What Legal Issues Come Up When Running a Sweepstakes or a Contest?
Marden-Kane’s strength is avoiding legal issues, and we follow a process to ensure we deliver, as promised. Sometimes a departure from the process is unavoidable due to unexpected circumstances. Difficulty in getting approvals on creative, on official rules could put you into jeopardy of late registration. This would result in a fine.
Because contests and sweepstakes are governed by both state and federal laws, it is essential that you follow the rules and keep up with how they are interpreted and enforced. If a Federal Governing Body or State Attorney General agency sees a potential violation they can take several courses of action. Some are modest such as seeking clarification or possibly calling for an end to the promotion. If the violation causes harm to the participants, legal actions may be taken. The extent of the action taken will have to do with the seriousness of the violation. Class Action Lawsuits have been filed on the behalf of consumers where circumstances are deemed harmful, not just to a few, but too many.
Many companies believe they can run their campaigns without the need for legal counsel. At Marden-Kane, we believe the time and modest expense to avoid possible legal concerns is money well spent. We work with highly informed and experienced attorneys, and urge our clients to take advantage of their knowhow.
Some things to remember about sweepstakes and contests are that there is big difference between the two, and how they both differ from a lottery. A lottery is a form of gambling and thus is heavily regulated on a state-to-state basis. Simply put, a sweepstakes is defined by everyone receiving an equal chance, with the winner being determined by a random drawing. Based on chance, people win without having to do anything other than enter, providing basic information. This information can be used by your company for future marketing so long as it complies with CAN-SPAM laws regarding use of personal information.
A contest is based on competition where people win because their submission is judged to be the best. This means some element of skill must be present. A sweepstakes becomes an illegal lottery when you introduce something called “consideration.” Consideration is present when something of value is given in order to enter. This is usually money, but even completing a survey when you give your time can be consideration. The simple easy way to avoid consideration is to offer an alternate free method of entry.
Concerned lawmakers are always on the lookout for what might be an illegal lottery, but this is not the only interested party. Social media means untold numbers of savvy sweepstakes players knows as “gamers” are constantly on the look out to find a promotion that is in violation. So be careful about eligibility, managing your promotion to the stated timeline in the rules. The proper function of the campaign including duration entry forms processing of the winners list are all areas that are transparent to the user.
For more information on what legal issues come up and how to avoid them when running a sweepstakes or contest, contact our experts at: (516) 365-3999
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