Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can find Dale on Google+ and Twitter, and reach him at (314) 552-6058 or djoerling@thompsoncoburn.com.

Effective April 10, 2013, the state of Florida made changes to its Game Promotion Statute. The changes were made partly in response to the state’s recent ban of so-called Internet sweepstakes cafes.

The changes in the law won’t drastically alter how many businesses conduct promotions in the state of Florida, but they do result in dramatic changes for nonprofits and charitable organizations, which, as of April 10, 2013, are now prohibited from operating game promotions.

To find out more about the changes, I reached out to Liz Compton, the chief of the Bureau of Compliance at the Florida Department of Agriculture and Consumer Services. Liz talked with us last year for a series of posts about sweepstakes in Florida. This week, she helpfully offered some clarification on the law change.

Dale Joerling: A recent Florida Industry eAlert issued by the Florida Division of Consumer Services states that for-profit entities may conduct game promotions on a “limited and occasional basis.” Does that mean that for-profit operations will be limited in terms of the number, duration, or frequency of these promotions? How so?

Liz Compton:  At this time, the department has no plans to promulgate rules limiting the number, duration or frequency of game promotions of for-profit entities that offer sweepstakes in connection with and incidental to the bona fide sales of consumer products or services.    

Dale Joerling: Does the amended Section 849.094 Florida Statutes prohibit non-profit and charitable organizations from operating a game promotion?  If so, does that include nationally advertised game promotions?

Liz Compton: Yes, the amendments to the statute prohibit a non-profit or charitable organization from operating a game promotion. This includes nationally advertised game promotions. Only for-profit entities may operate game promotions in Florida.

Dale Joerling: Can non-profit and charitable organizations conduct raffles for prizes under Section 849.0935 Florida Statute if they eliminate the element of money consideration but still allow for voluntary donations and contributions?

Liz Compton: The department has no regulatory authority over raffles conducted under Section 849.0935 so we aren’t able to offer an opinion on this.

Dale Joerling: When do these changes go into effect?

Liz Compton: The changes were effective as of April 10, 2013.

Dale Joerling: Will the Department of Agriculture and Consumer Services provide additional rules or guidance regarding the changes to Section 849 Florida Statutes?

Liz Compton: At this time, the department is reviewing the changes to determine whether additional rules are necessary. Information regarding the changes is available on our website at www.800helpfla.com or by calling 800-HELP-FLA (435-7352).

Dale Joerling: What are the most frequent questions you’ve received since announcing these changes in the law?

Liz Compton: Most questions relate to the ability of a charity or non-profit to run a game promotion.  As mentioned above, the amendments to the statute only allow for-profit entities to run a game promotion.

Dale Joerling: Is there anything else marketers or other companies should know about these changes?

Liz Compton: It is important for entities that file game promotions to note that filing with the department does not authorize and will not be considered a defense to a charge of possession of a slot machine or device or any other devices or a violation of any other law.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

It might not occur to you to think about civil rights act compliance when planning an in-store or retail promotion – but that’s just what the state of California requires. The Unruh Civil Rights Act is a California statute that specifically prohibits discrimination based on sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation. Named for the colorful California politician who authored the bill, Jesse Unruh, the act protects against intentional discrimination that is unreasonable or arbitrary, such as discrimination that perpetuates any irrational stereotypes or emphasizes irrelevant differences between groups of people. The act applies to all types of businesses in California, such as hotels, restaurants and retail establishments.

In 1985, the California Supreme Court debated whether a car wash could offer “Ladies’ Day” discounts to female customers without offering a similar promotion to male customers. The Court found that the Unruh Act prohibited businesses from offering price discounts to females without offering similar discounts to males. The Court discussed a number of alternative store promotions that might be acceptable under the Unruh Act. One alternative could be a business offering reduced rates to all customers on one day each week, or offering a discount to any customer who meets a condition which any customer could satisfy (like presenting a coupon or wearing a certain color shirt).

More recently, the California Superior Court found that a 2005 “Mother’s Day” tote bag giveaway at a Los Angeles Angels’ game did not violate the Unruh Act because the promotion did not constitute a “de facto discount.” It was simply a gift and not a discount on the admission price, the court ruled. During the baseball game, tote bags were given to all females attendees over age 18. The Court decided that the Mother’s Day promotion did not unreasonably or arbitrarily discriminate against males because it was intended to target mothers. In other words, the intended discrimination (only providing tote bags to women over age 18 years) was based on motherhood and not on gender.

Felicia Williams is an associate in Thompson Coburn’s Advertising, Marketing and Promotions Law group. You can reach her at (314) 552-6277 or fwilliams@thompsoncoburn.com.

Internet and mobile advertising is subject to the same rules as anything else, the Federal Trade Commission recently assured us in a detailed 53-page booklet.

To be fair, online advertising is subject to ordinary advertising rules. But there are always twists to how ordinary rules are applied online. The new FTC booklet, “.com Disclosures,” focuses on those online twists.

Anyone involved in online ad clearance ought to read this document carefully. The booklet is even designed the way the FTC wants online ads to be designed – with plain language text, clear headings, useful hyperlinks, and conspicuous disclaimers.

Here are a few of the key points:

• • Important limitations on ad claims — including many cost, health, and safety disclosures — should be incorporated into the ad terms, not made in separate disclosures.
  
• • Disclosures that don’t need to be in the text of the ad still need to be clear and conspicuous.
  
• • Hyperlinks for disclaimers need to be placed near the claim to which they pertain and properly labeled to indicate the type and importance of the information to which they link. Labeling a disclaimer hyperlink as “disclaimer,” “more information,” or “fine print” is often inadequate.
  
• • When a purchase is involved, advertisers may need to state or repeat key disclosures as the consumer adds goods to his or her shopping cart or makes the order.
  
• • "Space-constrained ads”— that’s legalese for ads displayed on smart phone screens or other mobile devices — raise special concerns.
  
  • - When normal web ads will be displayed on smart phones, those ads need to be designed so that disclosures will be apparent to smart phone users – for example, in the same column as the claim they modify.
    
  • - Even short teaser ads need to contain key disclosures. In one example, the agency showed how a short two-line diet-product teaser ad can be made compliant with the addition of “Ad:” (making clear it was a paid endorsement) and of “Typical loss: 1 lb/wk” (adding that key qualification to the otherwise broad diet benefit claim).

The FTC booklet also reminds readers of a few advertising basics: “Deception is unlawful matter what the medium.” “Advertisers are responsible for ensuring that all express and implied claims that an ad conveys to reasonable consumers are truthful and substantiated.”  And the one lawyers like best: “Whether a particular ad is deceptive, unfair, or otherwise violative…will depend on the specific facts at hand.”

Mark Sableman is a partner in Thompson Coburn’s Intellectual Property group with a focus on media and information technology law. He writes frequently on advertising, marketing, data privacy, and trademark law. You can reach Mark at (314) 552-6103 or msableman@thompsoncoburn.com. 

I thought I’d take a break from our Sweepstakes Boot Camp series to look back at the most popular Sweepstakes Law Blog posts over the last year. I ran the analytics on our site, and the results are illuminating.

Our readers are clearly drawn to information about sweepstakes fundamentals, such as registration and consideration. But they’re also interested in more cutting-edge topics, like Facebook promotions and ongoing questions surrounding the concept of vote farming.

I also see that blog visitors flocked to my Q&A with Liz Compton, the chief of the Bureau of Compliance at the Florida Department of Agriculture and Consumer Services. It appears many of you are keen to know more about marketing promotions in Florida, home to some of the country’s most stringent regulations for sweepstakes and contests.

What other blog topics should I tackle over the next year? E-mail me at djoerling@thompsoncoburn.com, or tweet me a suggestion at @SweepsLawBlog.

Top 10 Sweepstakes Law Blog posts: March 2012-March 2013

1. Do you need to register your sweepstakes?
2. Are you violating the Facebook contest rules?
3. Consider this: How do states define “Consideration”?
4. Consult this checklist before promoting your next sweepstakes
5. 5 pitfalls of refer-a-friend sweepstakes options
6. ‘Void in California’ no more: Alcohol beverage producers free to market sweepstakes
7. Lawyer who lost $100,000 contest prize spurs debate about ‘vote farming’
8. The IRS wins every sweepstakes
9. An exclusive interview with Florida’s top sweepstakes regulator – Part One
10. An exclusive interview with Florida’s top sweepstakes regulator – Part Two

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can find Dale on Google+ and Twitter, and reach him at (314) 552-6058 or djoerling@thompsoncoburn.com.

When someone wins a trip in a sweepstakes or contest, they usually expect that the prize will be for two people so they can bring a travel companion along on their journey. If your promotion requires winners to fly solo, you need to make that very clear in the rules and any accompanying advertisements or other promotions. It needs to be very conspicuous that the trip is only for the winner.

Assuming your prize does include a travel companion, you need to be aware of several issues. First, the minimum required age for the companion is important. If the person accompanying the winner is under 18 years old (or is considered to be a minor in their state of residence) then the minor’s parent or guardian must grant permission before the companion can be allowed to accompany the winner on the trip. The companion also must agree to execute an affidavit of eligibility and publicity and a liability release form similar to that required of the winner. Again, if the companion is a minor, a parent or guardian needs to sign the affidavit as well.

The winner’s travel companion must also agree to participate in the prize on the same conditions agreed to by the winner and travel on the same itinerary as the winner. Those conditions may be set forth in a number of documents, including the official rules for the contest or sweepstakes, a supplemental prize description, the prize provider agreement, and the terms and conditions of the airline, hotel, or event sponsor.

You may also want to consider requesting that the companion agree to grant the sponsor the right to use any images of or comments from them in future advertisements. If such language is already in the rules, this may be a belt-and-suspenders approach. But it’s a good practice to follow, particularly if the prize includes participation in videos or photos of the trip, or games or competitions that the sponsor intends to use in future ads or promotional materials.

All of these requirements should be clearly explained to the companion even if they are set forth in the official rules and reiterated in the affidavit that the companion (or his or her parent or guardian) signs before the prize is delivered.

Making certain that both the winner and the travel companion understand the requirements for taking the trip together will help you avoid unnecessary problems when the prize is awarded.

