Account Supervisor Cheryl Thornton contributed this post on consideration.
Consideration has many definitions, but when it’s included in a Game of Chance such as a Sweepstakes, the promotion could be violating federal, state and local laws and regulations governing Sweepstakes and Contests.
When a promotion combines the elements of (1) prize, (2) chance and (3) consideration, it is a Lottery. All lotteries, except those which are state operated are illegal under federal law and the laws of all fifty states.
(1) Prize is anything of value awarded to winners.
(2) Chance is the process of randomly selecting the winners.
(3) Consideration- of which there are two types of consideration consists of; Monetary and Non-Monetary. Monetary is the purchase of a Sponsor’s product or any other payment/entry fee required to enter. Non-monetary is substantial time or effort expended which benefits the Sponsor in some direct way.
In order to make your promotion legal, you must eliminate one of the elements in order to be compliant with federal and state laws. Since the prize can’t be eliminated as this is what attracts entrants to participate in the promotion, and games of chance are more popular than games of skill, the logical element to remove is consideration; whereby entry to all who are eligible is “free”.
Consideration can legally flow to the promotion sponsor; it just can’t be mandatory. Virtually all U.S. jurisdictions will permit a promotion where participants pay to play, as long as the sponsor provides a free alternative method of entry (AMOE). These alternative methods of entry can include; mailing, phone call to an 800 telephone number or e-mailing entrant’s information as outlined in the official rules. Disclosures of the AMOE must be “clear and conspicuous”, so that entrants are adequately informed of the existence of a non-purchase method of entry. It is also important to maintain that non-paying participants have equal opportunity to both enter and win the sweepstakes. The AMOE also must have “equal dignity” with the purchase method of entry.
Consideration that precedes the game is legal as long as the Sponsor limits sweepstakes participation to those who made a purchase or transaction prior to the start date of the promotion. Otherwise, the sponsor would be unlawfully inducing consumers to subscribe as a condition of participating in the game.
Requiring the winner of a sweepstakes to submit some type of payment in order to claim a prize can constitute after-the-fact or “post consideration” and violates the prize notification statutes of various states. These statutes make it illegal to condition the award of a prize to a winner on the payment of a fee, requirement to purchase, or submission to a sales presentation in order to claim the prize.
Just follow these simple tips when planning your sweepstakes and you should be on your way to a successful and legal promotion. With the constant changes to sweepstakes law, it is always best to check with legal counsel or an expert like Marden-Kane prior to running any game of chance.
Do you want to learn more? Then contact Marden-Kane. We are here to help you with your promotional needs.
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Thank you for a clear, concise explanation of the elements of what makes a contest legal or not. My husband – a life-long broadcast professional – would recite the “Prize, Chance, Consideration” mantra frequently, when pointing out the pitfalls of my efforts at charity fundraising that might (inadvertently) be illegal. This lays it out perfectly.
Consideration can play a role as long as 100% of all procedes goes to a charitable organization correct?
Your question will need to be answered it 2 parts. The first is what is consideration – which in the example in your question is making a donation in order to enter; and therefore would require an alternate means of entry to be a legal sweepstakes.
And, the second pertains to cause marketing and co-venture laws which is dependent upon the Charity and which States your promotion will run. For further information, please contact us directly @ expert@mardenkane.com.
Is asking fir a name, address, phone number and email address falling under “consideration”? Furthermore, if I use this as a method of compiling an email list for marketing purposes, does it then become “consideration”?
Collecting personal information such as name and contact information to be used in awarding a prize does not typically fall into the realm of consideration. However, to use the collected information for other marketing purposes we recommend that you disclose this information and provide an opt-in (and opt-out mechanism if you ever use the collected data). For specific recommendations that might apply to you, contact us or your attorney.
my golf club is considering a sweepstakes funded by the club to attract attendance at our weekly happy hour. The club will supply $25 each week and a drawing will be held from a list of all member numbers. If the member is present they will win the prize. If not the club will add another $25 next week and so on. The event will be advertised and in fact be no purchase required. You must just be at the club at the time of the drawing and the time will be advertised and held the same time each week. Do you think we are okay? Is requiring people to be at the happy hour consideration? Thanks for your help. Steve
Legal experts might say that requiring people at the happy hour is consideration, although your risk may be low. There are other factors to consider as well, like if alcohol is served, and are all members able to be there or does the timing or location create a hardship. It only take one disgruntled person to file a lawsuit and create a problem. Best practice would be to get a promotional agency or lawyer to draft official rules and help you sort through the details.
