New Mexico Administrative Code › Title 12 - TRADE, COMMERCE AND BANKING › Chapter 2 - CONSUMER PROTECTION › Part 3 - REQUIREMENTS FOR THE PROMOTION AND ADVERTISING OF SUBDIVIDED LAND, TIME SHARE INTERESTS, CONDOMINIUMS AND MEMBERSHIP CAMPGROUNDS ISSUED PURSUANT TO NEW MEXICO'S UNFAIR PRACTICES ACT AND FALSE ADVERTISING ACT › Section 12.2.3.8 - STATEMENT OF BASIS

Current through Register Vol. 35, No. 13, July 16, 2024
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.