This post is part of our 2013 Sweepstakes Boot Camp series.
Click here to see all Boot Camp posts.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Part 1 of this series discussed how important it is to have contest insurance if the promotion has an expensive prize. It also warned that there are scammers who will sell you insurance but refuse to pay if someone wins the contest.

Part 2 of this series will focus on two things that you can do to make sure that your insurance coverage will be there if you need it.

First, while the overwhelming majority of contest insurance sellers are reputable and honest, you still need to be cautious in selecting your provider. Searching online for indications of the provider’s capabilities, history, and reputation can be informative. Checking with the Better Business Bureau and persons who you know who have used the provider’s services may also be helpful. But don’t hesitate to ask the provider for a list of references and recent customers. If the provider is reluctant to let you talk to any of its customers, it could be a red flag. Similarly, the old adage that, “if the price or offer is too good to be true, it probably is” may be a sign that you should look elsewhere.

The second thing that you should be aware of is the importance of contractual requirements that sponsors typically need to satisfy in order to receive coverage. Providers of contest insurance routinely condition their liability for paying for the prize(s) on the sponsor’s compliance with an assortment of requirements, usually called “certificates of participation.”

For example, I have seen certificates of participation or other such agreements that require the sponsor to:

1. Submit the contest’s official rules to the provider for approval;
2. Make sure the official rules comply with all federal, state and local laws and regulations;
3. Not tamper with or deviate from the official rules when implementing the contest;
4. Strictly adhere to the required procedures for determining the winner;
5. Provide third-party witnesses who can verify that the winner in fact won the prize;
6. Meet all deadlines for submitting claims;
7. Prepare proof of claim documentation;
8. Agree to allow a full investigation regarding how the winner won the prize; and
9. Pay all fees to the provider prior to start of the promotion.

Failing to comply with any one of these conditions could void the agreement and cancel the insurers’ responsibility for covering of the cost of the prize(s). It should come as no surprise that the insurer will try to find any possible way to avoid paying for the prize, so be warned. Your company’s failure to strictly comply with all the requirements could jeopardize the coverage upon which you are relying.

You should also consider adding a provision to the official rules alerting the winner that the insurer has the right to conduct a comprehensive investigation of how the promotion was implemented and how the winner won the prize, and note specifically that the investigation may include subjecting the winner to background checks and a polygraph examination.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Jacoby Jones’ incredible 108-yard touchdown in the 2013 Super Bowl helped many Baltimore residents win $600,000 in free furniture. Thankfully the furniture store secured an insurance policy to cover the promotion. (AP Photo/Charlie Riedel)

Recently I have helped several clients with contests that seemingly required entrants to do the impossible to win a prize. One promotion required contestants to guess a six-digit code that would open a safe. Another involved hitting a hole-in-one, and a third contest required the winner to sink a 50-foot putt. The odds of winning any one of these promotions are far less than one in a million.

But despite those long odds, these types of contest are very popular with consumers because the prizes are typically quite valuable. For example, if someone guesses the correct six-digit code that opens the safe (notwithstanding the odds of one in ten million) they will win $200,000.

Because of these expensive prizes, sponsors of these types of contests almost always obtain contest insurance that will reimburse them in the unlikely event that they have to award the prize.

For that reason, I was very interested in two recent incidents in the news, both of which confirm that sometimes individuals overcome the odds and win these contests.

The first article was the kind of news that makes everyone smile — except the insurance company. A furniture store in Baltimore, Md., advertised that anyone buying its furniture during the weekend before the Super Bowl would receive the furniture for free. But they could only walk away with a free sofa if the Baltimore Ravens scored a touchdown by running back the kick-off on the first play of the second half. As you may recall, the Ravens’ Jacoby Jones ran back the second half’s opening kick-off and instantly made the customers who bought furniture from that Baltimore store very happy.

The other article made no one smile. It was reported that a Connecticut businessman who specialized in selling insurance for golf tournament hole-in-one contests had been charged with multiple felonies after repeatedly failing to pay prize winners. According to the article, it is alleged that he has refused to pay hole-in-one contest winners in eleven states, and has ignored a cease and desist order and a $125,000 fine from the Washington State Insurance Commissioner.

How disappointing it must be to win a valuable prize, only to be told that the insurance company refuses to pay. While the sponsor of the sweepstakes may still be liable for the prize, many of these contests were sponsored by charities, and most winners did not want to take money from a charity.

In Part 2 of this series, we will discuss the steps you should take when researching an insurance provider and the critical contract elements that will increase the odds that your contest insurance will be there when you need it.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

“Win a trip to Tahiti.” “Travel to a NASCAR Race.” “You May Win a Fishing Trip to Canada.” “Win a Trip to Outer Space on the Virgin Galactic.” All of these titles are guaranteed to attract attention, particularly that last option, which could send your contest entrants over the moon with excitement.

It has been my experience that most people like to travel — and even more people like the idea of traveling. That’s one of the reasons that travel is so often used as a prize in a sweepstakes, contest, or incentive program.

Travel prizes can range from a visit to the local amusement park to a trip around the world. What these prizes have in common is that they are all luxuries — opportunities that the winner may not have, or may not want to purchase on their own. For some winners, these prizes may be opportunities of a lifetime. For most, they can generate memories that will last for years.

However, a travel prize can bring along with it a number of concerns that are not usually issues in non-travel prizes.

One of the most important issues is the description of the prizes that are to be awarded. As I’ve hammered home before, with any promotion it’s important that you describe the prize as clearly as possible. But with a travel prize, it is imperative. All of the details of the prize package need to be identified as clearly and specifically as possible.

For example, instead of describing the prize as “airfare and hotel accommodations,” it is much clearer to explain that the prize is for economy class airfare including the cost of one piece of luggage, and double occupancy accommodations in a hotel with at least a 3-star AAA ranking.

There also needs to be disclaimer language in the rules that makes it abundantly clear that any aspect of the trip not specifically described as being part of the prize is not included in the prize. Here again, it is crucial to describe items that are not included in the prize. For example, the prize does not include meals, ground transportation to and from the airport, or transportation at the destination site.

In addition, you need to make certain that the prize being offered is in fact the trip the winner receives. If the sponsor is not arranging all of the details, but instead is relying on a travel agent or other entity to arrange the trip, or if another company or organization is supplying the prize, there should be a prize provider agreement between the sponsor and the firm supplying the prize.

Another issue raised by travel prizes is the requirements that apply to the winner’s travel companion. That topic will be the subject for an upcoming blog in the near future.

This post is part of our 2013 Sweepstakes Boot Camp series.
Click here to see all Boot Camp posts.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Vine image via The Baking Cup

The video-based social media site Vine is less than a month old, so I haven’t seen any contests or sweepstakes crop up, but it’s only a matter of time until companies take advantage of this inventive, highly visual social media application as a platform for marketing their sweepstakes.

Vine allows Twitter users to create and upload a six-second video. I think those who sponsor, create, or enter sweepstakes and contests will really enjoy this new feature and quickly view Vine as a welcome addition to their promotions.

For example, sponsors who are looking for real-life examples of customers using their products will find Vine’s mini-video to be a major step forward over still photos. For creators of sweepstakes and contests, Vine adds another tool for making their promotions more attractive to users, who are rapidly becoming more comfortable creating videos and looking for opportunities to demonstrate their creativity with video entries. And users will find Vine to be a simple way to create a video. Because of the limited length of the end product, using Vine is doesn’t require a huge commitment of time.

Vine appears to be very simple to use. The site has a straightforward “get started” video that many users will find helpful. The learning curve is also shortened because Vine is similar to the video feature on many smart phones, but it does have some capabilities that most phones don’t have, such as recording in slow motion.

Here’s a great roundup of creative uses of Vine in its first month out, with several contributions from Twitter corporate design specialist Ian Padgeham, who’s creating some incredible short animations.

From my quick review, it doesn’t appear that Vine’s Terms of Service addresses the use of Vine in sweepstakes or contests. But sponsors, creators, and users should be on the lookout for guidelines about this use in the future. In the meantime, it will be interesting to see how soon we start seeing Vine as a common feature in sweepstakes and contests.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

A picture is worth a thousand words, but a picture of your customers using your product may be worth thousands of new buyers. In the past, photo contests usually cropped up as “cutest baby” or “best picture of the year” competitions. But all of that has changed. Over the past few years, photo and video contests are commonplace, particularly with Internet-based promotions. Today’s photo contests often focus on pictures of consumers using a sponsor’s products in their everyday life.

One reason for the increase in photo contests is the smart phone. It is reported that nearly 50 percent of U.S. consumers now are using smart phones. This has resulted in a huge number of people having immediate access to quite sophisticated photo and video capabilities. The widespread availability of these cameras — and their relative simplicity — has made contests on the internet more popular than ever for consumers. The ease with which the photos or videos can be uploaded to a sponsor’s website and used in its marketing strategy make it even more popular with sponsors.

Although these types of contests are becoming somewhat ubiquitous, they have certain inherent potential problems that you should pay attention to, including the following.

Copyrights
Most contests’ official rules will require that the entrant own the copyright to any photos that they submit. Ensuring that your company has the right to use the copyrighted photo is imperative. Many companies are sponsoring photo contests to obtain visuals that can be used to market their product or services. But for sponsors to legally use a photo submitted by an entrant in a contest, they must obtain authorization from the person who took the picture. Three of the most common ways to do that (ranked according to their reliability) are:

1. 1. including a provision in the contest official rules that all entrants (or winners) agree to allow a sponsor to use the photo for marketing purposes;
2. 2. adding a box that entrants must click affirming that they agree to allow the sponsor to use their photos; and
3. 3. send the entrant a written license agreement and ask them sign it and return it to the sponsor.

Remember that some state laws may not allow one or more of these options, depending on the particular situation.

Inappropriate Photos

Another inherent concern is whether the photo or video that is submitted is appropriate for the contest and its entrants. Most official rules spell out that the photo entry will be rejected and the entrant disqualified if the photo:

1. 1. Is vulgar, contains improper language, nudity, etc.
2. 2. Is derogatory, hateful, or racist;
3. 3. Violates another person’s commercial property rights;
4. 4. Violates another individual’s privacy or publicity rights;
5. 5. Was taken by a professional photographer – unless professionals are specifically included in the eligibility requirements.

