United States: The Sweepstakes Games You Can’t Afford To Lose

Last Updated: October 24 2013
Article by Maura A. Marcheski and Melissa L. Steinman

We all know that sweepstakes and contests can be vulnerable to enforcement and litigation, but did you know just how many ways your company can hold a losing ticket when running a prize promotion?  Let's review some of sweepstakes and contests that got caught in red over the past few months to see the variety of ways a prize promotion can go bust.

Most recently, the Children's Advertising Review Unit ("CARU") told Discovery Girls Magazine to modify its advertising for a sweepstakes in order to better protect the privacy of child entrants and more clearly disclose the odds of winning.  The magazine (directed to children ages eight and up) required participants to enter an email address and complete a survey (which included over 50 questions) to be entered for a chance to win an iPod Nano.  CARU determined that the website collected personally identifiable information from children without first obtaining prior verifiable parental consent in violation of COPPA and its guidelines on data collection.  Discovery Girls Magazine agreed to modify its sweepstakes and advertising going forward.

A few weeks ago, the FTC filed a case against a company that allegedly sent millions of personalized, professional-looking letters to people saying that a cash prize of more than $2 million was reserved just for them.  One catch, however, was that the "winners" had to return a form and pay a $20 or $30 acceptance or registration fee.  The other catch was that the recipients didn't actually win a prize after paying the fee.  Though the letters included a disclosure stating that the recipient hadn't in fact won the sweepstakes, the FTC argued that these mice-type disclaimers were in direct conflict with the letters' claims of major winnings.  The FTC alleged that the "sweepstakes scam" made $11 million from consumers and persuaded a federal court to freeze the operation's assets while the FTC moves forward with the case.

Back in June, the New York Attorney General's office addressed another kind of sweepstakes faux-pas, this time involving a free alternative method of entry.  The AG charged A&P Supermarkets with violating state law by failing to properly inform customers that they could enter a sweepstakes without having to make a purchase.  In A&P's "Frozen Food Month Sweepstakes," any customer who purchased more than $50 in frozen food products at an A&P store was automatically entered in the sweepstakes.  Though the sweepstake's Official Rules disclosed a free alternate method of entry, that wasn't enough to thaw the AG's concerns.  A&P paid $102,000 to settle the case and promised to advertise the free method of entry in larger signage, to include copies of the official rules in the stores, and to advertise the free method with "equal prominence" to the paid entry.

Last spring, the FCC fined a Boston radio station $4000 for not airing the material terms and conditions of a contest in violation of FCC law.  Though the contest was promoted on-air as a chance to win a choice of three cars, the contest announcements didn't mention that the winner would not receive the car outright, but rather only won a two- year lease of the car.  Making matters worse, the "winner" only got the lease if he or she passed a credit check.  Though the official rules on the promotion's website disclosed all these terms, the FCC fined the station $4,000 for not broadcasting the disclosures on the air.

Finally, even private plaintiffs can get in the act.  While usually this means the class action bar because of the stakes involved, even small cases can mean a lot to the people involved.  For example, last year a private plaintiff sued a Pennsylvania state Representative who sponsored a cake-baking contest as part of his re-election campaign.  The contest's flyer promised that the winner of the contest would receive a cash prize of $200.  A mother-daughter team entered and won, but instead of the $200 prize, they were only awarded $100.  When the winners questioned the Representative about the prize, he said that the contest was supposed to be a "50/50" raffle with a $10 entry fee, so if bakers had purchased all 10 slots, the Representative would have matched the $100 entry fees with $100 in additional prize money. The details of this structure, of course, were not disclosed on the flyer and the winning bakers brought a lawsuit against the Representative for the additional $100 of missing prize money—apparently, the principle meant as much as the prize to the plaintiffs.

A lot of eyes are on sweepstakes.  Whether it's an 11-million dollar operation or a small-town baking contest, if you're running a prize promotion, you should be aware of the high level of regulation and interest in this area of promotions law, and the fact that sweepstakes and contest sponsors can be held responsible for what may seem to be minor or technical violations and slip-ups in the administration of a promotion.  This is true, moreover, even when there is arguably no consumer harm as a result of an error.  Moreover, a sponsor could face a consumer class action over problems in running the promotion, and even modest prize values may be challenged by consumers who feel that a promotion is unfair.  The cases discussed above serve as concrete examples of the risks inherent in running sweepstakes or contest today, and what prospective promotions sponsors should watch out for in structuring and administering such promotions in order to ensure that they go smoothly.

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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions