions, except to the extent they are deceptive or misleading. These regulations do not supersede those set forth in 1 NMAC 2.2 [now 12.2.2 NMAC] entitled "Game Promotion Regulations Issued Pursuant to New Mexico Unfair Practices Act and False Advertising Act". Rather, these regulations supplement those regulations; these set forth additional requirements to apply specifically to promotional sales of subdivided land, condominiums, time-share interests and campground memberships in New Mexico. The regulations apply so long as the promotion occurs in New Mexico, even if the property itself is located outside of New Mexico.

C. Advertising of subdivided land is governed by Section 47-6-18 NMSA 1978 of the New Mexico Subdivision Act, Section 47-6-1 NMSA 1978 et seq. The regulations promulgated here apply to subdivided land only when game promotions are used in connection with the sale of that land, and these regulations do not supersede the New Mexico Subdivision Act.

D. Before promulgating these regulations, three public hearings were held: on May 23, 1985 in Ruidoso; on June 10, 1985, in Santa Fe; and on June 11, 1985, in Albuquerque. All comments received at the hearings were considered in the revision of the regulations finally adopted. Consumers had already effectively spoken to this office and expressed their concern through their daily complaints and inquiries. Representatives of developers and advertisers who produce and disseminate promotional materials testified at the hearings to address their concerns. This office also solicited written comments on the regulations. The comments received reflected the interests of the American land development association, particular developers involved in the development of time-shares in New Mexico and the game promotion industry. All comments were considered.

E. Preamble to the regulations.

(1) The attorney general has concluded that regulation of the promotion and sale of subdivided land, condominium, time-share and campground memberships in New Mexico is in the best interest of the health, safety and general welfare of the citizens of New Mexico. Revisions have been made to the proposed regulations to reflect the input received from all concerned. The revised final regulations particularly reflect direct mail standards developed by the American land development association, the land development industry's own professional association and lobby organization.

(2) The revisions should make the regulations both more acceptable to the industry regulated and more readily enforceable by the office of the attorney general while preserving the primary focus of protecting consumers from unfair or deceptive acts or practices. Since these final regulations do not differ significantly from those that were proposed, and indeed since the vast majority of changes adopted conform to industry concerns, it was not necessary to issue these regulations in any revised proposed form or to hold any additional hearings.

(3) The following responds to a number of the particular comments received during the rule-making proceeding:

(a) This office has authority to promulgate these regulations pursuant to the New Mexico Unfair Practices Act, at Section 57-12-13 NMSA 1978, and the False Advertising Act, at Section 57-15-7 NMSA 1978. The fact that these regulations apply only to the promotion and sale of subdivided land, condominium, time share and campground interests does not mean these regulations are not authorized or that they unfairly and unlawfully discriminate against one particular industry. The attorney general is not required, as some commentors suggested, to regulate all promotional materials of every kind rather than limit the regulations, as done here, to the particular promotions targeted. These regulations address the specific concerns consumers have raised. They are drawn narrowly, to address the problems noted, and are not intended to be any broader than necessary. All promoters of any and all products, interests or services are always subject to the general proscriptions of the New Mexico Unfair Trade Practices Act and False Advertising Act. These regulations merely address those same general prohibitions against unfair or deceptive practices in the context of the specific issues raised by time-share and related promotions. The specificity of these regulations is designed to assist the industry in knowing precisely what practices have caused substantial concern and merit particularized guidelines. The scope of these regulations is thus rationally based.

(b) The need for these regulations has been emphasized repeatedly in the steady flow of complaints and inquiries the attorney general's office has received from consumers. Some opponents of the regulations have argued, however, that consumers who have been confused or misled by sweepstakes promotions have not been sophisticated enough to protect themselves and that regulations should not be adopted to protect them. We disagree. Consumer protection law is not designed only to protect the sophisticated and the educated. To the contrary, consumer protection law is geared to the entire general public. Indeed, it should provide special protections for the less educated and most vulnerable members of society. These regulations are designed to help provide that protection without imposing unreasonable burdens on the industry.

(c) Regulations such as these to address unfair trade practices and false advertising in the promotion and sale of property interests are not novel. Many of these provisions simply conform with requirements in many other states. The fact that these requirements are adopted by regulation, and not enacted by the legislature, also does not render them unlawful. The test is whether the regulations pursue the general prohibition against unfair and deceptive acts or practices. So long as they do, these regulations are authorized and appropriate. Contrary to some industry critics, other industry representatives expressed interest in the establishment of these specific standards in New Mexico for promotional materials since similar standards are in effect in other states. For example, industry representatives concurred that these regulations should help protect the industry from violators who adversely affect the industry as a whole. Furthermore, the American land development association, a nationwide representative organization of land developers, recognized the similarity of these regulations with standards the industry has imposed on itself. These regulations should not, therefore, prove burdensome.

(d) This office recognizes the importance of tourism in New Mexico. These regulations are by no means intended to hinder that vital element of the state's economy. To the contrary, these regulations should help enhance state tourism by providing important protections and safeguards to visitors. These protections should help ensure favorable impressions and encourage visitors to suggest that other potential tourists visit New Mexico as well. The state's interest in tourism is not served by any unfair or misleading practices, and that is all these regulations are designed to prohibit.

