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SWEEPSTAKES AND CONTESTS
Brian S. McCormac
BrownWinick 666 Grand Avenue, Suite 2000
Des Moines, IA 50309-2510 Telephone: 515-242-2431 Facsimile: 515-323-8531
E-mail: mccormac@brownwinick.com
Overview • Types of Promotions
– Lotteries – Sweepstakes – Skill Contests
• Lotteries are illegal unless run by the government or with government permission
• Challenge is to structure your promotion as a sweepstakes or skill contest.
Elements of a Lottery
• Prize • Chance • Consideration
What is a Prize?
• Anything of value offered as an inducement to enter – Cash – Merchandise – Coupons – Discounts
What is Chance?
• Any part of the winner selection process beyond the judgment or control of the participant.
• Examples: – Random drawing – Instant win code – Scratch card
What is consideration? • Always includes payment of money to enter
– Entry fee – Purchase requirement
• May include “substantial effort” if required to enter – Traveling to a location/store visits – Lengthy survey – Waiver of legal rights (NJ AG: do-not-call waiver) – Attending a sales presentation (often separately
regulated)
Structuring a Legal Promotion
• Must remove one lottery element – Remove consideration, you have a
sweepstakes – Remove chance, you have a skill contest – Remove prize, you have no participation
Sweepstakes
• Key features – Prize awarded by random selection – No consideration required to enter
Sweepstakes
• How do you remove consideration? – Offer a free alternate method of entry (AMOE)
• Mail/postcard • Online entry
– Must disclose AMOE in all advertising
Alternate Method of Entry
Alternate Method of Entry
• Must treat free and paid entries with “equal dignity” and “equal prominence” – Equal Dignity: treat all entries the same
• Avoid: – Different deadline dates – Different prize pools (Publishers Clearinghouse) – Different entry limits
– Equal Prominence: display AMOE in same manner as purchase entry
• No Purchase Necessary language usually covers this issue
Special Consideration Issues
• Post consideration – Claiming prize requires payment or
expenditure of substantial effort • Requiring car winner to fly to pick up prize • Often arises with travel prizes where some
element of trip not included • Carefully describe travel prizes in rules (e.g., “ground transportation excluded”)
Special Consideration Issues
• Preexisting Consideration – Customer only sweepstakes
• Entry limited to existing customers who have already paid consideration to sponsor
• Generally acceptable, but must limit frequency • Make no pre-purchase representations that a
sweeps will be offered
Special Consideration Issues • Text messaging
– Deal or No Deal cases • Equal Dignity issue
– Internet AMOE much more cumbersome than texting – 1-800 number would have been better because of similarity to
text entry
• $ .99 text message premium held not to be an unlawful entry fee by Georgia Supreme Court
• Best to avoid text messaging as AMOE because of facial consideration requirement and risk of differing state laws
Special Consideration Issues
• Internet access • 1-900 numbers • Refer-a-friend • “Like” on Facebook
Special Consideration Issues • Consent to receive marketing emails • Open question • NY AG has opined that requiring persons
to accept a telemarketing call constitutes consideration
• Requiring consent to receive marketing emails could be deemed consideration – Avoid by using an opt-in so entry doesn’t
require consent
Special Consideration Issues
Skill Contests • Removes the element of chance • Winners selected in accordance with
objective criteria – There can be no element of randomness in
winner selection process • Consideration usually exists
– Substantial effort to enter – Cost of materials – Entry fee generally permitted
Skill Contest
• Examples – Skintimate
• Good example
– Macaroni Grill • Bad example
Skill Contests
• Skintimate Contest rules set forth: – Entries judged by panel – Criteria: Use of brand assets (25%), Quality of
Execution (25%), Originality (25%), Creativity (25%)
– In the event of a tie, tied entrant with highest score in Creativity will be the winner
Skill Contests
• Macaroni Grill “Create Your Own Pasta” recipe contest. – Contest had two rounds
• First round was a random drawing to narrow field to 500 entrants
• In second round, panel of judges read the 500 recipes and judged them on: taste/flavor (50%), innovative ingredients (40%), creativity of name (10%)
• Tiebreaker: random drawing
• Problematic because of use of random selection
Official Rules • All sweeps and contests should have official rules • Must Contain the following:
– “NO PURCHASE NECESSARY” – Void where prohibited – Eligibility/residency requirements – Start and end dates – Entry instructions – Description of selection process – Odds of winning – Description of prizes and ARV – Sponsor name and address – How to obtain winners list
Official Rules
• Should contain other CYA clauses – Morals – Not responsible for late, illegible entries – Limitation of liability – Sponsor’s decisions final – Force majeure
Promotions Gone Wrong • Kraft “Ready to Roll” Sweepstakes • Kraft inserted game pieces with cheese slices • Grand prize was car; odds 1:15,000,000 • Undetected printing error resulted in virtually
every game piece being a winner • Attempts to cancel brought class action litigation
and regulatory scrutiny • Kraft settled for $10 million • Moral: include a “Kraft clause” in rules to protect
against such errors
Promotions Gone Wrong • McDonalds Monopoly Fraud • Security chief of contractor administering
promotion stole winning game pieces and claimed over $13 million in prizes
• No McDonald’s employees involved • McDonald’s voluntarily gave away $10 million in
store visit promotion to restore customer goodwill
• Moral: include a “McDonald’s clause” to protect against illegal or fraudulent acts
Promotions Gone Wrong • Radio station “Hold your Wee for a Wii” • Contestants drank as much water as they could
without urinating—entrant who drank the most would win
• Entrant died from water intoxication • Contestant’s family filed wrongful death lawsuit • Jury awarded contestant’s family nearly $17
million in damages • Criminal charges explored but not brought
Questions ?
Brian S. McCormac BrownWinick
666 Grand Avenue, Suite 2000 Des Moines, IA 50309-2510 Telephone: 515-242-2431 Facsimile: 515-323-8531
E-mail: mccormac@brownwinick.com Website: www.brownwinick.com
Website: www.brownwinick.com
Toll Free Phone Number: 1-888-282-3515
OFFICE LOCATIONS:
666 Grand Avenue, Suite 2000 Des Moines, Iowa 50309-2510
Telephone: (515) 242-2400 Facsimile: (515) 283-0231
616 Franklin Place Pella, Iowa 50219
Telephone: (641) 628-4513 Facsimile: (641) 628-8494
DISCLAIMER: No oral or written statement made by BrownWinick attorneys should be interpreted by the recipient as suggesting a need to obtain legal counsel from BrownWinick or any other firm, nor as suggesting a need to take legal action. Do not attempt to solve individual problems upon the basis of general information provided by any BrownWinick attorney, as slight changes in fact situations may cause a material change in legal result.
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