Is it “consideration” when you ask for entrants to like or follow you on social media to enter to win a pize?
That is not normally deemed “consideration” as long as the social platform is free, open to everyone, and the social platform’s promotion guidelines allow it. Facebook, for instance, has it in their promotion guidelines that you can’t require a “like” or “follow” for entry into a promotion.
I want to giveaway points(with points you can redeem prizes) on my rewards website. You can enter te giveaway by sign up to the website and clicking the entry button. You can only click the button once every hour for a entry and you can only enter if you are signed up. Is this legal in terms of consideration? Can I let people shorten the time between entries by letting them spend a few points if they have points available?
From the info you provided that could be a viable solution. We would need to know more to give any guidance. Contact us if you need help.
Hello. If patrons who purchase today are interred tomorrow into a sweepstake ending that day, is that legal prior consideration not requiring an AMOE? If not, can you give a similar example of legal prior consideration? Thanks so much.
We would need to have more information. Please contact us at expert@mardenkane.com or give us a call!
Very informative post – thank you.
Would requiring an entrant to watch a short (<1 minute long) 3rd party ad video be considered consideration?
Requiring that your entrant watch a short video may be ok, but there are other factors to consider. be sure to consult us or another promotional marketing agency with specifics before you run your promotion.
Would asking entrants to answer 10 survey questions to be entered into a sweepstakes be “consideration”? The entrants can only enter the sweepstakes via an email invitation and are requested to answer the survey questions. If they do not answer/complete the survey questions they are still entered into the sweepstakes.
If they aren’t required to complete the questions to still be entered this is not consideration. If the survey responses were required, then the length of time it would take to complete the survey would have to be evaluated, along with a few other factors, to be able to determine if it was consideration. You can contact us for assistance on your specific case at the contact us link.
Interesting, how about if everyone is given a free entry into the sweepstakes but are also allowed to “spin the wheel” to win even more entries? Can players purchase additional “spins”?
To avoid it being consideration, you must allow someone to earn the same amount of entries without purchase that one can through a purchase.
That’s what iI was wondering, even when all participants have the same chance of winning more entries as they would be entering through the method involving consideration. So even though they all start equal they must end up equal. Is that correct?
In a sweepstakes, all entrants must all be able to obtain the same amount of entries for free as they would by obtaining them with purchase.
So if I run a sweepstakes and make it free to enter via email address, could I legally give more entries with a purchase on the site?
No. You always have to have the max number of free entries available be equal to the amount that can be earned in other ways, including purchase.
If a web site offers a free trial that allows the user to enter the giveaway would this be considered legal?
Possibly. You would have to look at what was required from the trial, who could participate, etc. You should consult a promotional marketing company with the particulars to make sure everything is legal where you plan to run it to make sure.
Could you give examples of non monetary considerations?
The most common non-monetary forms of consideration is time. Asking someone to complete a 15 minute survey or go to a retail store to enter (which could take both time and money to get there) are both forms of consideration.
Is it “consideration” when you require entrants to install an app on their phone in order to claim a prize?
We would need to know more info, but as long as anyone can download the app without cost or restrictions, it sounds reasonable.
Entrants must drive a considerable distance (up to 50 miles) and be there to win the grand prize. They all get a T-shirt for coming. Consideration?
We would need more info. Depending on the state where this is happening and other factors it might not be legal. If this is a promotion you are thinking of running, we would recommend consulting us or a company like us to ensure the promotion is being run legally.
I am considering running a summer reading program, where people read books to receive entries to win prizes (can read any books they like, not determined by me). Kind of like library summer reading programs. Would requiring them to read a book to enter be considered “consideration”? I (and my business) do not benefit from them reading the books, I just want to encourage reading and give back to my audience/community by giving away some fun prizes at the same time!
Consideration would be determined based on the length of the book, the age of the individual reader, and what the prize is, as well as if this is a local or national promotion. Always consult as attorney or promotional marketing expert to be sure your promotion is legal.
Thank You!
Good morning if I want to do a raffle which would require a payment to enter is that possible on TickTock
You might want to check out our blog posts on Tiktok and running a legal “pay to play” sweepstakes to help you:
https://www.mardenkane.com/articles/how-to-run-a-legal-tiktok-contest-or-sweepstakes.html and https://www.mardenkane.com/articles/run-a-legal-pay-to-play-sweepstakes.html
If you need help drafting legal rules for your giveaway use our “Contact Us” link and we can get you a quote.