The Horror Of It All
Every now and then everyone can appreciate a good horror story; but when it comes to promotions…there is no such thing as a Good Horror Story and Never Ever is when marketers want them to occur.
“They know what you did last summer!” Promotions are heavily regulated by Government Agencies (FTC, FCC, FDA, and State’s AGs); Self-Regulatory Bodies (NAD, DAA, CARU, DMA); Competitors and Consumers alike. Everyone is watching, so take heed of the promotion guidelines available to avoid the nightmares that can unfold. You can find the complete guidelines on each of their respective websites; however, here are a few tips to follow so you can avoid being added the list of horrors featured herein:
• Make full disclosure of the rules and all material issues pertaining to the promotion.
• Properly identify the type of promotion you want to run (contest of skill, game of chance, incentive offer, etc.)
• Make sure that your promotion is not a lottery. Provide a free method of entry. Even if your promotion has multiple steps/overlays, they cannot contain illegal lottery elements.
• Make sure that the Official Rules covers whatever could go wrong.
• Do not be deceptive. Disclose material terms in general advertising of the promotion.
• All disclosures need to be clear and conspicuous.
• Fine print cannot be used to contradict statements or to correct misrepresentations.
• As consumers may only glance at a headline, accurate information in the text may not remedy a false headline. Do not bury required disclosures in numerous, densely packed lines of fine print or remote internet links (or omitting them altogether).
• Register your promotion when required.
• Follow direct mail disclosure statutes.
• Do not assume that Canadian and/or International law are the same as US law.
• Set forth Judging criteria in Contests and what happens if there is a tie.
• Follow the Sponsor’s rules, and do not change the rules midstream.
• And last but not least ….. If you see a creepy, haunted house, please don’t go in it, even if the door is wide open. And if you do, DO NOT go upstairs; just GET OUT!
Don’t end up with a “Sweepstakes Massacre”, contact us and/or consult with your legal team who has the appropriate experience with state and federal laws pertaining to all types of promotions. To read more posts by Marden-Kane, please visit our main blog page or subscribe to our email list.
Now let’s take a look at some Horror Stories I found on the web. Believe it or not, they are real. So take a look if you dare…
OR it will Cost You!
The NY AG alleged that McNeil Consumer & Specialty Pharmaceuticals failed to adequately tell consumers how to enter its sweepstakes without purchasing a Tylenol product. Newspaper and magazine advertising for the sweepstakes contained large, bold print directing the reader to “Buy Tylenol” to enter. The words “No Purchase Necessary” appeared in fine print at the bottom of the ads. In TV ads, the voice-over stated “For your chance to win just buy any Tylenol product”, but the voice-over failed to state that no purchase is necessary. The words “No Purchase Necessary” appeared briefly, in small type at the bottom of the screen.
The NY AG settled with A&P food stores in May, 2004, involving a similar sweepstakes that allowed consumers with an A&P Bonus Savings Card to be automatically entered in the sweepstakes when they bought certain products. Advertisements told consumers to visit stores for details, but consumers in at least two stores were unable to obtain information about alternate methods of entry that did not require a purchase. A&P also failed to post in its stores the rules and regulations about the sweepstakes and the minimum number and value of the prizes, failed to maintain an adequate bond, and failed to register the sweepstakes with the Secretary of State.
CVS sponsored a sweepstakes for a trip to Hawaii; ads explained that consumers who visited a CVS store, purchased digital pictures, and used a CVS ExtraCare card were automatically entered into the sweepstakes. A footnote in the ads said “No purchase necessary” and directed consumers to a CVS web site to enter and view the official rules. There was no other mention in the ads of a non-purchase method of entry. To obtain such information, consumers had to use a computer and have Internet access to reach the CVS web site. On the web site, consumers could enter the sweepstakes and were told they could obtain free entry forms at CVS stores, but such forms were not available in at least two CVS stores.
