HQ 0731006 - Importation of Sales Promotion Game Materials - United States International Trade Commision Rulings

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HQ 731006

November 1, 1988

RES-10 CO:R:C:V 731006 A

CATEGORY: RESTRICTED MERCHANDISE

Donald B. Cameron, Esq.
Frank Brennan, Consultant
Mudge Rose Guthrie Alexander & Ferdon
2121 K Street, NW.
Washington, D.C. 20037

RE: Importation of Sales Promotion Game Materials

Dear Sirs:

Your letter of April 22, 1988, and other communication, requests reconsideration of Customs Headquarters Ruling Letter 730757 (November 6, 1987), which concluded that "Home Pride $250,000 Grocery Lotto Game" bread wrappers and game cards were in violation of the import prohibition against lottery materials, under section 305 of the Tariff Act of 1930 (19 U.S.C. 1305).

FACTS:

Continental Baking Company (CBC) wishes to import from Canada a wrapper for its "Home Pride" bread with a promotion advertising the product. The wrapper identifies the product and describes how prizes of up to $10,000 worth of groceries may be won playing an instant win game. A game card is included within a plastic pouch in each wrapper and the wrapper also includes information on how the game may be played without making a purchase.

Besides obtaining the game card by purchasing a loaf of bread, the "free option" provides that by mailing a request with a stamped self-addressed envelope, the same type of game card may be obtained on the basis of one request per household per day. It is claimed that the non-purchase option of entry into the game will be widely advertised by radio, television and newspapers. CBC claims that during a 1 month promotion period, broadcast media (TV and radio) reached an estimated audience of 100 million broadcast impressions, and the media plan also included 37 million colored advertisements inserted in daily newspapers in the promotional area. Samples of a television videocassette and a newspaper insert were included in the CBC submissions.

The "Home Pride $250,000 Grocery Lotto Game" has been ongoing in the United States using all domestic materials. CBC reports that from January 19, 1987, through April 15, 1987, approximately 23.5 million game cards were utilized in the promotion, less production losses, scrap and the like and there were 36,608 mail- in requests from non-purchasers.

CBC alleges that the promotion scheme in question comports with other similar games and has not been challenged as being a lottery by either State or Federal agencies other than the Customs Service.

An earlier attempt at importing the bread wrappers and game cards was considered by Customs to be in violation of section 305 and that position was upheld in Headquarters Internal Advice Decision 57/87, dated November 6, 1987, on the basis that all three elements of a "lottery" were present, namely a prize, consideration and chance. Reconsideration of that Decision has been requested, with a primary focus on the element of "consideration. "

ISSUE:

Do wrappers (and game cards) explaining and used in the "HOME PRIDE $250,000 LOTTO GAME" come within the import prohibition of 19 U.S.C. 1305?

LAW AND ANALYSIS:

Section 305 of the Tariff Act (19 U.S.C. 1305) prohibits the importation of lottery tickets, printed matter that may be used as lottery tickets, or advertisements of lotteries. The courts have held that the three elements essential to constitute a lottery are a prize, a consideration, and a chance. United States v. 83 Cases of Merchandise Labeled "Honest John", D.C. Maryland (1939), 29 F. Supp. 912, citing Horner v. United States, 147 U.S. 449, 13 Sup. Ct. 409 (1893). The Customs Service has also adopted that definition. See, for example, Headquarters Rulings Letters 724314 (October 2, 1984), 730107 (February 24, 1987), 730161 (February 24, 1987).

CBC cites a memorandum and order of the Federal Communications Commission (F.C.C. 73-1260 adopted November 28, 1973) for the proposition that the "Home Pride Lotto" game involves no direct or indirect flow-through of payment to the promoter of the game. Even if the non-purchaser participant goes
to the place of sale of the bread and uses stamps, envelopes and stationery for a write-in request, it is argued that this does not constitute legal "consideration" for playing the game. See Garden City Chamber of Commerce v. Warner, 100 F. Supp. 769 (E.D.N.Y.). In support of the position that non-purchasers are not unreasonably disadvantaged where there is a legitimate non- purchase alternative, CBC refers to decision letters from the F.C.C.'s Chief, Complaints and Investigations Branch, dated December 22, 1987, and the U.S. Postal Service, dated May 1, 1980.

Responding to CBC's parent corporation, the Postal Service's Consumer Protection Division, replied in a letter dated March 4, 1988, that in forming an opinion on whether a free-entry alter- native to consideration were genuine, it would look for evidence showing that it:

(1) is free
(2) is readily practicable
(3) gives nonpaying entrants the same opportunity to win (4) is viable throughout the entire period that entry is available
(5) is effectively communicated

A staff member of the Federal Trade Commission's Division of Marketing Practices gave verbal concurrence that the five Postal Service principles were reasonable and approximated the practice of the FTC when it was relevant to determine the existence of a lottery.

While the Customs Service will do its own analysis of the interpretation and application of section 305 of the Tariff Act, it is recognized that a uniform national policy is desirable, when appropriate. Headquarters Ruling Letter 709664.

Examination of the bread wrapper and newspaper inserts discloses that the phrase "NO PURCHASE NECESSARY" appears in a prominent and reasonable location followed by an explanation of how to obtain the game piece and Official Rules. The television vidoecassete sample also gives notice of the availability of entrance for non-purchasers.

The non-purchase entrance into the "Home Pride Lotto" game involves no purchase from, or other payment to, a sponsor and is not so costly compared to the product or otherwise onerous as to deter potential entrants from employing it. Non-purchasers may
win the same prizes as purchasers and one game piece per house- hold per day provides substantially the same eligibility. Non- purchase entry is available throughout the entire period that is available for entry via payment. While a separate point-of- purchase notice might even better enhance the message of free entry, it appears that CBC has made a reasonable and considerable effort at giving effective communication.

HOLDING:

It is the opinion of this office that Continental Baking Company has established that its "HOME PRIDE $250,000 Grocery Lotto Game" lacks the element of "consideration" within the meaning of section 305 of the Tariff Act (19 U.S.C. 1305) and thus, bread wrappers and game cards used in connection with the sales promotion program for Home Pride bread may be imported. Headquarters Ruling Letter 730757 (November 6, 1987), is reversed accordingly.

Sincerely,

John Durant, Director

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