Sweepstakes are valuable marketing tools that businesses use to promote their products and services across all forms of media. If businesses are interested in running legal sweepstakes promotions, they must be aware of the importance of sweepstakes contest rules. Prior to the commencement of sweepstakes contests, their parameters (e.g., duration and prize amounts) must be established in the contest rules. Such parameters cannot be changed, even if the subject sweepstakes are unsuccessful in attracting a significant number of entrants. The reason for this is that sweepstakes contest rules are legally binding contracts between sponsors and contest entrants. Operators who fail to comply with their own sweepstakes contest rules run the risk of being sued by private litigants and/or investigation by regulatory authorities.
Sweepstakes Contest Rules Requirements
Sweepstakes contest rules should include, among other things, the promotion's duration, entry eligibility, winner selection process, prize amounts, number of available prizes, and a free alternative means of entry ("AMOE"). Because sweepstakes rules cannot be changed after a promotion begins, the pre-set contest duration must be allowed to play out, even where operators want to terminate their contests before the established contest end dates. The amount and number of prizes must be adhered to, even where the expense associated with such prize(s) exceeds the estimated value of the sweepstakes as a marketing tool. Similarly, operators may be prohibited from changing their sweepstakes contest rules to fix mistakes, as seen in the following case.
Advertising Sweepstakes Promotions
Sweepstakes sponsors must follow applicable Federal Trade Commission ("FTC") regulations when running and marketing their sweepstakes promotions. In general, contest advertisements may not be false, misleading, or deceptive.
In addition to these FTC regulations, television and radio stations must follow the Federal Communications Commission's ("FCC") Broadcast Contest rules. Broadcasters may either disclose the material terms of their sweepstakes rules on air or via the website link where such terms are made available in written form. Further, when making contest announcements, stations must "fully and accurately disclose the rules and material terms" of their contests and conduct them substantially as advertised. Violators may face fines of up to $10,000 per violation, among other civil penalties, as well as, potentially, a year in prison.
FCC v. IHeartMedia's Classic Rock Station
Recently, the FCC fined iHeartMedia Classic Rock "Big 105.9" WBGG-FM Station (the "IHeartMedia Station") $20,000 for allegedly violating the FCC's Broadcast Contest rules by failing to conduct its sweepstakes promotion substantially as advertised.
It seems that the IHeartMedia Station prevented an individual from participating in the "You Can't Win" Sweepstakes because he had previously won another of the IHeartMedia Station's contests while the subject Sweepstakes was ongoing. The written "You Can't Win" Sweepstakes (the "Sweepstakes") contest rules stated that people are ineligible to participate if they had won another IHeartMedia Station contest "within 30 days prior to the start date of the Sweepstakes." The IHeartMedia Station argued that such language meant that people who won other IHeartMedia Station contests in the 30 days prior to the start or during the course of the Sweepstakes were ineligible to participate.
The FCC found such language to be ambiguous, however, and explained that ambiguous rules should be "construed against the promoter's interests." Accordingly, the FCC interpreted such language to mean that only winners who had won contests in the 30 day period leading up to the Sweepstakes' start date were ineligible to win the Sweepstakes. The FCC, therefore, held that the IHeartMedia Station should have allowed the prospective entrant to participate because he had won a contest during the course of the Sweepstakes and not in the 30 days prior.
Consult a Sweepstakes Attorney
It is crucial that your sweepstakes contest rules set out the contest's parameters as precisely as possible. If your sweepstakes rules are drafted poorly, you may face a similar situation to that of the IHeartMedia Station, and be responsible for civil penalties and fines. Given the foregoing, it is recommended that you retain qualified legal counsel to: 1) ensure that you get your sweepstakes rules right in advance; and 2) help you navigate any issues that may arise during the course of your promotion.
Related Blog Posts:
What is an NFT Sweepstakes AMOE?
Sweepstakes Promotions: Winner Selection Tips
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.