Companies such as Publishers Clearing House, American Family Publishers, and Reader’s Digest inundated our mailboxes with their marketing ploys that offer opportunities to win fantastic prizes. Some particularly egregious examples of promotional game misuse were brought to Congress’s attention in the 1990s, and in response the federal government, along with many state governments, enacted statutes, or amended those that existed, to “establish strong consumer protections to prevent a number of types of deceptive mailings.” The federal Deceptive Mail Prevention and Enforcement Act (the “DMPE Act”) was enacted in 1999 and was designed to protect consumers and in particular senior citizens from false or misleading advertising that causes entrants to buy products that they don’t want or need. It also bars companies from mailing advertisements that make consumers believe they may have already won a prize. DMPEA applies to any sweepstakes or contest that uses the U.S. Postal Service to advertise or implement the promotion. The Act prevents the misleading use of prizes that are designed to look like checks or government documents. It also prohibits the use of any advertising language that claims the promotion has been approved by a government agency or endorsed by any official government entity. The Act also allows recipients to have their names removed from receiving similar sweepstakes mailings from the sponsor in the future.
If your promotion contains Prize, Chance and Consideration, be very afraid!
Applicants for Final Four tickets required to pay a full face value plus $6 non-refundable handling fee for each ticket. Non-winning applicants received refund of face value only. Court found that this promotion was a lottery since all three elements (prize, chance & consideration) were present. Prize: Scarcity of tickets makes market value much greater than face value. Chance: Drawing, as event too small to meet ticket demand. Consideration: Handling fee which bore no relation to actual administrative cost and was not refunded.
World Triathlon Corp. (WTC) organized Kona Ironman in Hawaii. Individuals who failed to qualify for Ironman Kona race could purchase a $50 “membership” in Ironman “Passport Club,” which provided increased chance of selection in Ironman Kona Lottery. They randomly selected winners received opportunity to buy a spot in race for $850. WTC settled with DOJ and agreed not to contest claims that it violated both Florida’s constitutional ban on lotteries and federal law barring illegal gambling businesses. Prize: The opportunity to buy a spot in the championship race. Chance: Random selection of winners. Consideration: The “membership” fee.
Do not be Deceptive; clearly advertise all of the prize details.
A Florida restaurant promoted a contest with a grand prize of a new Toyota. Unbeknownst to the winner, the contest was meant to be an April Fools’ Day joke – instead of the expected car; the winner was presented with a new toy Yoda. The winner sued, and the restaurant settled by giving her a new Toyota.
A Los Angeles radio station ran a weeklong contest in which listeners were supposed to follow how many miles two Hummer H2 vehicles traveled. The radio station told listeners that the lucky winner would receive a brand new Hummer H2. At the conclusion of the contest, the winner arrived at the station to take possession of her prize vehicle and was presented instead with a radio-controlled toy Hummer. The winner filed suit for $60,000 (the price of an H2).
Companies asking consumers to promote their products in social media in exchange for the chance to win a prize must instruct entrants to disclose this within their post by adding #contest or #sweepstakes.
The FTC investigated Cole Haan with regard to its “Wandering Sole” Pinterest contest. The contest required entrants to create Pinterest boards with images of Cole Haan products and the hashtag #wanderingsole for a chance to win a shopping spree. The FTC concluded that the pins constituted an endorsement of Cole Haan and that the chance of winning a prize by pinning those images was a material connection that needed to be disclosed. The FTC also noted that it did not believe that the #wanderingsole hashtag adequately communicated the material connection. The FTC elected not to recommend enforcement action, noting it had not previously addressed whether entry into a contest was a material connection or whether a pin on Pinterest may constitute an endorsement. The FTC also noted that since the time of the contest, Cole Haan had adopted a social media policy that addressed the disclosure concerns noted by the FTC. The FTC concluded the letter by stating that it expects Cole Haan “will take reasonable steps to monitor social media influencers’ compliance with the obligation to disclose material connections endorsing its products.”
The FTC’s Endorsement Guides: What People Are Asking reflects the basic truth-in the-advertising principle that endorsements must be honest and not misleading. An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make. In addition the Guides say, if there’s a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed.
