Sweepstakes Law – New York Bar Association CLE Program in Marketing and Advertising Law

Barry M. Benjamin, Managing Partner of the New York office and President of Kilpatrick Townsend’s Advertising and Marketing Group, was honored to present at the New York Bar Association’s Continuing Legal Education Program, Marketing and Advertising Law : Social and Digital Media after a Year of Transformation. The session focused on recent events in sweepstakes law. The session focused on the basics of sweepstakes and skill contest laws and regulations, and highlighted recent promotional disasters to underscore the domain’s relevance in today’s highly engaged advertising market. .

5 key takeaways from the presentation, including:

1. Does not require consideration. To prevent an illegal sweepstakes that violates lottery laws, a promotion must eliminate one of the three elements of a lottery: prize, chance, and consideration. Usually this means eliminating the quid pro quo – not requiring a purchase or entry fee, including a free alternative method of entry (“AMOE”) for those who do not wish to make the purchase or provide the required quid pro quo by the sponsor. It’s not just theoretical, as enforcement proceedings have been brought against seemingly innocuous programs like in 2015, when the oversubscribed Ironman Triathlon organization used a pay-to-play lottery system to select those who could enter the race. To resolve alleged lottery law violations with the Justice Department, the group paid more than $2.7 million. To learn more, click here.
2. Write carefully and apply the official rules. The official rules of any promotion are the contract between sponsor and entrants. The rules represent the sponsor’s offer, which upon entry (acceptance) becomes a binding agreement. After the start of the promotion, the rules cannot be changed. It is therefore essential that the rules contain not only the disclosures required by law, but also clear instructions to the consumer as to how to participate. And, the sponsor must train staff to enforce the official rules as written. In March 2022, the Federal Communication Commission fined radio station iHeartMedia $20,000 for disqualifying previous award winners within 90 days of their award, when official rules actually stated disqualification within 30 days. To learn more, click here.
3. Clearly disclose the AMOE. It is crucial when structuring and advertising a promotion that where the monetary consideration is part of the entry mechanism, that the AMOE is clearly and visibly disclosed. In July 2021, Coinbase held a raffle where exchanging doge coins was an entry for a chance to win. However, disgruntled consumers have filed a class action lawsuit alleging that the AMOE has not been adequately disclosed, meaning that all participants have been misled into believing that it is not. only by exchanging doge coins someone could enter to win. To learn more, click here.
4. Pick a winner when you say you will. When advertising a promotion, people pay attention, especially people who entered to win. They pay close attention to how and when winners will be selected. It was a problem in December 2020 for the group of influencers ironically named “Not a Content House” (ironic because producing content was exactly what they did). They announced a contest in which the winners would be flown to their location to meet and interact with the group. Yet on the day they were due to announce the winner, the waiting attendees were greeted with a deafening silence. No winner has been announced. Indeed, nothing has been announced. The group had forgotten – in the midst of the Covid crisis, but still – to select and announce a winner. This drew a major reaction from their ardent fans. To learn more, click here.
5. Apply the rules when selecting a winner. As stated above, the Official Rules constitute a contract between Sponsor and all entrants, and entrants must abide by the Official Rules. Which, of course, means sponsors must strictly and completely enforce their official rules. London’s Natural History Museum learned that lesson the hard way, after selecting a winner in its Wildlife Photographer of the Year in 2017. The winning photo was a photo of an anteater under a starry sky, alongside a a termite mound. Someone, however, suspected a rat. After a thorough investigation by a team of five scientists, they concluded that the anteater was actually a stuffed animal – a fake. The winner protested, but the sponsor’s findings were final, as stated in the rules. To learn more, click here.

Lotteries and skills competitions continue to be popular tools for companies to market their products and services. When mishandled, these promotions can generate costly and embarrassing consequences, ranging from simple bad publicity to significant civil and criminal liability. These negative results are not just theoretical, as the examples above show. Most promotions, however, are handled properly and can generate huge customer interest, website and social media traffic, revenue, and brand awareness. One last point to remember – be one of those who do it well.