Sweepstakes and promotional games are a dynamic and profitable way to develop a database of engaged consumers and increase brand awareness. Consumers are more easily drawn to your marketing message or brand by the possibility of winning prizes than with more mundane advertising that offers few incentives. When performing such promotions, you must comply with specific state and federal laws that apply to promotional games and sweepstakes and the rules of operation and marketing on social media websites. If you do not strictly adhere to both these laws and the rules of the web platform, you risk incurring substantial legal or financial liability (and social media repercussions) for such violations.
Two main categories of promotional games: “skill” games and “luck” games
Of the two, games of skill are generally easier to manage because there are fewer legal hurdles. However, it is more difficult to implement a pure game of skill than a game of chance (regulators have a narrow view of what constitutes a “skill”, and even small elements of chance can change the way a game is seen). Skill games may violate anti-gambling laws depending on the prize structure awarded and the sponsor’s level of involvement in the organization of the games. In addition, some states require promoters of skill games to pre-register with relevant government agencies.
Games of chance are generally considered illegal lotteries, unless one of the following three elements constituting a lottery is removed: (1) a prize awarded to the winner; (2) an element of “luck” involved in determining the winner; and (3) the consideration required of competitors for entry into the game. Because the removal of the prize feature undermines the promotional aspect of the game and because chance is difficult to eliminate entirely, consideration is the element. most frequently deleted.
The consideration can be removed by offering a free and alternative means of entry (“AMOE”) that does not require a purchase or other costly action (common AMOEs include sending a postcard with certain information of contact or calling a toll-free number). To effectively eliminate the element of consideration, AMOE entries must have the same chance of winning as the entries of consumers who make purchases or take an action so complex that it is recognized as a form of consideration. For example, if you can win ten raffle entries by making ten purchases, you must offer the public the opportunity to enter for free up to ten times by calling a toll-free number.
Promotional game rules
You should determine all key aspects of the contest (duration, prize amounts, number of prizes, etc.) in advance when writing the essential contest rules. Once a promotion begins, it is extremely difficult to legally change the material conditions. Some of the important considerations of the contest and the corresponding rules are described below.
Duration: The key to rule writing is not to stretch too far in terms of time or prize value. Shorter contest durations with fewer prize commitments are easier to manage. If a shorter competition turns out to be successful, nothing prevents you from organizing another immediately after the end of the first. But if you enter into a one-year contest with prizes handed out every month, you can’t just stop an unsuccessful contest after the first few months.
Winners: You must maintain a list of winners and, depending on the state, file it with the applicable state agency. Before awarding a prize, it is advisable to obtain affidavits from potential winners verifying their identity. If you intend to publish the names or likenesses of the winners, you must obtain the appropriate permission from the winners. In addition, you must always prohibit the employees of your company and the relatives of these employees from participating in the contest.
Price: It is advisable to have an independent and respected third party conduct the winner selection process to ensure the appearance of fair play. In addition, when it comes to offering non-cash prizes (such as merchandise), it is recommended that an alternative cash equivalent be offered. In Florida and New York, raffles with a total prize value exceeding $ 5,000 must be registered and bonded. In Rhode Island, the price threshold for entry is $ 500, but there is no bond obligation and entry only applies to contests run by physical businesses related to a point of sale. sale. To avoid having to meet these requirements, you may prohibit residents of any or all of these states from participating in your applicable contests.
Intellectual property rights: In addition to the above, it is essential that you ensure that your marketing approach complies with applicable state and federal laws and guidelines. For example, you should comply with intellectual property laws and social media website marketing guidelines, when promoting your sweepstakes promotions. This is especially true when you are offering the opportunity to win a prize with a registered trademark, such as an iPhone®, or market your contest in a social media environment, such as Facebook®, and wish to use the name Facebook® in your postings. marketing materials.
This blog post was originally published on November 18, 2012 and updated on October 26, 2021.
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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.