U.S. Direct Mail Enforcement Takes An Unprecedented Turn

The coordinated actions included two lawsuits seeking equitable relief filed under 18 USC 1345. One action was filed against BDK - an international mailer and its principals, a list broker and its employee, and an international printer and its principals. A second action was filed against a U.S.-based sweepstakes mailer and its principals. At the same time, a FTC action was filed against a sweepstakes mailer, its list broker, and their respective principals. The government also announced a settlement with an international caging facility located in the Netherlands.

On the very same day, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated the payment processor PacNet as a significant transnational criminal organization (TCO) pursuant to Executive Order (E.O.) 13581. E.O. 13581 came into effect in July 2011 as a means to suppress criminal activities by blocking property of significant TCOs that constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the U.S. PacNet is only the seventh TCO targeted under the E.O. 13581. Sanctions under E.O. 13581 so far have only been imposed on conventional criminal organizations (e.g. the Comorra in Italy, the Yukuya in Japan, etc.). It is the first time that a leading, internationally-recognized payment processor was sanctioned under the E.O. 13581. Notably, PacNet was never given an opportunity to respond to the charges, nor even afforded any due process rights to have OFAC's determination vetted by a judicial officer.

The enforcement actions were announced by the Attorney General, Loretta Lynch. Her office has made clear that these types of mailings are a high enforcement priority.  

The actions make clear that those involved in the direct mail industry - whether as a marketer or a supplier - should take steps to reconfirm that the mailings comply with current legal standards. Suppliers should take particular note as the government's focus on suppliers to marketers is reminiscent of FTC's dandelion theory. Under this approach, the government will focus on legitimate suppliers to marketers without whose services marketers cannot reasonably exist (i.e., the roots). By removing access to the roots, the government hopes to eliminate mailers that it believes fail to comply with the law. This is particularly true as the government tries to combat international mail fraud, which can be an elusive task.   

TAKEAWAY: The September 22nd enforcement actions are unprecedented. They all took place without providing any of the defendants (including the suppliers) with notice or an opportunity to present their side in court. The actions serve as a strong reminder to review current compliance and vetting practices for marketer clients and their marketing materials.  


What exactly did the marketing companies do wrong?

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