contests laws Archives - American Sweepstakes

I was asked a question yesterday that I get quite often so I thought I would write about it here again. The question does vary a little on how it’s stated. One of our clients asked the following “We are doing a quick giveaway via social media and want to check…are we covered from a legal aspect?” My question back was, do you have official rules? Their answer was no, they did not think they needed them for these small giveaways.

My answer is always yes, you do need Official Rules. Giveaways are just another word for sweepstakes which are a game of chance where the winners are normally randomly chosen. Contests on the other hand are a game of skill and participants usually are invited to submit some content (photo, video, essay, etc.). A panel of judges then chooses the winners based on criteria that are defined in the official rules. So whether you are planning to run a sweepstakes or a contest, or whether the size of the prize, small or large, there are rules and regulations that you must follow in order to be compliant.

Therefore, you need to have a set of Official Rules that outlines the promotion. A promotion that contains all of these three elements: Prize, Chance (random selection) and Consideration (Purchase, Payment or Time) is an “Illegal Lottery”. The Time element is the grayest area. If you are planing to run a promotion that does include Consideration, then you must allow an alternate means of entry (AMOE).

Most social media entry requirements do not usually require consideration. However, writing about a product or a destination or taking a photo or video of the product/destination to enter may be consideration. For example, if the participant can take a photo of themselves with a product in a store, then a purchase would not be required. Or if you’re asking them to take a photo of themselves with a pair of shoes “out and about the town” that would most likely require purchasing the shoes and therefore, Consideration. There is a fine line between the two.

Another example is asking participants to take a photo while taking a bite of a doughnut or sipping a drink. They can’t return the doughnut or the drink then, so wouldn’t that require purchase? You need to ask if the participant can effectively compete without actually making a purchase.

Also a very popular trend on social media is inviting participants to earn extra entries by performing different tasks and challenges on various platforms. Not only do you need to follow the guidelines of each social media platform, you also need to keep in mind the degree of effort that you are asking participants to perform to gain an entry. So how much time is too much and what can you really require? The Supreme Court did rule that watching a 30 minute TV show wasn’t too much time, so that’s a guideline to follow. But keep in mind that while awarding bonus entries for sharing/referring may not likely fall under consideration, it may be against Federal CAN/SPAM regulations.

Another thing to keep in mind is the FTC’s Endorsement and Testimonial Guidelines. They recently published a list of Q&A’s that state that when it comes to sweepstakes and contests, any incentive, no matter how minimal, such as an entry for making a post on social media sites, may be an endorsement. Thus it requires a disclosure. The use of the promotion title alone is not adequate, and they are encouraging including #Contest or #Sweepstakes or #Entry or a similar designation in a hashtag. The recent updated Q&A’s now states that using #sweeps as the hashtag is not enough and instead it should be #sweepstakes.

A rising trend today on social media is running a sweepstakes or contest utilizing only a hashtag with no entry form. Entrants may be invited to post a tweet on Twitter or upload a photo on Twitter or Instagram utilizing a promotional hashtag. Many marketers like these types of promotions since it creates buzz and makes it easy for entrants. However, hashtag entries do not collect data on the entrants since there is no entry form to fill out. Data collection is the number one reason why marketers run sweepstakes and contests. Without collecting data this also can make it more difficult to contact winners. There are however, applications that you can utilize that include both such as what was discussed in this post.

So it all comes back to what your main objectives are for running a promotion. You need to consider what the risks may be and also be realistic in what you are asking participants to do. Most of all, be sure to cover yourself and your company by running a successful and legally compliant promotion that includes a set of Official Rules.

The BAA’s 37th Annual Marketing Law Conference just wrapped up on Wednesday, Nov 11th, in Chicago which I was glad to attend. The organization (Brand Activation Association) broke another attendance record with over 760 attendees who ranged from leading regulators, legislators, corporate counsel, marketers and technology innovators who gathered again at the Marriott Hotel on Michigan Ave.

This year’s conference was entitled “Walking the Line: Between Innovation and Regulation”. “The theme of this year’s conference perfectly sums up the challenge of our industry and why our event is more important than ever,” says Ed Kabak, BAA’s Chief Legal Officer. As has been the case in past years, Wednesday’s first session featured Linda Goldstein, a Partner in the Media and Marketing practice at Manatt, Phelps & Phillips LLP in New York. Linda reviewed some of the most newsworthy developments of the year and what they mean for marketing and advertising lawyers and professionals. As usual Linda’s talk was very informative and entertaining as she reviewed again the basics of sweepstakes and skill contests along with social and digital media legal issues from some of the latest promotions. I wrote about Linda’s presentation from last year’s conference here in which she covered some of the same legal matters.

There were two central themes that appeared to be prominent at this year’s conference which Linda first touched upon in her presentation. The first was Real-Time Marketing. More brands are now putting much effort into connecting their product or service with consumers in the moment. To do this successfully, the content must be relevant. We reviewed many examples of those that pulled it off well and those that didn’t. Some brands have started using the new live streaming apps, Periscope and Meerkat, that are perfect ways to connect experiential marketing with consumers. However, broadcasting live video to the world has its inherent risks, along with possible copyright and trademark infringements

The other central theme was focused on the FTC’s Endorsement &Testimonial Guidelines which are not new, but it appears the FTC is now clearly monitoring what is happening online and on social media. Sweepstakes and contests are a material connection to the brand, and therefore need to be disclosed. They are recommending brands direct the participants to us the #sweepstakes, #contest, #entry hashtags along with their promotional hashtag in any social media posts that gain the consumer an entry. Another type of material connection that should be disclosed is an employer/employee relationship to the brand. The FTC charged Sony and their agency, Deutsch LA, with deceptive behavior on Twitter when it found that employees were using the same hashtag that the consumer was using, #GameChanger, when posting about their Playstation Vita handheld device.

Real-time marketing is one of the areas that the FTC is highly looking at. Linda ended her presentation by stating that trust is key and that brands that walk the talk will be rewarded. “These real time platforms will take us to new territories; we the attorneys’ must protect our clients as we walk the line between innovation and regulation.”

Wednesday morning we were treated to another highly entertaining presentation from Ron Urbach, Chairman/Davis & Gilbert LLP, who also demonstrated how important it is for those in our industry to keep current. Ron used the term “Disruption” to describe how today’s technology allows new brands and services to thrive. He pointed out Airbnb, which has changed the way we travel, and Kickstarter, the way we invest. So to help get his point across Ron created a video of a group of fictitious millennials who were using social media and technology to launch new products, such as DrinkAgain Pay Water Fountains and Rag Exchange – The Fashion Lease Experience. Ron was their lawyer, or as one of the female characters called him, their “interpreter”.

This video demonstrated several areas in which the group crossed the line and Ron had to reign them back in to stay compliant. We were reminded that if you link your product to a celebrity, don’t forget about the FTC endorsements guidelines. If you’re going to do live streaming, then you better establish guidelines, train the person(s) doing it and then monitor it carefully. Brands must also develop a social media policy, train employees, monitor and then enforce their policy. And, don’t forget to get consumer’s consent before re-posting any photos or videos of theirs.

Ron summed up his presentation by stating that today we need “Live Lawyering”, along with training and best practices. Pay attention to “Disclosure in a Disruptive World – and provide the right info at the right time in the right way.”

Hopefully many of us will be headed back to next year’s 38th Annual Marketing Law Conference. We were treated with some beautiful, unseasonably warm weather this year. Can the BAA conference team please schedule that for us again?