Smart phones and other mobile devices have become a significant part of everyday life. Consequently, businesses have sought to engage consumers through this popular medium by creating smart phone-based mobile applications (or “apps”) and related app-based loyalty programs and promotions. Regardless of the medium or technology involved, one cost effective means of attracting consumers to download mobile apps and join loyalty programs involves the use of sweepstakes apps and other app-based promotional contests.
Unsurprisingly, given this potent symbiosis, McDonald’s is bringing back its popular Monopoly-based promotional sweepstakes, but this time via a mobile app and related loyalty program. As discussed here:
“For McDonald’s, reviving the game could further juice sales, but also provide an even bigger boost to its loyalty program, a key area of growth under CEO Chris Kempczinski.
In the chain’s most recent earnings call last month, Kempczinski said customers more than doubled their visits after joining the program….”
What Legal Issues Apply to Sweepstakes Apps?
Sweepstakes apps provide business owners with an ideal means to reach a broad audience and increase loyalty program membership. But be careful: there is a complex system of state and federal laws, rules and regulations that apply to mobile apps and sweepstakes separately, as well as unique legal issues that arise when they are used together.
For example, certain mobile apps might be capable of tracking the physical location of end-users. Geolocation tracking may be necessary for a contest that takes place, at least in part, in a specific geographic area. Prior to engaging in such geolocation tracking, however, app operators must ensure that they obtain express, informed end-user consent in order to avoid unwanted regulatory scrutiny and litigation exposure.
Further, most promotional contests, like the McDonald’s Monopoly game, are games of chance. However, games of chance will be considered illegal lotteries in each state, unless one of the following three elements that comprise a lottery is removed: (1) a prize awarded to the winner; (2) chance in determining the winner; and (3) consideration for entry in the game. Because removal of the prize undermines the promotional aspect of the game, and because chance is hard to eliminate entirely (many states find that even a small trace of chance in determining the winner(s) satisfies the “chance” element), consideration is the element most frequently removed.
Given the need to eliminate consideration, sweepstakes app operators must ensure that their respective sweepstakes promotions are free to enter (or have a free alternative means to enter). This could be problematic if joining a loyalty program is made a precondition for being eligible to enter a given sweepstakes, as the act of joining the loyalty program could be deemed a form of consideration.
Retain Attorneys Familiar with Mobile Apps and Sweepstakes
As mentioned above, there are various laws that apply separately to mobile apps and sweepstakes, as well as unique legal issues that arise when mobile apps and sweepstakes are used in combination. Due to the interplay of local, state and federal laws, rules and regulations, and the considerable risks to businesses that do not comply with same, it is essential that business owners obtain the advice and counsel of qualified attorneys when commencing any sweepstakes or contest, whether through a mobile app or otherwise.
Please note that this is only a brief overview of some of the legal issues involved in running sweepstakes and other promotional contests by and through sweepstakes apps.
If you are interested in learning more about this topic or require assistance in connection with your mobile app and/or sweepstakes app promotional campaigns, please e-mail 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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