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.