Make sure your promotion’s official rules and affidavit of eligibility limit the type of photos that will be accepted, and that the sponsor has the sole authority to reject photos it considers inappropriate.

This post is part of our 2013 Sweepstakes Boot Camp series.
Click here to see all Boot Camp posts.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

How much does the type of prize affect the popularity of a sweepstakes? I believe it can make a huge difference, even if the alternative prizes have the same value.

For example, if you have $500 allotted for a prize, you could buy a $500 product and hope your target customers want to own that item, or you could award the winner with $500. It is my experience that given a choice, winners usually prefer money. However, even if the prize is a set amount of money, the form in which it is presented to the winner can make a considerable difference in how they feel about the sweepstakes.

Many serious sweepers tell me that if they win a cash prize, the money usually gets deposited into a checking account. After some time, even if it is ultimately used for a specific purchase, it’s difficult to remember that the acquired amount came from winning a particular contest. On the other hand, if the prize is a gift certificate that can only be used in a certain store, winners often wish they had more control over how the prize money can be spent. This mentality explains the popularity of websites such as Plastic Jungle and Cardpool, which buy and sell gift cards.

Gift credit cards such as Visa, Mastercard, or American Express fall nicely in the middle. By giving a gift card, you give the winner the freedom to spend the money as they choose, without allowing the value of the prize to get lost in a checking account.

The major potential problem with gift cards is that they are subject to two sets of rules.

• - First, they are governed the official rules of the sweepstakes. Under these restrictions, for example, the prize card may not be transferred, used for prior purchases, or redeemed for cash.
• - The cards are also subject to the terms and conditions specified by the company that issued the card, which could forbid the prize winner from selling the card or using it for businesses purposes. The prize-issuing company may also impose fees or an expiration date.

If you use a gift card as the prize in your sweepstakes, it is imperative that you make winners aware of and understand that two sets of rules may apply to cards they have won. You also need to make sure that this information is clearly and conspicuously disclosed to everyone who enters the promotion.

This post is part of our 2013 Sweepstakes Boot Camp series. 
Click here to see all Boot Camp posts.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

(This post wraps up our three-part series on COPPA. Part one: “Sorry, tweens: No sweepstakes or contests until you’re 13.” Part two: “FTC strengthens law protecting children’s personal information.”)

The Federal Trade Commission released its long-awaited amendments to the Children’s Online Privacy Protection Act (COPPA) rules on Dec. 19, 2012. Anyone who creates or reviews sweepstakes and contests involving children should be aware of these changes.

One of the FTC’s primary responsibilities is to protect consumers from inadvertently disclosing confidential personal information to third parties. When the consumers are under the age of 13, the Commission is charged by COPPA to implement more stringent requirements to protect these under age consumers.

In 2010, the FTC launched a review of the COPPA rules to make certain that the law continued to be effective in protecting children, despite the tremendous expansion of technology that enables many very young children to access Internet sites that could not have been contemplated when COPPA was enacted in 1998.

Last year the FTC culled through more than 200 comments from industry representatives, advocacy groups, academics, technologists, and individual members of the public, and issued a number of recommendations. Last month’s rule changes follow some of those recommendations and depart from others.

Among the most important changes that will effect sweepstakes and contests are the following:

1. Child-directed Internet sites that incorporate outside services — such as plug-ins and advertising networks — that collect personal information from visitors are now included as “operators” under COPPA. (As we’ve covered previously, operators must follow a number of requirements related to the collection of children’s personal information.)
2. Similarly, web sites that use plug-ins or advertising networks that have actual knowledge that they collect personal information are included in the definition of a website “directed to children.”
3. The definition of “personal information” now includes geo-location information as well as photos, videos, and audio recordings that contain the child’s image or voice.
4. Parental consent can now be obtained by electronic scans of signed parental consent forms, videoconferencing, government-issued identification, and debit cards or other electronic systems.
5. “Consent plus” is still an acceptable consent mechanism for operators who collect personal information only for their internal use.

Every person who works with sweepstakes or contests that may involve children under the age of 13 should familiarize themselves with the revisions to the COPPA rules made by FTC in this latest set of amendments.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

If you missed our October 2012 webinar on sweepstakes law, the entire presentation is now available to live stream. This one-hour session, "Sweepstakes, The Essentials: What You Need to Know,” provides a great overview of the legal issues surrounding sweepstakes, contests, and other type of promotions.

To access the webinar recording, click the image at right. The recording will automatically begin playing. 

I hosted the session with associate Felicia Williams, and provided answers to the following questions:

• - How do I make sure that my sweepstakes is not illegal gambling?
• - Do I need to register it in any states?
• - What is the difference between a sweepstakes and a contest?
• - What needs to be included in official rules?
• - What are the pitfalls that must be avoided?

We also touched on the federal regulations affecting sweepstakes, contests, and promotions, including Children’s Online Privacy Protection Act, which is in the news this week following the Federal Trade Commission’s latest amendments to COPPA. Stay tuned to the Sweepstakes Law Blog for an upcoming post on what businesses need to know about the rule amendments.

Please note: If you are viewing this webinar for CLE, please check with your CLE accrediting jurisdictions in advance to determine whether it qualifies for CLE credit.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Fitness boot camps are all the rage these days. At these grueling workouts, participants run sprints, flip tractor tires and strain through push-ups, all with a red-faced “drill sergeant” screaming in their face.

I experienced a different type of boot camp during my nine weeks of basic training in the U.S. Army. I remember my stereotypically loud drill sergeant repeatedly telling me to pay attention “because something you learn today may save your life someday.” So far, not much I learned in that basic training has saved my life, but I did learn a few important things. Whether at an Army base or in a gym, the goal in both of these boot camp programs is essentially the same: Work hard on the basics so that in the heat of battle, you’re better prepared.

The same philosophy is true for sweepstakes, contests, and other promotions. If you concentrate on the basics and ensure your promotions’ processes are correct and legal, then you’re in much better shape down the road when a problem crops up.

To that end, I will spend the first part of 2013 acting as your (much friendlier) drill sergeant in a series of posts we’re calling Sweepstakes Boot Camp. These posts will hone in on some basic elements of sweepstakes and contests, bring you up to speed on any new regulations or rules, and offer common-sense tips that you can use to review your own promotions processes.

Thompson Coburn Sweepstakes Law Boot Camp will probably not save your life, but it may someday save your sweepstakes or contest.

Some of the topics I plan to cover include:

1. Photo and video contests
2. Travel companions
3. Travel prizes
4. Scratch off cards
5. Gift cards as prizes
6. Protecting yourself from typos and other errors
7. Canadian sweepstakes

At the conclusion of the boot camp, I will post a short quiz that will be accompanied by a sweepstakes where you could win a fabulous military-themed prize

If you have any topics or questions you think deserve a few drills in the sweepstakes Boot Camp, please let me know

Grab your boots, sweepstakes soldiers. Ten-hut!

This post is part of our 2013 Sweepstakes Boot Camp series.
Click here to see all Boot Camp posts.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Season's greetings and happy new year!

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Browse any social networking site these days and you’re likely to run into a banner exhorting consumers to “Pin It to Win It.” The request is typically linked to photo clusters of savory soups, designer handbags, or even surfers riding the waves. Welcome to the highly visual world of Pinterest, where you're definitely not alone. More and more businesses are selecting the site for their latest promotions.

For the uninitiated, Pinterest is an image-based social networking site that provides an easy-to-master avenue for you to collect and categorize your favorite items from around the web and share them with your friends. Pinterest describes itself as a “virtual pinboard,” and its many users are referred to as “Pinners.”

Pinterest was launched in 2009, and by 2012, had attracted more than 11 million users. Not surprisingly, it didn’t take long for sponsors to flock to Pinterest (as they have with Facebook, Twitter and others) to host their sweepstakes and contests. A quick search found Pinterest contests sponsored by Kraft, Banana Republic, Albertson’s, Lord & Taylor and dozens of other companies. In fact, for all you meta-marketers out there, here is a Pinterest board of contests held on Pinterest.

To help sponsors create viable promotions, Pinterest recently issued new Marketing Guidelines that pertain to sweepstakes and contests. The guidelines contain tips for sponsors, including the following dos and don’ts:

Do:

• - Encourage authenticity: Reward the quality of pinning, not just the quantity of it.
• - Promote your contest: Link to your Pinterest account or contest board from your website, social media and marketing channels.
• - Prevent spam: Read up on our anti-spam measures to help keep your contest fun and useful.
• - Make getting involved easy: Create clear instructions and a simple process.

Don’t:

• - Encourage spam: Steer clear of contests that encourage spammy behavior, such as asking participants to comment repeatedly.
• - Run a sweepstakes where each pin, repin, or like represents an entry. Ask pinners to vote with a repin or like.
• - Overdo it: Contests and promotions can be effective, but you don’t want to run a contest too often.
• - Suggest that Pinterest sponsors or endorses you: Make sure you don’t say or imply this anywhere in your marketing materials or branding.

The guidelines also remind sponsors that they are responsible for complying with all federal and state legal requirements. This includes preparing the official rules, setting and enforcing eligibility requirements, and complying with state marketing regulations, including registration of sweepstakes in certain states.

Pinterest’s guidelines caution companies that many of these requirements vary from place to place. They also urge promotions sponsors to work with a lawyer to make sure they are in compliance.

Thompson Coburn’s Sweepstakes Law group has handled many Pinterest sweepstakes and contests. Let us know if you need our assistance.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

During the sweepstakes law webinar that Thompson Coburn held last month, I pointed out that under many state and federal statutes, private parties have the right to challenge sweepstakes or contests that they believe violate state or federal law.

Most of these lawsuits appear as large class actions, but individuals have the power to file their own suits. I stressed this point to the webinar attendees: Each sweepstakes is vulnerable to litigation. The number of entries or the value of prizes matters not. So don’t think your modest sweepstakes or contest is immune from a disgruntled entrant who knows her way to the courthouse steps.

As if to re-enforce my comments, it was reported last month that a paralegal and her daughter have sued a state representative, claiming he failed to pay the $200 prize advertised for a campaign event contest.

