By Deborah Weil
Contributing Editor
The Internet Letter
March, 1995

Lurking in the jungle of opportunities on the Internet is a growing number of contests and sweepstakes. According to a list compiled by Yahoo, a popular WWW search engine, there are now over 50 contest sites, offering giveaways ranging from a $1.3 million mansion to a glass floral arrangement.

In between are the expected T-shirts, round-trip air tickets, CD-ROMs, soft and hardware and coffee mugs. Sponsors range from entrepreneurial individuals to major corporations. Federal Express invites respondents to complete an on-line shopping survey to qualify for a $50 coupon good towards shipping charges.

Bill and Fran Powderly, authors of the mansion contest, plan to award their lovingly-renovated 225-year-old manor house in Bucks County, PA to the lucky winner of a three-round on-line trivia contest. Prospective contestants need only pay a $100 entry fee.

But surely there's a catch. With so much of the Net's burgeoning commercial activity taking place in uncharted - and largely unregulated - waters, what are the risks associated with on-line promotion?

"The Internet is very much like the Wild West right now," said Lewis Rose, an attorney with the Washington D.C. law firm, Arent Fox. "Consumers need to be extremely wary about entering a contest (on-line) where they don't know who the promoter is."

Rose, who specializes in advertising, marketing and promotion law, maintains an Advertising Law site on the Internet's World Wide Web.

He advises both those posting promotions on the Net and those choosing to participate in contests to be especially careful. "The enforcers and the regulators aren't up to speed," he said, noting that as yet neither the Federal Trade Commission nor state attorney generals are technically able to police the electronic wires of the Net.

"The first people to discover and make use of the new technologies are usually crooks," agreed Eileen Harrington, associate director of the FTC’s Bureau of Consumer Protection. "We are very concerned about deception carried out over the Internet and on on-line services... The folks who are involved in economic fraud run the same kind of scams, regardless of the media."

The FTC has already settled one case involving fraud on the Net and "a handful" of investigations of deceptive on-line advertising or marketing is under way, according to FTC spokesperson Bonnie Jansen.

(The first case, settled last fall, concerned false claims put forth by a credit-repair scheme advertised on America OnLine. The $99 program allegedly advised consumers to take illegal steps - described on-line as "100 percent legal" - in order to repair their credit rating.)

In addition, the FTC recently issued a Proposed Telemarketing Rule which specifically includes the Internet as a conduit for sales communications. Interestingly, the rule sets forth a number of requirements which would be difficult to enforce on the Information Superhighway. Required disclosures include stating to the consumer the name of the "caller" and making clear that the communication is a sales pitch. The rule also prohibits telemarketing before 8 a.m. or after 9 p.m.

In a medium which knows no geographical, nor time, boundaries it’s not clear how the rule would be enforced. The impossibility of defining the jurisdiction covered by the Net "is a big problem," said John Mendenhall, assistant director of the FTC’s Cleveland regional office and the agency’s resident expert on games of chance. "Technically, by posting a sweepstakes on the Internet you’re going to put yourself at risk of civil and criminal prosecution in a lot of different localities."

Arent Fox’s Rose advises anyone posting an on-line promotion "to restrict entry to those jurisdictions which have enacted laws with which you can comply." But since it’s often difficult to know where someone is located based on an e-mail address, he suggests embedding a form in the Web site "requiring the entrant to include a postal address and a certification that he or she is eligible to enter." For the consumer, Rose offers the old-fashioned caveat: "If something sounds too good to be true, it probably is."