In April, we blogged about how Reese Witherspoon’s fashion line, Draper James, LLC (“Draper James”), was roundly criticized for creating the false impression that all teachers who registered on its website would be given a free dress. In reality, teachers were merely entered into a sweepstakes for a chance to win only one of a limited 250 dresses available to entrants. Recently, a group of teachers in California sued both Draper James and Reese Witherspoon over the failed marketing stunt. The complaint alleges, among other things, that “[t]here was no indication this was some form of lottery, or that Defendants would only be making an unreasonably limited number of products available under this offer or place an unreasonable limitation on quantity, or that there were any other material limitations on this offer.” Had Draper James retained a sweepstakes law attorney prior to launching their promotion, they would have likely avoided the ensuing social media firestorm.
How do you comply with sweepstakes law?
Defining a Lottery
A lottery exists when consideration must be provided by entrants for the chance to win a prize. Readers are probably most familiar with certain state lotteries, such as Powerball and Mega Millions. Lotteries run by private businesses and/or individuals are illegal. However, if the element of consideration is removed, the lottery becomes a legal sweepstakes, and if chance is removed, the lottery becomes a legal contest. “Consideration” exists when an individual provides “something of value” for the opportunity to enter a promotion. The analysis as to what constitutes something of value is obvious when consumers are required to pay an entry fee or purchase a product in order to be entered to win a prize. Additionally, courts have ruled that something of value can be: 1) “likes” on social media; 2) requiring customers to submit testimonials; and 3) mandating that time-consuming activities be undertaken to enter a promotion. In the Draper James case, the plaintiffs allege that the giveaway was an illegal lottery because entrants had to provide valuable consumer data as consideration for the chance to win one of 250 dresses.
| Your education on compliance with Internet, telemarketing, and trademark law should begin with a discussion between you and an experienced attorney. Scheduling a free consultation with Klein Moynihan Turco is a great place to start. |
Navigating Sweepstakes Law
In addition to addressing the element of consideration, some other key sweepstakes law issues to be mindful of include: 1) providing a free, alternative method of entry (or an “AMOE”); 2) drafting official contest rules that act as a contract between the sweepstakes operator and its entrants; 3) implementing proper protocols for notifying winning entrant(s); and 4) state laws that require registration and bonding.
The Draper James promotion is a good example of how a marketing campaign can bring negative attention to a brand. Seeking legal guidance from attorneys experienced in sweepstakes law in advance of promotion launch can save both reputational harm and the cost of litigation.
If you require assistance in connection with your sweepstakes and promotional campaigns, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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