According to the Pittsburgh Tribune, Pennsylvania state Rep. Jake Wheatley sponsored a cake-baking contest as part of his re-election campaign. The contest, as described in Wheatley’s flyer, promised that the winner of the contest would receive a cash prize of $200. Denise Robinson and her 21-year-old daughter entered the contest and their pineapple upside down cake was chosen as the winner. However, instead of receiving $200, the Robinsons were awarded only $100. When questioned, Rep. Wheatley purportedly told the Robinsons that the contest was supposed to be a “50/50” raffle with a $10 entry free. If aspiring bakers had purchased all 10 slots, he would have matched the $100 entry fees with $100 in additional prize money. Apparently, his campaign didn’t receive all 100 entries, making the prize value only $100.

Despite having to pay more than $90 to file their suit, the Robinsons brought an action against Rep. Wheatley for the additional $100. If Rep. Wheatley’s explanation was not disclosed in the written contest materials, the Robinsons appear to have a fairly strong case to receive the $100 and perhaps additional funds to cover their court costs as well.

The lessons here are two-fold. First, even very moderate prize values can be challenged by private parties who believe that a promotion is “not fair.” Second, although $100 in prize money may be insignificant, the damage to a sponsor’s reputation by being accused of fraudulent contest may be far more expensive and time-consuming to correct, particularly in instances, such as Rep. Wheatley’s, that attract a huge amount of coverage by newspapers, television and radio.

No doubt this lawsuit will remind Rep. Wheatley that when it comes to contests and promotions with unclear rules, you can’t have your pineapple upside down cake and eat it, too.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

As the holiday season approaches, many companies are interested in linking their promotions to charities that provide much-needed services or funding. A typical example of this occurred recently when a client decided to embellish the sweepstakes we created for them by offering to make a donation to a well-known charity for each eligible sweepstakes entry they received. The client also offered to make a donation for each product that it sold during the sweepstakes.

What this client — and many other companies — didn’t know was that by offering to make these donations, it could be considered a “commercial co-venturer” in certain states that regulate charitable contributions. In a number of those states, the statutes provide that if an organization whose regular business does not involve raising funds for charities conducts a “sale, performance or event” that will benefit a charity, it could be determined to be a commercial co-venturer.

Commercial co-ventures, or cause marketing, as it is sometimes called, generally involves an arrangement between a business and charitable organization to sell a product for the mutual benefit of both parties. The charity receives additional funds and the business gains increased sales, customer loyalty and good will.

Approximately half of all states maintain statutes that regulate cause marketing. Several states require commercial co-venturers to register or obtain a license to operate as a commercial co-venturer before beginning any solicitation for contributions. While each state has its own set of regulations, there are certain requirements that are contained in many state statutes. For example, commercial co-venturers must:

1. Have a written contract with the charitable organization receiving the donation and file the agreement with the state;
2. Disclose to consumers the following:
   a. The charity’s name and address
   b. The commercial co-venturer name and address
   c. How donations will be used for charity
   d. The tax exempt status of the donation
3. Complete an accounting and/or closure statement documenting the amount of the contribution at the end of the promotion;
4. Disclose the gross receipts and costs and expenditures deducted from the funds;
5. Submit confirmation of the amounts received by the charities;
6. Maintain the fund records for up to three years.

Despite the fact that commercial co-venturer laws have been in place for more than 15 years, many people are not aware of these requirements. However, as our client learned, these state laws can apply to sweepstakes and contests — and whether a statute applies to a particular situation is not always clear. For that reason, if a sweepstakes or contest involves a charitable contribution or a partnership between a business and a charity, it should be analyzed carefully to determine whether commercial co-venturer laws may apply.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Click here to view the comic, "Swept Away."

One of the reasons I enjoy working in advertising, marketing, and promotions law is the amazing variety of promotions that come across my desk, each somehow more imaginative and cutting-edge than the last. (I’ve discussed some of the most unique sweepstakes here.)

While I wouldn’t claim an ounce of the creative flair so frequently exhibited by these companies and their fantastic advertising/marketing teams, I like to add a touch of color to our blog when I can. So it goes without saying that last month when I came across attorney Bob Kohn’s inspired comic-book take on an amicus brief, it certainly caught my eye.

Our sweepstakes team set out to riff on that unique communications avenue and use it to highlight the importance of a careful legal review of any sweepstakes, contest, or other marketing promotion.

Today I’m proud to debut the result: “Swept Away” a two-page comic that follows the colorful misadventures of a marketing team that makes a questionable choice on their official rules and ends up paying the price (literally).

The format is fun, for sure, but the message is serious, and one that I’ve stressed on the Sweepstakes Law Blog many times before. If you grab generic sweepstakes language and slap it on your product or promotion, you run the risk of violating any number of sweepstakes regulations and rules.

Take it from this irate Canadian Mountie horse: You do not want to run afoul of sweepstakes laws.

What do you think of our sweepstakes comic? What other sweepstakes law topics would you want us to address in ink and paint? Leave us a message in the comments section.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Many thanks to everyone who attended our sweepstakes law webinar last week, “Sweepstakes, The Essentials: What You Need to Know.” Felicia Williams and I really enjoyed talking with all of you about the legal elements of sweepstakes, contests, and other marketing promotions.

Special congratulations to the winners of our webinar sweepstakes, who won some fabulous items from the Thompson Coburn store: Mary Beth B., James E., Christina N., Victor C., and Cindy H.

For those who missed the sweepstakes, a video of the presentation soon will be available on our TCLE site. We’ll be sure to notify you when it’s available for viewing.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Image via Gold Peak Tea on Facebook

The problem of too-vaguely-worded official rules reared its head again recently in the case of a Decatur, Ga., man who won — then lost — a $100,000 grand prize.

The winner, Theodore Scott, is a lawyer by trade, not a farmer. But the contest sponsor, Coca-Cola, claimed Scott disqualified himself by engaging in a type of farming: “Vote farming.” This term is somewhat hard to define. But with the ever-increasing use of social media promotions, I suspect it will crop up in the sweepstakes and contests lexicon more and more.

Broadly defined, “vote farming” involves contest entrants launching broad social media or online “campaigns” with the goal of soliciting votes from strangers and winning the contest. (Got a better definition? E-mail me your suggestions and I will crowd-source a new definition for “vote farming.”)

As reported by the New York Times, Mr. Scott won the $100,000 in the Gold Peak Tea “Take the Year Off” contest after his video entry received the most votes from the general public. 

However, as the article states, Mr. Scott had to forfeit the prize because he requested votes from members of the About.com Sweepstakes Forum, in violation of the contest's official rules. Coca-Cola, which owns Gold Peak Tea, determined that Mr. Scott’s solicitations violated the portion of the rules that states: “Finalists are prohibited from obtaining votes for any Submission and Video by any fraudulent or inappropriate means, including, without limitation, offering prizes or other inducements to members of the public, vote farming, or any other activity that artificially inflates such Finalists’ votes as determined by Sponsor in its sole discretion.”

I can sympathize with Mr. Scott’s disappointment in losing $100,000 and the opportunity to spend more time with his family. While it is unclear whether he actually read the 10 full pages of official rules before entering the contest, he now claims that the restrictions contained in the rules do not prohibit the requests he made to members of the Sweepstakes Forum.

I can also sympathize with Coca-Cola in that it appears the company was trying to create a contest that would be fair to everyone who entered. As someone who has created hundreds of sweepstakes and contest rules over the past 16 years, I appreciate Coca-Cola’s efforts to assure that all entrants would have a level playing field and that no one would have an unfair advantage — as evidenced by the 10 pages of rules.

Some commentators have opined that the official rules were not specific enough to put Mr. Scott on notice that his request to Forum members was inappropriate under the Rules. They also contend that the line between paying for votes (which is obviously inappropriate) and asking your family to vote for you (which is obviously acceptable) is so blurred, that terms like “vote farming” do not provide sufficient notice of what is prohibited. 

Others argue that even if the term “vote farming” was not defined, a reading of the full context indicates Mr. Scott should have known that his actions could have been found to violate the rules. And moreover, Coca-Cola reserved the right to determine in their sole discretion if his vote requests may have artificially inflated his votes.

The $100,000 lesson

One lesson here is that there needs to be some generally accepted dividing line between what is an acceptable means of requesting votes in these types of contests and what is “inappropriate,” particularly because this issue is certain to arise again in the future. Perhaps the first step in reaching this goal is to agree on a definition of the term “vote farming” as it applies to these types of rules.

Another lesson is that both entrants and sponsors need to pay careful attention to the rules. Sponsors should be careful to describe with as much specificity as possible what conduct is considered inappropriate and what practices are prohibited. Similarly, entrants need to make sure they read and understand all of the terms and conditions in the official rules. If they don’t understand them, they should contact the sponsor so that the rules can be clarified for all entrants.

Neither Mr. Scott nor Coca-Cola won anything as a result of this contest. Mr. Scott is out $100,000 and may not be able to take a year off with his family. Coca-Cola has antagonized a segment of its customers, which is the opposite result they anticipated from the contest. Let’s hope that this $100,000 lesson will somehow help both sponsors and entrants prevent this situation from occurring in the future.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Since the late 1990s, California law has prohibited producers and suppliers of beer, wine, and spirits from conducting sweepstakes or contests in California. It was the only state in the nation to prohibit promotions by alcoholic beverage manufacturers. 

For those of us who help such alcoholic drink manufacturers create sweepstakes and contests, this has meant making certain the promotion was invalid in California. We did this by applying the familiar term “VOID IN CALIFORNIA,” to comply with the laws. 

However, on Sept. 23, 2012, California Gov. Jerry Brown signed Senate Bill 778, which permits manufacturers and suppliers of alcoholic beverages to conduct sweepstakes and contests in the state. The new law will allow alcoholic beverage licensees to conduct consumer sweepstakes and contests, subject to a list of more than 20 conditions that must be met.

Some of those conditions include:

1. Entrants must be 21 years of age or older to participate.
2. The contest cannot involve consumption of alcoholic beverage.
3. Caps, corks, labels, etc. cannot be used as an entry.
4. Alcohol beverages cannot be awarded as prizes.
5. Entry or extra chances cannot be awarded for purchase of alcoholic beverages.