Keeping Up With ‐ Kim Kardashian was at the center of a surprisingly serious issue after she posted about a morning sickness drug called Diclegis on Twitter and Instagram in August 2015, April 2017 and July 2017, but without mentioning some important information nor proper disclosures that it was a sponsored ad. Kim K later updated the post to provide links to more information.
In 2013, Microsoft hired Machinima for an ad campaign where YouTube Influencers would create videos about the new Xbox One. But in the execution, the vloggers did not disclose that they were paid endorsements. When that became public in 2014, the FTC opened an investigation, and later announced they would settle the matter by prohibiting Machinima from compensating influencers who fail to disclose sponsored posts. It requires that Machinima ensures that its influencers are aware of their responsibility to make required disclosures, requires Machinima to monitor its influencers’ representations and disclosures, and prohibits Machinima from compensating influencers who make misrepresentations or fail to make the required disclosures.
The Federal Trade Commission enforces truth-in-advertising laws, and it applies the same standards no matter where an ad appears (newspapers, magazines, online, in the mail, or on billboards or buses). The FTC looks especially closely at advertising claims that can affect consumers’ health or their pocketbooks – claims about food, over-the-counter drugs, dietary supplements, alcohol, and tobacco and on conduct related to high-tech products and the Internet.
“All Natural” Claims: Tom’s of Maine settled a consolidated class action based on the use of the term “natural” for its personal care products ranging from toothpaste to deodorant. The claimants alleged that use of “natural” ran afoul of state consumer protection laws and warranty statutes. Tom’s claimed “We do not use any synthetic flavors or fragrances. Our customers prefer the fresh, natural taste and smell of herbs, fruits and flowers (or no fragrance at all!).” But the plaintiffs pointed to the use of processed ingredients like xylitol and sodium lauryl sulfate. The parties settled for $4.5 million.
“Made in America” Claims: CA law had previously required 100% American production, for products making the claim, but that was a rarity among state laws. This legislation brings CA into line with the rest of the country as well as with federal regulations against more relaxed standards for products carrying the “Made in America” or “Made in USA” labels. This also aligns the state with the Federal Trade Commission standard that “all, or virtually all” of a product must be made in the country for a “Made in” label to be lawfully used.
“Brewed in the USA” Claims: A Florida judge approved a settlement agreement settling a class action against Anheuser‐Busch in which plaintiffs claimed that Anheuser‐ Busch’s advertising implied that Kirin beer is imported from Japan when it is actually brewed in the United States. The settlement agreement requires Anheuser‐Busch to pay up to $50 per household for purchases of Kirin that purchasers thought to be imported, as well as prominently display the phrase “Brewed under Kirin’s strict supervision by Anheuser‐Busch in Los Angeles, CA and Williamsburg, VA” on bottles and consumer‐facing packages.
False Claims: Using illegal spam and bogus news sites to convey false claims for diet products is bound to attract FTC attention. Advertisers like to drop prominent names because they attract the attention of prospective buyers and in this case they didn’t even get authorization from the celebs first. The FTC argued that customers were tricked into thinking it was real, and not advertising. The FTC’s CAN-SPAM Rule draws clear lines between acceptable promotion and deceptive practices. Affiliate arrangements won’t insulate wrongdoers from liability.
SMS marketing is a permission-based marketing channel, which means you need the customer’s permission. Failure to do so would be in violation of the Mobile Marketing Association’s (MMA) best practices and the Telephone Consumer Protection Act (TCPA).
Steve Madden, Ltd., an international shoe retailer, was accused of sending more than 200,000 text messages to consumers through one of its third party advertisers. The company presented two defenses to these accusations: That consumers had implicitly consented to receive text message solicitations by providing their cell phone numbers while visiting Steve Madden stores; and alternatively That a third party advertiser sent the text messages and should be responsible, not Steve Madden. Neither of these defenses is viable. First, under the TCPA, consumers must provide express and unambiguous consent to receive unsolicited text messages for commercial purposes. A customer that verbally provides his or her cell phone number at a point-of-sale retail outlet without being expressly told how that number will be used, has not provided “consent” under TCPA requirements means requiring prior express written consent to send autodialed and/or pre-recorded text messages to cell phones for marketing purposes. Limited exceptions will apply to this requirement, such as calls/texts from the consumer’s cellular carrier, debt collectors, informational notices and healthcare-related calls. If a dispute concerning consent arises, the advertiser bears the burden of proof to demonstrate that a clear and conspicuous disclosure was provided and that the consumer unambiguously consented to receive text messages and/or telemarketing calls to the number provided. Second, in a Declaratory Ruling issued on May 9, 2013 the FCC ruled that a seller who does not “initiate” calls/text messages as contemplated under the TCPA can nevertheless be held liable where there is an “agency relationship” with its third party advertisers.
