Businesses often employ sweepstakes promotions as a marketing vehicle to promote their goods and services. Sweepstakes can also constitute the business itself, e.g., Publishers Clearing House. When done well, sweepstakes can become cultural phenomena, such as the McDonald’s Monopoly sweepstakes promotion. Alternatively, when done poorly, sweepstakes can have adverse business consequences and cause marketing teams to wish that they had never run them. There is a lot of regulatory nuance involved in running sweepstakes promotions. As such, it is important to consult with seasoned marketing attorneys to ensure that contests comply with applicable federal and state laws. One pitfall of the unwary is the issue of sweepstakes consideration.
What is the sweepstakes consideration element and how can businesses comply with applicable law?
Sweepstakes Consideration
A lottery is made up of three (3) elements: prize, chance and consideration. Consideration is defined under the law as the exchange of anything of value. Lotteries are only legal if run by state governmental agencies. However, if the element of consideration is removed, a lottery becomes a legal sweepstakes. If chance is removed, and skill is added, a lottery becomes a legal contest. Businesses have gotten into hot water over the years when they have taken a narrow view of what amounts to consideration, treating only monetary payment as a thing of value. In practice, sweepstakes consideration can be any transaction that involves a quid-pro-quo. For example, certain sweepstakes promotions have run into trouble where: 1) entrants were required to watch multiple long video advertisements; 2) entrants were required to link multiple promotion-related posts to their own social media; and 3) winners were required to submit payment in order to claim their prizes. In some circumstances, sweepstakes sponsors may accept sweepstakes consideration, provided that they also offer a free, alternative method of entry (often referred to as an “AMOE”). Common AMOEs include entry through U.S. Mail, via email, or by calling a toll-free number. Please note that AMOEs must be disclosed in a “clear and conspicuous” manner and give non-paying participants equal opportunity to enter and win sweepstakes prizes.
Sponsor a Sweepstakes Promotion
The element of consideration is just one of many factors that sweepstakes sponsors must contemplate when launching sweepstakes promotions. When conducting sweepstakes contests online, businesses should consider eligibility requirements, including entrant age and geographic location. Additionally, specific state laws may require that certain promotions be registered and bonded in advance. When running sweepstakes through social media platforms, such as Facebook, businesses must also be mindful of platform specific guidelines. Given the extent of compliance issues involved in the area of sweepstakes law, it is recommended that businesses speak with a sweepstakes lawyer before initiating any sweepstakes marketing campaign.
If you require assistance in connection with sweepstakes law compliance, 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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