We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
The widespread use of sweepstakes and contests in the marketing
world may lead some to forget that these programs are highly
regulated under both federal and state law. Failure to comply with
applicable law can lead to regulatory inquiries, as well as civil
and criminal penalties.
You need to consider some of the legal issues involved before
conducting sweepstakes and contests.
Illegal lotteries: The first order of business
is to ensure that the proposed event does not constitute a private
lottery, which the gambling laws of all 50 states prohibit.
Lotteries involve three elements: a prize, chance (luck, as opposed
to skill) and consideration (the participants must give something
of value to participate). Advertisers can avoid an illegal lottery
by avoiding any one of these three elements. Because there is
nearly always going to be a "prize," avoid an illegal
lottery by removing either "chance" or
"consideration."
Sweepstakes: Events that award prizes based
solely on chance, but do not require the participants to give
anything of value to participate, are sweepstakes. Sweepstakes
avoid the illegal lottery problem by eliminating the element of
consideration (e.g., "no purchase necessary to enter or
win").
Contests: Events that award prizes based on
skill (e.g., best essay, best artwork, etc.) are contests. Contests
avoid the illegal lottery problem by eliminating the element of
chance.
Traps for the unwary
On the surface, compliance with legal requirements appears to be
deceptively simple. In practice, however, there are many traps for
the unwary, including the following:
Some states require registration of sweepstakes and/or contests
and may require reporting of results and bonding.
All sweepstakes and contests should have a carefully crafted
set of rules that include specific information regarding the prize,
the chances of winning and other aspects of the sweepstakes or
contest.
It is often tricky to avoid the element of consideration. Some
states take a broad view of consideration and will treat any
significant expenditure of time (filling out detailed
questionnaires) or effort (driving around town looking for clues)
by the participant to be consideration, even if the participant is
not required to buy something or to pay to participate.
Sweepstakes conducted online through Facebook, Twitter or other
social networking sites must comply with the relevant "terms
of use" for that website.
The sweepstakes should be limited to adults to avoid issues
under the Children's Online Privacy Protection Act of 1998.
However, use caution, as the age of majority may vary from state to
state.
A contest sponsor can inadvertently create chance in the
contest if, for example, the contest results in a tie and the
sponsor randomly selects a winner.
With care and proper legal counsel, you can conduct sweepstakes
and contests successfully and in compliance with applicable laws;
however, doing so requires planning and attention to the legal
details. It is always prudent to consult with qualified
intellectual property counsel for guidance to ensure legal
compliance.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Those loyal readers of this blog know that the focus tends to be on what your company can and cannot do regarding social media use by potential employees or current employees, but this discussion shall focus on former employees.
The U.S. District Court for the Southern District of Florida recently released a decision in a TCPA suit brought by a man seeking damages in connection with a series of autodialed telephone calls made to his mobile phone.
The Dark Knight Rises, the latest "Batman" film released by Warner Brothers Entertainment Inc. ("Warner Bros."), grossed more than $1 billion worldwide and currently stands at eighth place on the all-time worldwide box office charts.
Recently, Abercrombie & Fitch CEO Mike Jeffries has come under fire for what some may call the company’s "no ugly chicks" approach to marketing and retail.
Today's teens certainly constitute the social media generation. And a recent study titled "Teens, Social Media and Privacy" by the Pew Research Center's Internet & American Life Project sheds light on this phenomenon.
InsidePrivacy.com recently published a "survey of data security surveys" that came to troubling conclusions—that data security weaknesses remain incredibly common across industries, despite being easily avoidable.
Not many marketers have the fortitude or the financial wherewithal to go toe-to-toe with the Federal
Trade Commission (FTC) to fight a charge of false advertising, writes Venable partner Gregory J.
Sater in the May issue of Electronic Retailer magazine.