(e) Specific changes made since the regulations were proposed include a change in the definition of the term "sweepstakes". The change makes the definition more acceptable to the industry by providing even more specific terminology, consistent with the federal trade commission's definition of the term. The definition of "verifiable retail value" has also been changed to conform to industry standards, as well as to the federal trade commission's definition of the term.

(f) These final regulations do not apply to radio and television advertising, as was initially proposed. Upon considering the comments tendered, it was decided that the time constraints of those media make such regulation impractical. These regulations do apply, however, to telephone solicitations, with a more limited standard for compliance consistent with the opportunities available in telephone conversations.

(g) A definition for "vacation certificates" has been added to the regulations, since substantial deception in utilizing this particular form of promotion has been brought to this office's attention since the regulations were originally proposed. Specific standards concerning vacation certificates, consistent with these regulations other provisions, have likewise been added to the regulations.

(h) A definition for "premium gift" has also been added. The "premium gift" is the gift which the majority of promotion recipients receive. It is the gift which creates the most controversy, in terms of its value and availability.

(i) The definition of "promoter" has been changed to be more specific by including any organization which either authorizes or disseminates the promotional material. Wording of specific regulations in 9.1.2.1.f [now Subparagraph (f) of Paragraph (1) of Subsection B of Section 12.2.3.9 NMAC] has also been clarified, giving examples of specified industry practices, such as characterizing time share weeks during seasons of the year as "high", "medium", and "low", "red", "white" and "blue", or "floating".

(j) The proposed requirement to disclose affirmatively that which is obvious - i.e., that consumers must bear the cost of travel to the site - has been eliminated. A clarification instead has been made to disclose conditions of eligibility for purchase of the property interest promoted.

(k) The regulations have been clarified so that all conditions or terms of sale of the property interest promoted do not have to be included on the game promotion piece itself; only the conditions of eligibility for purchase must be disclosed. Subject to applicable federal and state laws, promotions may request information regarding age, income level and marital status.

(l) Words such as "awards", "prizes", and "gifts" may not be used if the person must supply anything, other than his time to visit the property, in order to claim the award, prize or gift. Likewise, a recipient of a promotion shall not be described as a "winner" or a "finalist" and promotional pieces may not notify persons that they have won a "prize" unless the matters "won" or "prizes" to be received are given without condition. Conditions attached to the receipt of anything of value offered in a promotional piece must be prominently disclosed. This should help leave no reasonable probability that the offer will be misunderstood.

(m) The required disclosure of the time required to attend any sales presentation has been changed to allow for "a reasonable estimate of the least amount of time" required to attend such sales presentation. This responds to concerns seeking to provide reasonable time estimates, since individual circumstances may vary.

(n) Promotional material need not include the telephone number of the sponsor of the promoter, developer, broker or owner. The identity of the promoter and sponsor should continue to be disclosed, however, to respond to consumer inquiries and to assist this office's ability to enforce the regulations.

(o) Words and graphics which create a likelihood of confusion and misunderstanding that the promotion is connected with a government agency cannot be used. The final regulation addresses this general standard more flexibly than the proposed rule, which was geared to particular words and phrases.

(p) The manner in which winners are selected must be disclosed. The regulations do not intend, however, to prevent the use of preselection of winners by computer. They merely require disclosure of the particular method used.

(q) The definition of "verifiable retail value" and the obligations of the promoter or seller to substantiate this value have been revised to reflect the input of the industry and the practice of other states.

(r) A separate section has been included concerning the statements of the odds of winning various "prizes". The regulations do not require that odds and values be stated on the front of the promotional piece, as the proposed regulation did, to conform with other state practices. The final regulations do encourage that format, though, and the suggested examples noted provide for this placement. The most important part of the requirement - namely, that odds and values be clearly and conspicuously disclosed - remains intact.

(s) The regulations impose special requirements for the so-called "premium" gifts that almost everyone wins. If gifts are not on hand, then they must be shipped within 30 days.

(t) The regulations have not changed the requirement to disclose whether a promotion is part of a national sweepstakes, and to state, where applicable, that all gifts will not be given at all locations. This follows an existing requirement in 1 NMAC 2.2 [now 12.2.2 NMAC] and could be confusing to consumers if not disclosed.

(u) The proposed requirement that the number of gifts be disclosed has been eliminated as duplicative of stating the odds. The proposal to require that the names of winners of previous gifts may not be used on a future promotional piece without their consent has been revised to require disclosure on the promotion that a person's name might be so used if he or she wins. This enhances the regulation's goals of full disclosure to consumers of all relevant terms and conditions.

(v) These regulations do not require submission of promotional material to the attorney general for prior review. Such promotional material certainly may be submitted, and promoters are encouraged to do so. Commenters suggested, however, that if promoters were required first to submit their materials to the attorney general's office, then that office should be required to respond with approval or disapproval in a certain number of days, and that no response should be deemed to constitute approval. Those comments are not persuasive. Given limited resources, this office cannot review and respond to all promotions, and should not be required to do so. This office nevertheless has a valid state interest in receiving promotions before they are distributed to allow it to decide whether to seek injunctive relief. This office thus could have properly required prior submissions of promotions without binding itself to any time limits on when to respond. To avoid, however, even the potential appearance of imposing unfair burdens, the office has decided instead to encourage voluntary submissions of promotions before they are distributed, rather than to require such submissions.

N.M. Code R. § 12.2.3.8

5/1/98; Recompiled 10/15/01