Is Your Contest Illegal? 33 Important Legal Considerations for Contests and Sweepstakes
In today’s competitive marketplace, companies are relying heavily on innovative and edgy promotions that often include submission of user-generated content, tweets, Facebook applications, blogging, viral marketing and other social networking elements.
However, the tech-savvy marketing professionals who are entrusted to do so are often unaware of the complex legal overlay of the digital world and the potential significant financial repercussions for their company’s failure to comply. In working closely with our clients to structure sweepstakes and contests in compliance with applicable legal requirements, we have identified the following top compliance issues to consider before administering a promotion.
Are You Running a ‘Sweepstakes’ or ‘Skill Contest’?
A “sweepstakes” is a promotion where the winner is determined by a chance event and the participants exercise no control over the outcome. Typical sweepstakes are random drawings or instant win games, such as scratch and win cards.
If the promotion involves skill, rather than random chance, it might be a contest since a “contest” or “skill contest” refers to a promotion where skill or the ability to perform a required task determines the winner. If there is a mix of chance and skill to determine the winner(s), you may have an illegal lottery.
Issues Applicable to Both Sweepstakes and Skill Contests
The following legal documentation should be in place prior to launch of a promotion:
- Official Rules: Each promotion must include a set of official rules that identify the material terms and conditions that govern the promotion, and various laws provide that they meet certain requirements.
- Advertisements: Each promotion is advertised in some manner (print, Internet, radio, television, etc.). All ad copy and other creative elements (e.g., web pages, registration/entry forms, banner ads, direct mail pieces and game cards) must include certain abbreviated rules disclosures. These vary from state to state. The exact language and size of the abbreviated rules must be specifically tailored for the nature of the advertisement and the medium.
- Winner Releases: Sponsors of promotions typically require signed affidavits of eligibility and liability/publicity releases from all major prize winners (trips, vehicles, prizes with the approximate retail value over $600, inherently dangerous prizes, event prizes, etc.).
- Guest Release: If a prize awarded in the promotion involves the winner being permitted to bring a guest (e.g., travel companion for a trip/event prize), sponsors typically require signed guest releases from the winner’s invited guest.
- Contracts: Signed contracts should be in place with all vendors, co-promotional partners, prize suppliers, fulfillment houses, bonding companies, licensees (e.g., a third party that will use your company’s trademarks to promote a promotion) or other third party that provides services or prizes in connection with the promotion. Each agreement should spell out the third party’s obligations for the promotion and indemnify your company for a breach of those obligations.