Online sweepstakes games have long been a favorite promotional means to attract and repay publishers. In the United States, such advertisements are subject to strict legal and administrative requirements. This article focuses upon the state –related limitations on “pay-for-play” sweepstakes games of chance.
In short, sweepstakes games of chance – in contrast to sweepstakes games of skill – are considered unlawful if all of the following factors are present:
To usually be considered a lawfully obedient sweep in the U.S., one of these three components must be removed. Removal of the state element creates sweepstakes games. Directly speaking, “consideration” is something given in trade for something else. The addition of consideration creates an illegal lottery.
Consideration can be more than just financial payment to the sweepstakes games promoter. It can also involve things like requiring to buy a product/service, forcing players to complete difficult steps and disguising entry fees as something else.
Social media platforms and the Internet have improved the prevalence of online sweepstakes games and contests explode over the last few years. For a company to limit its liability when handling these kinds of advertisements, it is necessary to have the proper right documentation in place. To secure a company is protected, several requirements should be involved in its legal documentation. For instance, the sweepstakes games or contest needs to add the proper disclosures and disclaimers, outline an official set of rules, have proper releases for players and winners, as well as give specified provisions regarding an agreement with applicable state and federal laws.
Online advertisements may be required to provide participants with the necessary knowledge about the sweepstakes games and may address other potential legal issues. For instance, use of the Internet enables participants to submit repeated entries more quickly. Furthermore, promotions that help or require participants to “share” content may also raise intellectual property (IP) issues, such as third-party copyright violation. As such, organizations should ensure that they secure the proper statements needed for any promotional stuff to be used in connection with the winner.
The collection of personal information, whether deliberate or unintentional, from members, can also trigger legal issues. For example, organizations must ensure that their advertising does not violate any federal laws regarding privacy or collection of personal data. Online sweepstakes games via the Internet may also be subject to varying state laws based on the location of the member or can trigger code under the Children Online Privacy Protection Act (“COPPA”) if they target children.
For those businesses involved in running an online competition or sweepstakes games, we can assist by assuring that proper releases and disclaimers are in place. We will also examine the framework of the game or sweepstakes games to ensure agreement with both state and federal law as it concerns the actions.
As an internet and eCommerce law firm, our internet and eCommerce lawyers can assist with advising on online sweepstakes games and games legal issues. See our Internet & eCommerce service line page for additional information about online sweepstakes games and contests legal services.
So, how does a promoter remove the part of consideration?
The most popular method is simple. Members are not charged by the promoter to enter the advertising.
Another way may, under clearly defined conditions, permit sponsors to require that participants pay consideration “indirectly” via the purchase of a service/product while giving an easy alternative method of entry (“AMOE”) for entry. Non-paying players must have an “equal opportunity” to enter and win. A majority of states in the U.S. claim that promoters conspicuously reveal the AMOE.
Another primary thing to consider is the value of the award.
Prize values are essential when it comes to deciding legal requirements. For instance, if the aggregate amount of the prize exceeds $5,000 in the states of Florida and New York, promoters are expected to register and bond the material sweep. Rhode Island requires that sweepstakes games conducted by brick-and-mortar-businesses at a local outlet be recorded if the aggregate prize value exceeds $500. With experienced lawyering, promoters may be prepared to avoid registration and bonding conditions.
Marketers that wish to complete online sweepstakes games should consult qualified FTC advertising compliance and defense attorney as states’ legal requirements (not to mention the federal law) where entrants are accepted can be very complex. In addition to knowing relevant authorities and state attorneys’ general views – the risk in some states may be more significant than in other details – dealing rules should be completed.
Drafting proper sweepstakes games rules is also important to avoid potential obstacles and minimize liability display. States should, without limitation, involve a statement that no property is necessary to enter or win, set forth entry features and constraints, disclose deadlines and the approximate numeric chances of winning, describe the winner selection process, explain eligibility requirements and the geographic extent of the promotion, describe how conquerors will be notified, and set forth the prizes and similar values. Rules should also reveal whether winners will be required to complete an affidavit of qualification and publicity release.
Promoters should bear in understanding that the Federal Trade Commission defends against dishonest trade practices and the customary laws must include specific information regarding, without limitation, the sponsor and prizes. Publicity and privacy policies should also be vetted for agreement by counsel.
Informational purposes only. A brief overview of U.S. sweepstakes games legal issues. Not legal information. Always seek the help of a lawyer.