Your giveaway may violate laws applicable to contests – Media, Telecommunications, Computers, Entertainment

United States: Your giveaway may violate contest laws

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Brands often use giveaways as a marketing tool to create buzz among the consuming public. When done correctly, businesses can see an increase in revenue and consumer loyalty through giveaways. However, when a giveaway campaign is poorly structured, brands can suffer reputational damage and may be subject to regulatory action and/or civil lawsuits.

The gift went wrong

An example of a gift gone wrong is one given by Reese Witherspoon’s fashion line, Draper James, LLC (“Draper James”) in 2020. The subject line of Draper James’ Instagram post read, “Draper James would like
to give teachers a free robe.” The post went on to explain that a registration form had to be filled out and that the offer was “only valid while supplies last.”

Despite the disclaimer, Draper James’ disclosure was found to be insufficient. After posting the promotional message, thousands of teachers signed up, thinking they would get a free robe. In reality, the teachers were entered into a raffle to win one (1) of the 250 dresses available. Teachers who did not receive a gown took to social media to express their outrage over the giveaway. A class action lawsuit was then filed against Draper James, which was quickly settled out of court in September 2020.

The Draper James campaign example should serve as a wake-up call to brands interested in engaging in promotional marketing. Brands should use plain language to explain when a promotion is, in fact, a sweepstakes and is NOT a giveaway with prizes offered to everyone who registers. To avoid such a situation, brands are recommended to seek the advice of lawyers experienced in sweepstakes and promotional marketing.

What should brands be aware of when giving gifts?

Brands can use giveaways, sweepstakes, and other contests as exciting ways to promote their respective products and services. A giveaway is a type of promotion where something is given away for free. In contrast, a lottery exists when people pay for the chance to win a prize, which can only be operated by state governments. Although private entities cannot offer lotteries, they can offer sweepstakes or contests. If the payment is removed, the lottery becomes a legal draw, and if the chance is removed, the lottery becomes a contest/game of skill.

Offering legal sweepstakes requires brands to comply with state sweepstakes laws to avoid fines, reputational damage, and criminal penalties.

Comply with competition law

When conducting sweepstakes, brands should consider the following legal sweepstakes requirements:

  • Sweepstakes must be conducted in accordance with the Official Contest Rules, which act as a binding contract between the sweepstakes operators and entrants. Among other things, the contest rules must include all eligibility requirements and all exclusions to entry.

In addition to complying with the law, brands need to be aware of how consumers will perceive their promotions. On the face of it, Draper James seems to have had good intentions. However, by using the word “give” instead of “offer the chance to win” in its promotional marketing, Draper James received considerable backlash from consumers that could have been avoided.

It is essential that all sweepstakes promotions have comprehensive contest rules and clear, visible information that accompanies both the marketing of the promotion and the sweepstakes entry flow. Consulting experienced sweepstakes lawyers well in advance of a promotion can help prevent regulatory and reputational damage.

Similar blog posts:

Why contest rules are important

Why Your Contest Promotion Needs a Privacy Policy

What is an AMOE NFT Sweepstakes?

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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