The statute can be found here. It takes effect Jan. 1, 2013.

The new law contains many specific conditions that must be met. As with any new law, you should read it very carefully and contact a lawyer familiar with sweepstakes and contest law if you have any questions about the statute’s requirements.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

It’s not too late to register for our free upcoming webinar on Oct. 10. This one-hour session will provide a great overview of the legal issues surrounding sweepstakes, contests, and other type of promotions.

For attorneys, the webinar can qualify as CLE in a number of jurisdictions. For non-attorneys, it simply provides a helpful introduction to sweepstakes law. And it’s all offered through TCLE, Thompson Coburn’s user-friendly webinar series.

Our webinar will focus on the following questions:

• - How do I make sure that my sweepstakes is not illegal gambling?
• - Do I need to register it in any states?
• - What is the difference between a sweepstakes and a contest?
• - What needs to be included in official rules?
• - What are the pitfalls that must be avoided?

Click here to register for “Sweepstakes, The Essentials: What You Need to Know.”

I will be leading the webinar with associate Felicia Williams. We hope to see you there!

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

For such a tiny state, Rhode Island packs a big regulatory punch for any company that fails to properly register its sweepstakes: a possible misdemeanor criminal charge. That penalty is nothing to sniff at, and it looms for any improperly registered Rhode Island sweepstakes with an approximate retail value of at least $500.

As the Sweepstake Law Blog has discussed previously, just three states in the U.S. require certain types of sweepstakes to be registered: Florida, New York, and Rhode Island. Of the three, Rhode Island arguably has the least stringent registrations laws. But it also has the lowest monetary threshold of the states requiring registration.

Under Rhode Island law, any game, contest or other promotion offering the opportunity to win prizes valued over $500 must be registered with the secretary of state if the promotion takes place in a retail establishment. In other words, if the total announced value of the prizes is in excess of $500, then the in-store sweepstakes must be registered. (This is in contrast to the $5,000 prize values that compel registration in both Florida and New York.) Regardless of the prize amount, Rhode Island does not require sponsors to post a bond or establish a trust account.

At the time of registration, the sweepstakes sponsor must pay a filing fee of $150 and provide all of the standard information requested, including:

• The minimum number of participating objects available;
• The minimum number of prizes available;
• The proportionate opportunity of winning prizes;
• The geographic area covered by the contest, and all its rules and regulations.

Sponsors should closely adhere to these procedures, as failure to register a qualifying sweepstakes is a misdemeanor criminal offense under Rhode Island law.

Like many other states, Rhode Island also requires that information be posted concerning the sweepstakes rules and available prizes. The information must be posted in a conspicuous and prominent location in every retail store that participates in the contest. In addition, once the contest has ended, the sponsor must keep records of each prize winner for at least six months – although the sponsor is not required to file a winners list. As with registration itself, failures to post this information and to maintain records constitute misdemeanor offenses.

The Rhode Island requirements are critical for any companies offering promotions that include any locations in the state. After all, it only makes sense that nationwide sweepstakes open to all U.S. residents must comply with the laws of all 50 states, as well as federal law.

Thompson Coburn’s sweepstakes attorneys have helped companies register numerous promotions in Rhode Island. If you need any assistance in making sure your sweepstakes is up to snuff in the Ocean State, please contact us.

Felicia Williams is an associate in Thompson Coburn’s Advertising, Marketing and Promotions Law group. You can reach her at (314) 552-6277 or fwilliams@thompsoncoburn.com.

Image via Flickr

Sometimes even the slightest change in a sweepstakes can make a huge difference. Recently, a client who has sponsored numerous online sweepstakes decided to expand its marketing outreach by using direct postal mail. What the client didn’t know was that promoting the sweepstakes via the U.S. Postal Service triggered application of the Deceptive Mail Prevention and Enforcement Act (DMPEA) which contains a sizeable list of items that must be included in the sweepstakes.

DMPEA, which has been around since 2000, was designed to protect consumers and in particular senior citizens from false or misleading advertising that causes entrants to buy products that they don’t want or need. It also bars companies from mailing advertisements that make consumers  believe they may have already won a prize. Despite the fact that the law is more than a decade old, there are sweepstakes creators who don’t know what the Act requires because they seldom work with direct mail promotions.

DMPEA applies to any sweepstakes or contest that uses the U.S. Postal Service to advertise or implement the promotion. The Act prevents the misleading use of prizes that are designed to look like checks or government documents. It also prohibits the use of any advertising language that claims the promotion has been approved by a government agency or endorsed by any official government entity. The Act also allows recipients to have their names removed from receiving similar sweepstakes mailings from the sponsor in the future.

Other DMPEA requirements:

1. 1. The statement “No Purchase Necessary” must be clearly and conspicuously displayed in the rules and on all promotional materials relating to the sweepstakes.
2. 2. Sweepstakes materials must state that a purchase will not increase an entrant’s chance of winning.
3. 3. The sponsor must prominently disclose its name, address, and contact information in the rules and on all advertisements.
4. 4. Sponsors must provide a customer with a complete set of Official Rules for the promotion.
5. 5. Sponsors must disclose the number and approximate retail value of all prizes to be awarded.
6. 6. The approximate odds of winning a price must be disclosed and if the odds are based on the number of entrants, the sponsor must provide an estimate of the anticipated number of entries that will be received.
7. 7. If a cash prize is to be delivered in installments, a detailed description of the payment process must be disclosed.

In addition, the Act specifically prohibits statements that suggest making a purchase will affect future sweepstakes opportunities. It also bars sponsors from making statements that a previous purchase or payment is a needed to participate in the sweepstakes.

Contests

DMPEA also applies to contests and requires the following disclosures be made by the contest’s sponsors:

• - The number of rounds or levels of the contest and the cost of entering each level.
• - The estimated number or percentage of winners who have won previous games.
• - The method used for judging the contest and the judges’ qualifications.
• - The date prizes will be awarded the value of each prize.

Penalties

The Act does not pre-empt any state law remedies, but it provides penalties for failing to comply with its requirements. Two of the most significant penalties are the monetary fines:

1. 1. Up to $2 million dollars per project (the penalty increases in proportion to the number of days of the violation).
2. 2. An additional penalty of $1 million dollars if a cease-and-desist order is violated.

