Regulated Industries and Sweepstakes
Some regulated industries require special disclosures and/or have special legal requirements for running sweepstakes. These regulated industries include alcohol, tobacco, gasoline, firearms, dairy, banking, pharmaceuticals, and cause-related marketing. It is absolutely essential to know the laws of these industries, or partner with a promotional marketing firm who works with legal counsel who is familiar with these laws, before undertaking a contest or sweepstakes.
Here are some basics to be aware of, but this is by no means an exhaustive list.
“Void in California” used to be fairly common for alcohol-related sweepstakes because California law formerly banned sweepstakes and contests in California. With the passage of the amendment to Section 25600 of the Business and Professions Code in 2012, when the California Legislature passed Senate Bill 778, alcohol-related sweepstakes have been allowed in California since January 1, 2013. However, there are still many restrictions regarding how the sweepstakes must operate and be marketed there.
Other states have similarly restrictive laws when the sponsor sells alcohol. No state allows anything alcohol related as a prize, nor do any allow sponsors to require the purchase of alcohol; a free method of entry is always required to enter. In some states a regulatory body or state authorities by law must pre-approve alcohol beverage promotions, including all related point-of-sale advertising material.
Some of the following states currently have special laws regarding alcohol: Alabama, California, Indiana, Maryland, Mississippi, North Carolina, New Jersey, New York, Pennsylvania, Texas, Vermont, West Virginia, and Utah.
Tobacco sponsorship of a sweepstakes or contest, or use of tobacco products as prizes, is limited in participation in some states. And in Massachusetts, Michigan and Virginia all tobacco-related sweepstakes are banned. As the use of vaping products evolves, the laws surrounding these products is also changing rapidly when it comes to promotions.
While you can award guns as prizes in a sweepstakes, the actual transfer of any firearm as a prize must be done through legal channels. A common legal clause in gun giveaway sweepstakes rules states, “Transfer of the prize shall be conducted through a federally licensed Federal Firearms License (FFL) dealer. All firearms transfers will be conducted in strict compliance with all applicable federal, state and local laws. By entering this sweepstakes you acknowledge that you are not legally prohibited from owning or taking possession of firearms.”
Cause related marketing
A Commercial Co-Venture (CCV) occurs when a for-profit business and a non-profit organization make an arrangement for a donation or some percentage of profit from the business’ sales go to the charity. This type of cause related marketing is regulated in almost half of the states in the U.S., and may require that the business complete a CCV filing or registration in the state(s) where the transaction is taking place.
Contact us if you have specific questions about any specific regulated industries and we can work with you to craft a program that meets legal requirements.
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