Question: Can you offer a coupon as a prize in a sweepstakes or contest?

Answer: It depends. If the coupon or voucher value covers the entire full priced item without any hidden fees (like shipping & handling, etc.) then you can offer it as a prize coupon. But if the coupon offered is for savings on a purchase, or if it does not cover the shipping and handling necessary to receive the prize, then the answer is no. The prize offered and claimed needs to cover an entire product and shipping so that the winner will not incur any expense.

Supporting information from Regulators: Promotions requiring post consideration (i.e., consideration to receive or claim a prize won) may, however, run afoul of states with prize pre-notification statutes (i.e., statutes that regulate promotions in which a person is notified that he or she has won a prize but which require purchase or payment. Some states technically prohibit or regulate notification to a person that he or she has won a prize where receipt of the prize is conditioned on a purchase or payment. Following are a few regulations pertaining to use of coupons in a prize promotion:

• 26 U.S.C. 5723(c) and C.F.R. § 275.21 – Prohibits certificate coupons or other lottery devices from be in placed on tobacco product packaging.
• Part of a California statute, Civil Code 1749.5, prohibits offering a coupon as a prize or gift if: the person must pay any money or make a purchase to obtain or use the coupon.
• All prize promotions with a “refer a friend” component should be vetted for CAN-Spam compliance. The CAN-SPAM Act may apply if coupons, points, additional sweepstakes entries offered in return for forwarding a commercial email, including a social media message.

How savings Coupons could be used: You can still use coupons within your promotional campaign as long as they are not listed as a prize. Coupon marketing is a marketing strategy that takes advantage of consumer interest in saving money on specific purchases. Coupons are valuable to e-commerce because they inspire customers to take action. Consumers will tend to buy sooner and more than they normally would if a special value coupon is offered. There are many type of coupon incentive offers; such as first time buyer coupon on next purchase of same product; coupon on multiple purchase of same product; limited timed offer; Buy-one, Get-one “BOGO” coupon;  Buy-one, Get-one half off; Buy-several, Get-one Free; Coupons for members only; coupon for a free item/gift with purchase; coupon for free shipping after a specific purchase amount has been met; percentage off the total purchase or total item cost; and, rebate coupons.

This post was contributed by Fae Savignano, EVP.

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If you want to include coupons within your next promotional campaign, please contact us first to ensure that it will be a compliant promotion.