Online contests and sweepstakes can be very effective tools to create buzz and generate interest in products and brands. Contests tend to increase web traffic, creating a positive sales effect. Laws and regulations are in place governing Internet marketing, enabling businesses to conduct contests and sweepstakes fairly and correctly. In addition, potential liability issues are mitigated when contests and sweepstakes are held in accordance with these pertinent rules and regulations. Below are some important legal aspects to consider when conducting an online sweepstake or contest.
Overview
Statutes prohibiting illegal lotteries exist in all fifty states. A promotion is deemed to be illegal when three conditions are all present. They are consideration, chance and prize. State lotteries have received special permission to conduct the lottery. These permissions are not extended to sponsors of any other chance promotion.
Consideration is not limited to requiring a purchase to enter. Consideration can be also be the expenditure of time or effort on the part of the entrant. Making someone drive to a destination may be deemed consideration, asking someone to fill out a survey of more than a few minutes can be deemed consideration and so forth. The collection of contact information necessary to fulfill prizes is not consideration. However the use of the data for anything other than prize fulfillment requires permission from the entrant. Until recently even the simple fact that a consumer might need to access the internet in order to enter the contest or sweepstakes could pose a potential issue. Although this has been relaxed, sweepstakes commonly provide a way to enter by regular mail.
To avoid legal issues and conflicts, the promotion marketing experts at Marden-Kane find creative ways to structure the promotion. If purchase is a necessary component of the strategy a skill contest can often be substituted for a chance promotion.
Registration and Bond Requirements
Some states have additional individual requirements for sweepstakes according to prize value. States such as Florida and New York require the promotion be registered and a bond be posted in cases where the total value of the prize structure exceeds $5,000. Being aware of these critical requirements and state-specific details and providing solutions for handling them is only one part of the tasks that Marden-Kane handles for clients; simply, they need not worry about violating a regulation that could prohibit or shut down a sweepstakes or contest.
Disclosure Requirements
In additional to registration and bonding, several other states have similar requirements based on the type of media used, or what method of entry is being used. For example, if a mail piece includes a sweepstakes offer on the outer envelope some specific disclosures must also appear. This is in response to a deceptive practices act that was passed to protect consumers from falling victim to mail fraud or scams. There are numerous other laws and regulations which every sweepstakes must comply with when the promotion extends beyond the U.S. Promoters are expected to research, understand and comply with all foreign country laws, regardless of their country of origin.
Privacy Issues
There is a host of privacy issues which relate to contests and sweepstakes in which children participate. For example, under the Children’s Online Privacy Protection Act (COPPA), websites prevents marketers from collecting personal information from anyone under 13 years of age without parental consent. The FTC enforces this vigorously. The official rules must include additional disclosures whenever a minor enters an online sweepstakes. Any promotion that requires personal information be exchanged also must include personal information opt-out provisions.
Specialized Direct Mail Disclosure Mandates
Whenever a contest or sweepstakes is promoted through direct mail, sponsors must comply with the federal Deceptive Mail Prevention and Enforcement Act (DMPEA), as well as with applicable state laws. The DMPEA governs:
– Sweepstakes mailings
– Skill contests
– Facsimile checks
– Mailings which resemble government documents
– Entry form disclaimers, statements and rules
The formulation and design of web-based and Internet contests and sweepstakes requires specialized knowledge and guidance in order to be properly executed. Contact Marden-Kane’s marketing specialists to assist with all of your company promotions needs. We will guide your company toward promotional success while ensuring that relevant contest and sweepstakes laws are followed correctly. For more information, please visit us at http://www.mardenkane.com/contactus.cfm or call (516) 365-3999.