If your sweepstakes or contest uses direct mail, be aware of DMPEA and make sure you avoid penalties by complying with the Act’s requirements.

~~~ 

Enjoyed any of our Sweepstakes Law Blog posts? Have a spare moment? If so, please consider recommending our blog for the ABA Journal’s Blawg 100. Here’s a link to the short recommendation form. Just enter our URL (www.thompsoncoburn.com/sweepstakeslawblog) and gift us with a kind word or two. Voting ends Sept. 7.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Kris Kringle had plenty of pointy-shoed helpers backing him up, but he still insisted on making his list and checking it twice.

Any businesses that promote sweepstakes should be just as vigilant about double-checking all elements of their promotions before releasing them to the general public.

To that end, I’ve created a checklist of 12 of the most important things to look for in these types of promotions. (To receive a handy PDF of the checklist, contact me at djoerling@thompsoncoburn.com.)

While this checklist covers many of the key aspects of a sweepstakes, it is no guarantee that the sweepstakes complies with all of the various state and federal statutes and regulations that may apply. Also, the checklist is not legal advice. The only way to determine if a sweepstakes complies with all applicable laws is to have it reviewed by a lawyer familiar with sweepstakes law.

Sweepstakes Checklist

1. Is the sweepstakes limited to residents of the U.S. or one or more states or cities within the U.S.?
2. Do the eligibility requirements for entrants clearly identify the age, residency, and other requirements for entrants to be eligible?
3. Must individuals be at least 13 years old to enter?
4. Is there a way to enter the sweepstakes by simply mailing a postcard with the entrant’s contact information to the sponsor?
5. Are the odds of winning clearly set forth in the rules and are they equal for everyone who enters, including the mail-in entrants?
6. Are the prizes described precisely and do they include all aspects and details, including the Approximate Retail Value for the total prize?
7. Is the method of selecting the winner explained and is there a date and time stated for when the winner will be chosen?
8. Is the sponsor’s name, address, phone number and web address listed prominently in the official rules and on all advertisements pertaining to the sweepstakes?
9. Is the statement “No Purchase Necessary” and “Void Where Prohibited by Law” displayed in the rules and in all advertisements?
10. Is the value of prize less than $5,000?
11. Are employees of the sponsor prohibited from entering the sweepstakes?
12. Is there an end date and time listed in the rules, and are the number of entries that each person may submit clearly stated?

If you answered “No” to any of these items, you should contact the sponsor or a lawyer who is experienced with sweepstakes for assistance and guidance.

Enjoyed any of our Sweepstakes Law Blog posts? Have a spare moment? If so, please consider recommending our blog for the ABA Journal’s Blawg 100. Here’s a link to the short recommendation form. Just enter our URL (www.thompsoncoburn.com/sweepstakeslawblog) and gift us with a kind word or two. Voting ends Sept. 7.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

This post is intended for information only and should not be considered legal advice. The ethical rules of some states require us to identify this as attorney advertising material. The choice of a lawyer is an important decision and should not be based solely upon advertisements.

We recently celebrated the Sweepstakes Law Blog’s six-month anniversary. We've had a couple of growing pains along the way, but it's been a real pleasure to bring you information, news and legal commentary on all things related to sweepstakes law.

Some highlights from our first six months:

- A much-read post about Facebook's promotions rules

- Our "Sweepstakes" nightmares series, which parsed some common problems companies encounter with sweepstakes (Part 1, Part 2)

- My exclusive three-part interview with Liz Compton, Florida's top sweepstakes regulator (Part 1, Part 2, Part 3)

We're proud of our work, but a blog is only as effective as its readers. To that end, I want to extend a heartfelt thank you to everyone who’s read, shared or responded to a post. I’ve enjoyed communicating with you about this dynamic area of law, and I’m always available if you have questions about creating a sweepstakes, contest or promotion.

If you’ve enjoyed any of our Sweepstakes Law Blog posts and have a spare moment, please consider recommending my blog for the ABA Journal’s Blawg 100. Here’s a link to the short recommendation form. Just enter our URL (www.thompsoncoburn.com/sweepstakeslawblog) and gift us with a kind word or two. Voting ends Sept. 7.

Thank you again. I appreciate your support!

Dale

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

I will confess that I am tweaker. If an associate gives me a draft document or my wife tries a new recipe, I usually respond by suggesting a few tweaks to improve their efforts. I like to think that this usually results in a better end product. However, this is not always the case with sweepstakes and contests.

Some sweepstakes sponsors, including many radio stations, newspapers and magazine publishers do not always create the promotions that they are conducting. Instead, they may be given a “company-wide sweepstakes” that they are expected to implement. Other affiliated companies typically run the same promotion. However, the parent company often encourages these local media outlets to tweak the promotion to generate more entries.

Modifying a company-wide sweepstakes allows the local sponsor to tailor the promotion to its area, but it also creates the opportunity for something to go awry. More importantly, if done incorrectly, the modifications may create a liability under state sweepstakes statutes for the sponsor who made the modifications.

Before you alter a company-wide sweepstakes, you should be aware of the following changes that could cause you trouble.

• Additional prizes
  Many companies (especially radio stations), have stockpiled tickets, gift certificates, or sample products that they can include as additional prizes to a company-wide sweepstakes. While this is an effective means of incentivizing customers to enter the sweepstakes, those added prizes may increase the value of the original sweepstakes, triggering registration requirements in states such as New York or Florida. As a rule of thumb, if a sweepstakes is available in Florida or New York and has a total prize valued at more than $5,000, you may have to register the promotion in those states.
  
  
• Additional eligibility requirements
  If adding certain prizes requires a different set of eligibility requirements, the prizes may require a separate drawing to determine the winners. For example, if the prize for the company-wide sweepstakes is a new car, but the radio station adds tickets to a nearby concert as a separate additional prize, the station may want to limit concert entries to only those individuals who live within their broadcast area. If a station goes that route, however, it needs to make certain that all eligible entrants have an equal chance of winning both drawings and that the winner of the concert tickets must also remain eligible to win the car.
  
  
• Adding a sweepstakes to a contest
  Tacking on a sweepstakes to a contest (or to another sweepstakes) can create problems for the sponsor. If in order to enter the sweepstakes, an individual must enter a contest, there is a possibility that requirement may be viewed as “consideration” for entering the sweepstakes. This could cause the sweepstakes to be viewed as an illegal form of gambling. You should contact an attorney who is familiar with sweepstakes law before adding a sweepstakes to a contest.
  
  
• Changing the official rules
  Amending the rules of a company-wide sweepstakes in any way can invite disaster. A fundamental principle of sweepstakes law is that all entrants must have the same odds of winning. If you modify the sweepstakes in any way that changes the eligibility to enter or the odds of winning, there is a strong possibility the sweepstakes could be found to violate state statutes. Don’t change any sweepstakes rules without approval of sweepstakes counsel.

If you’ve enjoyed any of our Sweepstakes Law Blog posts and have a spare moment, please consider recommending our blog for the ABA Journal’s Blawg 100. Here’s a link to the short recommendation form. Just enter our URL (www.thompsoncoburn.com/sweepstakeslawblog) and gift us with a kind word or two. Voting ends Sept. 7.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

When I saw an ad for a new Mexican restaurant that opened near my office, I thought about trying it. When I received a 10% off coupon in the mail, I thought about it again. But when my brother told me it was now his favorite restaurant, I went there for lunch on that very same day.

Without a doubt, a referral from your current customers is the best source of new customers. The same principle applies to sweepstakes and contests: You can increase participation through use of referrals.

As a result, “refer-a-friend” options are becoming very popular in the sweepstakes world, particularly with promotions pushed online or to social media sites.

These options appear in a various forms: “Refer-A-Friend,” “Send-A-Friend,” “Tell-A-Friend,” “Tweet-A-Friend,” and other variations, all of which basically do the same thing. Facebook’s “Share” feature has a very similar function.

Sweepstakes sponsors routinely incentivize their customers with rewards of coupons, gift cards, products, or additional entries into the sweepstakes if they forward the promotion to friends. It’s clear: Refer-a-friend options are here to stay.

However, refer-a-friend options carry some risks. Before you ask sweepstakes or contest entrants to refer the promotion to a friend, be aware of five potential pitfalls:

1. Being careless with consideration
   Make certain referring a friend doesn’t constitute the “consideration” required to enter the sweepstakes. If there’s no other way to enter the sweepstakes other than referring a friend, that requirement could be viewed as “consideration” under state law, which may result in authorities classifying the sweepstakes as an illegal form of gambling.
   
   
2. Sending messages that could be 'spam'
   Be aware that providing gifts or rewards to incentivize an entrant to refer your promotion through an e-mailed message to a friend may result in the application of the CAN-SPAM Act. Under the CAN-SPAM law, the sponsor may have to comply with the Act’s requirements regarding email messages, and the sponsor may be considered the “sender” of the e-mail to the friend.
   
   
3. Playing favorites
   If the person referring a friend receives additional entries or otherwise increases their chances of winning the sweepstakes, ensure that entrants who pass on the “refer-a-friend” option have equal opportunities to obtain an identical number of additional entries.
   
   
4. Allowing unlimited entries
   You may also want to consider placing conditions and limitations on the friends to whom the sweepstakes is being referred. For example, you may want to limit the number of referrals that one person can make, as a means of capping any problems that may arise by one entrant submitting huge numbers of inappropriate referrals. Similarly, it may be important to restrict referrals to persons over a certain age, those in a defined geographic area, or anyone employed by a sponsor. The bottom line is that all entrants must have the same odds of winning the prize(s).
   
   
5. Not seeking consent
   You should also make certain that the friend to whom the sweepstakes is referred meets the eligibility requirements of the sweepstakes and is aware of and consents to the releases and disclosures contained in the official rules.

Referrals to friends can be a very effective way to increase the benefits of sponsoring a sweepstakes, as long as you take these precautions.

By the way, please click here to forward this post to a friend.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Liz Compton Chief of the Bureau of Compliance, Florida Department of Agriculture and Consumer Services

This week we’ve been chatting with Liz Compton, the chief of the Bureau of Compliance at the Florida Department of Agriculture and Consumer Services.

In part one of the interview, we learned more about Liz’s background and the work of her team at the Division of Consumer Services. In part two, Liz responded to some hypotheticals about when and how sweepstakes should be registered in the state.

This information is important for all sweepstakes sponsors. That’s because Florida’s sweepstakes regulators are unique among others in the country, for more reasons than one.

It’s one of only three states that require certain sweepstakes to be registered and bonded. Florida regulators also closely monitor these promotions and won’t hesitate to bring administrative actions or impose fines should any sweepstakes fail to comply with its requirements.

But this friendly, knowledgeable staff is responsive and extremely helpful in answering any questions.

Here’s the final installment of our exclusive interview with Liz, where she expands on “material terms” and internal corporate promotions.

Dale Joerling:  Does Florida law apply to sweepstakes that are limited to the sponsor’s employees or distributors, such as an employee or distributor sales incentive program?

Liz Compton: No, because there is no sale of a consumer product or service involved.

Dale Joerling:  Must all prizes described in the official rules be awarded?  Does it make a difference if the official rules state that all prizes may not be awarded?

Liz Compton:  Properly claimed prizes must be awarded.  It is acceptable for the rules to state that all prizes may not be awarded if, among other things, the winner does not meet the eligibility requirements or prizes aren’t properly claimed. 

Dale Joerling:  What are considered to be the “materials terms” of a sweepstakes that should be included in all advertising copy pertaining to the sweepstakes?

Liz Compton: The following are considered “material terms” of a sweepstakes and should be included:

1) Name of the operator and game promotion