Consider all scenarios before launching your promotion and monitor it throughout.
Television comedian Stephen Colbert is known for encouraging his viewers to hijack online polls or other contests. With the tongue-in-cheek effort put forth during the years of The Colbert Report by his legion of followers, he managed to get nine things named after him, including a hockey mascot (Steagle Colbeagle the Eagle) and a Virgin Airlines airplane (Air Colbert). And while he was the winning entry for the name of a new International Space Station module, NASA declined, instead naming a treadmill on the station after him.
File this one under reasons to not give Internet communities the power to name products. When Mountain Dew tapped its Internet followers to help christen a green apple-flavored drink, the disastrously short-lived 2012 “Dub the Dew” promotion was quickly shut down when the suggestions that rolled in proved to be incredibly offensive. Once again, the 4Chan message board ran rampant over an online poll, proffering names both harmless (“Soda,” “Sierra Mist,” and “Soylent Green”) and insensitive (DIEabeties). Mountain Dew bailed on the promotion and issued a profuse apology to its fan base, conceding that the company failed to properly screen entries before posting.
A Facebook poll launched in the summer of 2012 to sponsor a Pitbull concert at the Walmart franchise that earned the most Likes on the page. When the two-man brain trust behind comedy website Something Awful—David Thorpe and Jon Hendren caught wind of the contest, they hijacked the poll to make sure the rapper got sent to the most remote Walmart store in the US, Kodiak, Alaska. Pitbull accepted his chilly fate with poise, inviting Hendren and Thorpe along to the frigid north. Thorpe took the hip-hop star up on his offer and met Pitbull at the show, who laughed off the joke by telling the prankster, “Keep bullsh***ing, Next thing you know we’ll be on the moon”.
Susan Boyle, the Britain’s Got Talent sensation, drummed up some serious publicity for her album party in 2012, but not the kind she was hoping for. Susan’s PR team sent one tweet promoting the party using the hashtag #susanalbumparty before they realized it wasn’t a great idea. Do you see the same two words I see? It was quickly deleted and corrected, but Twitter users caught on before they could prevent it from going viral. Some argue the hashtag was viral genius after all, it spread like wildfire on Twitter and made the news after just one use. But since Susan’s PR team declined to comment and deleted the tweet, it’s generally believed to have been unintentional.
Entenmann’s, known for their baked goods, used the hashtag #notguilty to promote their low-calorie food options – at the same time that #notguilty was already trending in the wake of the controversial Casey Anthony “Not Guilty” murder verdict, they deleted the tweet and apologized on Twitter.
AskDerm hosted a holiday contest with several valuable prizes, but the number of entries and overall engagement was pretty weak. Their hashtags included #contest #sweepstakes #giveaway #freebies #freestuff, but none of the tags were related to AskDerm’s industry or their company. Adding hashtags like #askderm, #skincare and #beauty would have given the giveaway more exposure and increased the number of people who entered. Since AskDerm didn’t ask people to use a branded hashtag, like #askderm or #askdermcontest, it also made it difficult for AskDerm to see all the entries at once.
BoardingPassNYC is a luggage company with a big following, they hosted a giveaway featuring a piece of luggage but the instructions for entry are pretty vague, and there are no details about the duration or other terms of the contest. With every promotion offering there needs to be Official Rules that govern. Dependent upon space, you can post abbreviated rules, legal disclaimers or a link to the full rules. Entrants need to know who is eligible, duration of the promotion, how they can enter, what the prizes are, etc.
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