Your Giveaway May Violate Sweepstakes Law

sweepstakes law
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Brands often use giveaways as a marketing tool to create buzz among the consuming public. When done correctly, businesses can see an increase in revenue and consumer loyalty through use of giveaways. However, when a giveaway campaign is poorly structured, brands can suffer irreversible reputational harm. A recent example of a giveaway gone wrong concerns one offered by Reese Witherspoon’s fashion line, Draper James, LLC (“Draper James”). The subject Draper James Instagram giveaway post read: “Dear Teachers: We want to say thank you. During quarantine, we see you working harder than ever to educate our children. To show our gratitude, Draper James would like to give teachers a free dress.” The post did go on to explain that a registration form needed to be completed and that the offer was only “valid while supplies last.” Despite the additional language, the Draper James disclosure proved to be insufficient. After publishing the promotional post, many of the thousands of teachers who signed up believed that they would each receive  a free dress, when, in reality, teachers were entered into a sweepstakes for a chance to win one of only a limited 250 dresses available to entrants. After nearly one million entries were received, Draper James’ sweepstakes site crashed. Teachers who did not receive a dress went to social media to express their outrage about the deceptive giveaway. In an attempt to quell the firestorm, Draper James: 1) publicized that it would make an unspecified donation earmarked to help educators support their remote classrooms; and 2) gave every registrant a Draper James discount code. How this response plays out both in the court of public opinion and with regulators, remains to be seen. The Draper James campaign example is a reminder to brands that they need to use clear language to explain when a promotion is, in fact, really a sweepstakes and not a giveaway with prizes provided to all who sign up. In order to avoid situations similar to this, it is wise to speak with a promotions law attorney who is familiar with the nuances of sweepstakes law and other games of skill and chance. 

What should brands know when offering giveaways?

Games of Skill and Chance

A giveaway is a type of promotion where something is given away for free. A lottery exists when people pay for the chance to win a prize. If payment is removed, the lottery becomes a legal sweepstakes, and if chance is removed, the lottery becomes a contest (or a game of skill). Private entities (unlike the state) cannot offer lotteries. Therefore, brands must turn to giveaways, sweepstakes or contests as fun ways to promote their respective products and services. Offering legal sweepstakes or contests requires brands to comply with state and federal sweepstakes laws in order to avoid fines, reputational harm and, potentially, criminal sanctions. 

Complying with Sweepstakes Law

When conducting sweepstakes, brands should be mindful of the following sweepstakes law requirements:

  • Although it is acceptable to offer entry through monetary payment or the purchase of a product or service, a free alternative method of entry (often referred to as an “AMOE”) must also be offered;
  • The sweepstakes must be conducted in accordance with official contest rules. The official rules will act as a binding contract between the sweepstakes operator and its entrants. Among other things, sweepstakes rules must include all eligibility requirements and any exclusions to entry. 

In addition to complying with sweepstakes law, brands must be cognizant of how consumers will perceive their promotions. On its face, Draper James looks to have had good intentions. However, consumers rarely read promotional details and by using the word “give,” instead of “offering the chance to win,” Draper James received considerable consumer backlash that could have been avoided. It is crucial that all sweepstakes promotions have comprehensive contest rules and very clear and conspicuous disclosures (fine print) that accompany both promotion marketing copy and the sweepstakes registration flow. Consulting with experienced sweepstakes attorneys well in advance of promotional launch can help prevent legal and reputational harm. 

If you are interested in learning more about this topic or require assistance in connection with your sweepstakes and contest promotions, 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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David O. Klein

David O. Klein

David Klein is one of the most recognized attorneys in the telemarketing, technology, Internet marketing, sweepstakes and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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