2) Start and end dates for entering the promotion (including times, if applicable) consistent with the official rules
3) A list of who is eligible or not eligible to participate with respect to age or geographic location
4) Disclosure of where the promotion is void
5) A statement that no purchase is necessary to enter or play the game promotion

Dale Joerling:  Is there any advice or other information that you would like to share with our readers?

Liz Compton:  It's important that they file registration with the Department of Agriculture and Consumer Services, ensuring that all information noted on the filing documents is accurate and consistent.  

Anyone with questions may contact the Florida Department of Agriculture and Consumer Services at:
1-800-HELP-FLA (435-7352) - Florida only
1-800-FL-AYUDA (352-9832) - En Español
850-410-3800 - Calling from outside of Florida

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

In yesterday’s post, we met Liz Compton, the chief of the Bureau of Compliance at the Florida Department of Agriculture and Consumer Services.

Liz kindly agreed to an interview, and told us about her journalism background, her role in Florida’s job creation efforts, and the strangest sweepstakes she’s ever encountered: A promotion for a New York-style colonoscopy.

Today in our discussion with Liz, we tackle some real sweepstakes issues encountered by companies across the country who register their promotions in Florida. 

Dale Joerling:  If, for whatever reason, a sponsor does not register a sweepstakes that is required to be registered in Florida, what should it do if:

a. The sweepstakes has not begun, but the deadline for filing the registration has passed;
b. The sweepstakes has begun and is underway but no winners have been selected; and,
c. The sweepstakes is over, the winners have been selected and the prizes delivered?

Liz Compton: In all instances, you must file a registration.  Penalties will be assessed for late filings.

Dale Joerling:  What should a sponsor do if the actual value of a prize was estimated to be under $5,000 but turns out (after the sweepstakes is over) to exceed $5,000 and the sweepstakes has not been registered in Florida?

Liz Compton: If the prize amount adds up to more than $5,000 they have to register with the Florida Department of Agriculture and Consumer Services. If they don’t register seven days in advance of the start of the sweepstakes, they are subject to penalties. Sweepstakes with prizes close to $5,000 that could go over should err on the side of caution and register with the department.

Dale Joerling:  What are the most common mistakes made by those registering sweepstakes in Florida?

Liz Compton: The number one occurrence is not filing in a timely manner. Another issue we see is not properly identifying the promotion’s operator.

Dale Joerling: How do you define “operator”? How do sweepstakes registrants fail to properly identify the operator? Can you give an example?

Liz Compton: An “operator” is any person, firm, corporation, or association or agent or employee thereof who promotes, operates, or conducts a game promotion, except any charitable nonprofit organization.  The operator noted in the rules is not always the operator noted on all other filing documents (application and financial security). Here’s a few examples of the operator not being properly identified on the filing documents: The promoter will list their company as the operator, a subsidiary of the operator would be listed as operator, or an entirely different company not mentioned in the rules as operator would be noted on all other filing documents.

Dale Joerling:  If a 12-month sweepstakes has a drawing every month from all accumulated entries (i.e. entries that were received from the beginning of the promotion) and the prize is $1,000 at each drawing, must it be registered in Florida? Or are these drawings considered separate sweepstakes that do not meet the dollar amount of the registration threshold? 

Liz Compton:  If your monthly entries are included in all subsequent drawings, this would be considered one promotion and one filing would need to be provided. The total of all prizes for each month must be added together for all months to arrive at the grand total. Based on the $1,000 prize example, you would need to file one promotion valued at $12,000. 

Dale Joerling:  What about monthly drawings from only from the entries received during each month of the promotion?

If your monthly entries are not included in any subsequent drawings, each month would be considered a separate promotion. Filing would be required for only those months in which the total of all prizes offered exceeds $5,000.  Based on your example, filings would not be required since there are no months during which the prize total exceeds $5,000.

Anyone with questions may contact the Florida Department of Agriculture and Consumer Services at:
1-800-HELP-FLA (435-7352) - Florida only
1-800-FL-AYUDA (352-9832) - En Español
850-410-3800 - Calling from outside of Florida

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Liz Compton Chief of the Bureau of Compliance, Florida Department of Agriculture and Consumer Services

Florida is a recognized leader in the development and enforcement of sweepstakes laws and regulations in the United States. 

It’s one of only three states in the country that requires certain sweepstakes be registered and bonded before they can operate in the state. Florida also closely monitors key aspects of these promotions, from drafts of official rules to the final list of prize winners. 

Florida’s regulators are not hesitant to bring administrative actions and impose fines for a sponsor’s failure to comply with the state’s requirements. However, the knowledgeable staff of Florida’s Division of Consumer Services is also very pleasant and helpful in answering questions about sweepstakes in their state.

While preparing a recent blog post, it occurred to me that I wasn’t certain how Florida would respond to various situations. I requested the opportunity to interview a member of the Consumer Services division about some of these questions and several others relating to sweepstakes in Florida. 

The resulting answers are illuminating. But before we dive into some sweepstakes issues, let’s get to know our interview subject: Liz Compton, the chief of the Bureau of Compliance at the Florida Department of Agriculture and Consumer Services.

Dale Joerling: What’s your background in state government, and how did you arrive at the Florida Department of Consumer Services?

Liz Compton: I was a television news reporter and anchor for 15 years. When a communications position opened up at the Department, I applied for it and was fortunate enough to get the job.  When the new commissioner was elected, I was promoted to Bureau Chief in the Division of Compliance.

Dale Joerling: What do you like about your job? 

Liz Compton: I always enjoyed educating people and protecting consumers and business owners from fraud. This job gives me the opportunity to continue in that direction. I also like the fact that when we license new businesses and renew existing ones, we are supporting job creation in Florida.

Dale Joerling: How has the volume or type of sweepstakes registered in Florida changed over the years?

Liz Compton: For the past few years, filings had remained pretty steady until the economy experienced a setback. Filings are picking up at this point, and that trend is expected to continue. 

Dale Joerling: How have online sweepstakes affected your enforcement workload? 

Liz Compton: They haven’t had an impact really. Online filings are referred just like any paper filings with the same time frame.

Dale Joerling: What’s the most unique or strangest prize you’ve ever seen

advertised in a sweepstakes?

Liz Compton: A trip to NYC for a colonoscopy

Tomorrow, we’ll share Part Two of our exclusive interview with Liz Compton. Liz will respond to some sweepstakes hypotheticals and reveal the most common mistake made by those who register sweepstakes in Florida.

Anyone with questions may contact the Florida Department of Agriculture and Consumer Services at:
1-800-HELP-FLA (435-7352) - Florida only
1-800-FL-AYUDA (352-9832) - En Español
850-410-3800 - Calling from outside of Florida

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

In this 2003 file photo, instant sports pariah Steve Bartman bungles a potential catch by Cubs outfielder Moisés Alou. (AP Photo/Amy Sancetta)

Baseball fans love clambering for soaring fly balls, and it’s generally a harmless endeavor. Except when the entire happiness of a Word-Series-bereft ball club depends on it. In the infamous Steve Bartman Incident, a spectator’s impulsive grab for the ball interfered with a possible out by Cubs left fielder Moisés Alou. Right idea, Steve; wrong time.

In sports, as in sweepstakes, the lesson holds true: Sometimes trying to do the right thing at the wrong time can lead to trouble.

That’s what happened recently when a client asked us to help create a relatively standard nationwide sweepstakes. The online sweepstakes offered an alternative mail-in entry method. The prize? A to-die-for winter vacation package to the Caribbean.

We told the client that awarding a travel vacation package for only one person was unusual. Typically a travel prize of this type included two people. However, the marketing budget apparently would only allow a prize for one person’s travel.

The prize, which included airfare, hotel, meals, and ground transportation, etc., was valued at $3,500. Because the prize’s Approximate Retail Value (ARV) was well below the $5,000 threshold for registration under New York and Florida’s statutes, the client didn’t need to register the sweepstakes in either of these states.

The nightmare began about three weeks into the five-week term of the sweepstakes. The client’s in-house lawyer reviewed the ads for the promotion and discovered that the prize had been increased from a trip for one to a vacation for two. And the ads listed an ARV of $5,200.

In a frantic telephone call to the marketing department, the in-house lawyer learned that, at the last minute, the company’s marketing department had decided to follow our advice, increased the prize package and revised the official rules accordingly.

But because the ARV of the prizes exceeded $5,000, they had unwittingly created a sweepstakes that should have been registered in both Florida and New York but wasn’t.

I explained to the perturbed in-house lawyer that the best way to deal with the failure to register this sweepstakes was to immediately contact the regulators in both New York and Florida and be completely upfront with them. We called both states and explained the situation. While the client did incur nominal fines, the effects of failing to register could have been much worse if the regulators had discovered this on their own.

What could have been done to prevent this nightmare from occurring?

Here are a few suggestions:

1. Make certain marketing personnel realize that no changes can be made to the official rules, abbreviated rules, ads, etc., after they are approved by the legal department, unless the same lawyers specifically approve the changes.

2. Also, make certain the marketing department understands that if the ARV of the prizes exceeds $5,000 and the sweepstakes is available in New York or Florida, it will probably need to be registered in those two states before it can be launched.

3. Be honest and up-front when dealing with enforcement personnel in New York and Florida (or any other state or federal authorities who have jurisdiction over your sweepstakes). I have found these people to be very understanding and appreciative if you are straightforward with them about your compliance with their regulations.

4. Carefully check the ads, e-mails, point-of-sale signage and other promotional materials that will be used in connection with a sweepstakes. Confirm that they do not conflict with or misrepresent the official rules, and that all disclaimers are accurate and appear in a clear and conspicuous manner.

5. Circle back with the marketing people responsible for the sweepstakes two days before the launch date to determine if there are any problems, questions or potential changes they want to make to the sweepstakes.

In most instances, changes can be made to a sweepstakes virtually up until the time it is launched. If the promotion must be registered, however, changes can only be made up until the registration is filed.

After a sponsor launches a sweepstakes, rules changes are generally not an option. If changes are absolutely necessary, consult an experienced sweepstakes lawyer.

Please note: We compiled this example from some of our actual cases. We modified the products and details to protect the parties’ privacy.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

A staffer at our law firm is not feeling amused by a certain amusement park. She recently won a sweepstakes for a fully-paid trip for four to this park. But now two weeks out from the trip, she and her family have no plane tickets, no room key and a growing animosity for the company.

The amusement park is providing the prize, but it’s an L.A. broadcast company that sponsored the sweepstakes. And it’s that company that will be in the lurch if this woman’s trip falls through and she takes her grievances to Twitter.

This PR nightmare could unfold for any corporation that launches a sweepstakes. And the fallout could be serious: Companies beware the wrath of a consumer with social media savvy and a serious axe to grind.

The bright side for business marketers? The nightmare can be averted with a little advanced planning. Namely, a good written agreement between the sweepstakes sponsor and the prize provider.

While most of our clients are sweepstakes sponsors, we do represent prize providers. Prize providers typically don’t want to be cosponsors of the promotion. They also want to avoid being subject to any liability if the promotion runs into trouble.

Sweepstakes sponsors have their own concerns. They depend on prize providers to supply prizes that are precisely as described in the official rules. Sponsors also want to sidestep any risk associated with the prize or the use of the prize by the winners. (If a lucky sweepstakes winner contracts food poisoning from his lifetime supply of hotdogs, the sponsor wants the prize provider to be on the hook for the hospital bill.)

