Sweepstakes and contests are great ways to promote your products, especially now that the internet and social media make it so easy to increase the visibility of your promotions. Unfortunately, many companies don’t realize that unless giveaways are structured correctly, they may be considered an illegal lottery, opening the company up to serious liability.
If your company is interested in connecting with consumers using a sweepstakes, your company must understand sweepstakes laws and sweepstakes regulations. Sweepstakes law encompasses the numerous regulatory, intellectual property, privacy, and other potential liability issues companies must consider before proceeding. Talk to a sweepstakes attorney in the Priori network to find out how you can offer a sweepstakes in compliance with federal and local sweepstakes regulations.
Legal Documents For Sweepstakes
There are several key legal documents for sweepstakes. Without these documents you risk regulatory penalties. The following are vital under sweepstakes law:
- Official Rules. A set of official rules that identify the material terms and conditions governing the promotion must be easily available alongside any promotion of the sweepstakes.
- Abbreviated Rules Disclosures. Even social media postings, tv ads, and banner ads must include some reference to the official rules and certain disclosures. The exact language and size of these abbreviated rules should be appropriate for the nature of the advertisement and the medium, which means that you must prepare versions to accompany any reference to the sweepstakes on any media.
- Releases. You should have winner releases that include affidavits of eligibility, liability releases, and publicity releases from all prize winners. This should also include a guest release for any third parties involved in the sweepstakes (such as the other person going with the winner on a prize vacation for two).
- Partner Contracts. Many sweepstakes involve partnerships with other companies or third parties to supply or carry out prizes. You need to make sure to draft contracts laying out responsibilities, indemnifications, and consequences for breaches with all vendors, co-promotional partners, prize suppliers, fulfillment houses, bonding companies, licensees, or other third parties that provide services or prizes in connection with the sweepstakes.
Key Sweepstakes Regulations
Sweepstakes are closely regulated by the Federal Trade Commission. There are many sweepstakes regulations that you must comply with in order to ensure that you are carrying out a legal promotion. These are three of the most important:
“No Purchase Required” Disclaimers
Gambling is highly regulated in the U.S., and such regulations vary by state. If a sweepstakes requires some purchase or specific action to win, this is considered “consideration” or payment -- requiring the sweepstakes to be regulated under rules applicable to gambling. This means that any sweepstakes should have at least one method of entry clearly laid out in the rules that doesn’t require mandatory consent to receive marketing materials, purchase of an item, or another action. There should also be a “no purchase necessary” disclaimer by any entry form. Otherwise, you open your company to costly sanctions under sweepstakes law.
All eligible participants in the sweepstakes must be treated equally. This prohibits discrimination illegal under federal law, but it also means that an entry from any method should be valued equally. No matter how a person enters, they should have the same chance to win.
You must fully disclose who is eligible to participate in the promotion. This can specify age, location, and other factors, but all eligibility requirements must be transparent and permitted by law. In addition, it is generally wise to exclude any persons related to your company or the promotion.
State Law Compliance
Sweepstakes must be careful to comply with state law, as well as federal law. Some states require costly extra registrations specific to that state before a sweepstakes can be valid there. In particular, Rhode Island, Florida, and New York have special registration provisions, depending on the value of what you are giving away as a prize. Make sure to either exclude residents of these states or to register within the state.
The cost of putting together the legal documents for sweepstakes and implementing a sweepstakes can vary depending on your needs. Hourly rates for sweepstakes attorneys start at around $275 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and to receive a free price quote from one of our sweepstakes attorneys.
What is the difference between a skills contest and a sweepstakes, and why does it matter?
Unlike sweepstakes, which select winners totally by chance, skills contests require winners to exhibit prowess in a “bona fide skill” which is judged by an independent third party using predetermined objective criteria. Legally, this difference matters, because the laws regulating skills contests and sweepstakes are different. In addition, any overlap between the two could be classified as an illegal gambling operation.
Can my sweepstakes include non-U.S. citizens?
Yes, you can include non-U.S. citizens in your sweepstakes, no matter where your business is based. That being said, allowing residents of other countries to participate in a sweepstakes means that you must comply with all regulations for sweepstakes in the jurisdictions of any participants that enter. If you are considering a worldwide or multi-country promotion, consult an international corporate lawyer to ensure compliance with all applicable sweepstakes laws.