For these reasons, it’s usually in the best interest of both the sponsor and the prize provider to enter into a written agreement that sets forth the details of the arrangement.

There is no one-size-fits-all agreement that can be rolled out for every sweepstakes. However, here’s  several items that sweepstakes and contest sponsors should consider adding to any prize provider contract. 

8 contract elements that could save your sweepstakes

1. Prize description

This description should duplicate the prize description contained in the promotion’s official rules. But add specific details about who will deliver the prize, when it will be delivered, and any other restrictions. For example, if travel for an amusement park promotion won’t apply if the winners live within 250 miles of the park, get that down in writing.
 
2. Approximate retail value

Figure out the approximate retail value of the prize and include it in the rules. And remember to spell out that winners are responsible for paying taxes on their prizes when Uncle Same comes knocking.

3. Legal releases

Litigation looms for any online sweepstakes that goes bad, so make sure your agreement includes the proper mutual indemnity provisions and release of liability clauses. Sponsors and prize providers typically split up the liability. Sponsors step up and take responsibility for making certain that the sweepstakes is legal and complies with all federal and state laws. Prize providers typically assume responsibility for delivering the prize and honoring the warranty for the product.

4. Copyright clearance
 
Secure a license for the use of any trademarks, copyrights, and other intellectual property connected to the promotion. If your online sweepstakes is giving away a Hunger Games archery set plastered with Katniss’ likeness, make sure you’ve got the official OK from Lions Gate Entertainment.

5. Timeline

Include a clear schedule and time table for delivering the prize. We advise against a “30 minutes or less or it’s free” claim.

6. Tax warnings

Remind prize winners that it’s up to them to comply with state and federal tax laws. Many consumers subscribe to the incorrect belief that they owe no taxes if the prize is less than $600. Sweepstakes sponsors have an obligation, too: If the prize worth more than $600, then they must send the winner an IRS form 1099-Misc. at the end of the year.

7. Contingency plan

Don’t forget to spell out exactly what happens if the promotion is cancelled, if the winner refuses to accept the prize, or if the entries have become compromised in some respect.

8. Exit strategy

For all the promotion and buzz you create for an online sweepstakes, the last thing you want to see is your prize provider go kaput or file for bankruptcy. But if the worst happens, detail which party will be responsible when the winners come calling. 

Avoid the vitriol from a sweepstakes winner who starts bashing your company on Facebook, Twitter, or the highly populated message boards of online sweepstakes clearinghouses like Sweeties Sweeps. Tuck these provisions into the fine print of your prize provider agreement and save yourself from some serious headaches if your sweepstakes goes south.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com. 

Aside from the winners, there’s no one more excited about sweepstakes prizes than the IRS. States that collect income taxes get pretty tickled, too.

Many sweepstakes winners don’t realize they have partners when it comes to accepting their prize. The IRS and state treasurers don’t care who wins the prize because they are guaranteed to receive a share of virtually every prize awarded. (They may, however, root for a winner in the highest tax bracket.)

Thompson Coburn’s tax gurus can speak to this more specifically, but here are some basic facts about state and federal tax laws that sweepstakes creators need to know.

The IRS and many states consider the value of a sweepstakes prize as “other income” for the winner and treat it like his or her salary. If a sweepstakes has a cash prize, the “income” is obviously the dollar amount of the prize. If the prize includes non-cash items or services, it’s the sponsor’s responsibility to determine the approximate retail value (ARV) of each such prize.

If the ARV of the prize is $600 or more, the sponsor (or the prize provider if the sponsor is not furnishing the prizes) must notify the winner of the amount of “income” they will receive and send the winner an IRS Form 1099-Misc. at the end of the year. 

One of the questions that I routinely receive is whether a person who wins a prize valued under $600 has to pay any tax. It’s a widely held but incorrect belief by many that if the prize value is less than $600, the winner isn’t required to pay any income tax. This myth may be based on the fact that a winner will not receive a Form 1099 Misc. But that doesn’t release the winner from paying income tax. Sweepstakes winners are required to pay taxes on the value of the prize they have won, regardless of the value of that prize.

Sponsors should make it clear to all persons entering the sweepstakes that the winner will be responsible for all taxes. At a minimum, this language should be included in the official rules. I generally like to put this disclosure in bold type so that it is very conspicuous even if an entrant doesn’t read other portions of the rules.

Also, I don’t believe the sponsor of a sweepstakes should provide advice to a winner concerning tax laws and regulations. The better practice is to tell winners that any such questions should be directed to the winner’s tax lawyer or advisor. Similarly, because tax laws are constantly changing, I want to remind all readers of this blog to consult with your own tax advisor before creating your next sweepstakes.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

“Like” it, “poke” it, but don’t post your latest sweepstakes on Facebook without some serious thought.  Your contest could be violating the site’s promotions rules.

It’s unclear how closely Facebook is monitoring illegal sweepstakes, although the company has come down hard on a few mostly foreign companies.  Still, the threat of enforcement looms for any business that tries improperly to boost its brand among Facebook fanatics. 

Facebook is now flooded with ads and promotions, in part because companies smartly realize the collective spending power of the 800 million users who log on to the site every month. The social networking giant hasn’t just changed our culture; it’s changed the way we market products.

And sponsoring a sweepstake or contest on Facebook is one of the simplest ways to generate leads and create buzz about a product or brand.

In one example, beauty brand Clairol boosted its Facebook fans by nearly 1,000 percent when it launched a giveaway campaign for a new hair color product. Pepsi jumped on the social media band wagon in 2010 with the Pepsi Refresh project, which offered grants to local charities. Users could vote through Facebook and “share” their charity picks with friends to generate more votes.

Sponsoring these types of promotions can increase a company’s Facebook “Likes,” boost their “Fan” base, and expand their customer database with opt-in email addresses.

But every promotion of this type falls under the Facebook Promotion Guidelines, which apply to any “contest, competition, sweepstakes, or other similar offering using Facebook.”

Originally, the guidelines required sponsors to obtain Facebook’s prior written approval to conduct a promotion on site, plus a commitment to a minimum media spend to support the promotion. The company eliminated those requirements in a December 2010 overhaul. However, the new guidelines are clear that the promotion must be administered using the Facebook platform, which means that the promotion also must comply with Facebook’s platform policies.

The guidelines contain eight items, including definitions of what constitutes a sweepstakes and a contest. (A promotion that includes a prize of monetary value and a winner determined based on skill is a contest; and if the winner is selected on the basis of chance, it is a sweepstakes.) The guidelines also include very specific requirements for any ads and other materials that use Facebook logos or trademarks without permission.

In addition, the guidelines require that the promotion include a complete release of Facebook by each entrant or participant and an acknowledgment that the promotion is no way sponsored, endorsed, administered by or associated with Facebook. That’s why you see that language on virtually every sweepstakes or contest that is conducted on Facebook.

It’s a little uncertain what consequences befall businesses that violate these rules. Facebook apparently hasn’t flexed its enforcement muscle much against improper sweepstakes and contests in the U.S. 

But it has cracked down on some foreign companies. Last year Facebook deactivated the official India pages of designer French Connection UK and chocolatier Cadbury’s for improper promotions.

Also, if your Facebook promotion violates the rules, there’s nothing stopping a competitor from reporting you to Facebook, leaving you vulnerable to enforcement.

If you are considering sponsoring a Facebook sweepstakes or contest, you need to make sure that you are complying with the Promotion Guidelines, all other applicable Facebook policies, and of course, state and federal regulations.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Over the past 17 years, I’ve created hundreds of sweepstakes and contests. Thanks to my clients’ marketing savvy, these promotions have featured all kinds of prizes, including $100,000 college scholarships, new cars, boats, exotic vacations, backstage passes, celebrity meet-and-greets, fashion makeovers, clothes, jewelry, shoes, and simple bragging rights.

It seems at times that virtually anything can be used a sweepstakes or contest prize, including one of my favorites, a facial makeover that included plastic surgery services. But while a sweepstakes could gift you with a skin-tightening facelift, it can’t offer the drugs that ease the pain of going under the knife.

For the most part almost anything can serve as a prize. But several categories of items may be illegal or so closely regulated that the related complications of offering them may prevent their use as prizes.

Obviously, any type of contraband or illegal substance cannot be a prize in a sweepstakes. This includes illegal drugs, prescription medicines, illegal firearms, counterfeit products, stolen goods and certain types of plants and animals.

Other less obvious items that may be illegal if offered as a sweepstakes or contest prize include alcohol and tobacco products. Both are subject to state and federal regulations that directly address giving these items away as part of a sweepstakes, contest or other type of promotion. The Federal Alcohol Administration Act is enforced by the Federal Alcohol and Tobacco Trade Bureau. The TTB, as it is called, regulates advertisements and trade practices relating to both alcohol and tobacco products.

The alcohol producers themselves have established beer, wine and alcohol self-advisory groups that create regulations applying to these types of promotions. Similarly, advertisements of tobacco products are regulated by the TTB and the Federal Trade Commission. In addition, most U.S. tobacco companies are parties to the Master Settlement Agreement that resulted from the states’ 1998 lawsuit against the major tobacco companies. The settlement agreement prohibits many types of marketing and advertising of tobacco products.

The lesson here is to make certain that the prizes you offer in your contest or sweepstakes are not prohibited by federal or state law or regulation.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Source: Federal Trade Commission

Making a Top 10 list is usually something to be proud of, unless perhaps if the list was created by David Letterman’s writers. But being included on the Federal Trade Commission’s List of Consumer Complaints is certainly no honor – especially if you make the Top 10 year after year.

Each year the FTC issues a report that categorizes the thousands of complaints it received from consumers in the previous year. The “promotions for free prizes, sweepstakes and lotteries” category is No. 3 on this year’s list, beating out 27 other types of complaints. In fact, the sweepstakes category been ranked in the Top 10 since the list was created in 1999.

The FTC defines this category rather broadly as “promotions for ‘free’ prizes for a fee; foreign lotteries; and sweepstakes offered through the phone, fax, email or mail; etc.” Nevertheless, the Commission received 100,208 complaints about sweepstakes and lotteries, which accounted for 6 percent of the more than 1.8 million complaints it received in 2011. Within that category, the complaints specifically related to sweepstakes and prizes were four times the number of complaints concerning lotteries. More importantly, the total number of sweepstakes complaints has doubled since 2009.

Many state attorneys general also issue reports detailing the consumer complaints they receive. Sweepstakes, contests and prizes account for a large number of those complaints and sweepstakes and prizes are usually in the states’ Top 10 lists as well.

In most instances, consumers complain to the FTC or their state attorney general when they feel they have been treated unfairly. For example, if they believe a sweepstakes was advertised in a misleading or deceptive manner, they may file a complaint. If the sweepstakes was not run in accordance with its official rules or if the prize they received is not as advertised, they may complain as well. In addition, there are numerous sweepstakes clubs across the country that track pertinent sweepstakes regulations and encourage their members to report violations.

The FTC list tells us several things. First, the use of sweepstakes and contests as a marketing tool has increased dramatically over the past few years, and these types of promotions are being used by a growing variety of businesses.

Second, the complaints to the FTC suggest that there are a significant number of sweepstakes designers and sponsors who either don’t know that sweepstakes and contests are regulated by both federal and state agencies; or if they do know that, they have decided not to comply.

Finally, because of the increased use of these promotions, and the rising number of complaints received by the FTC and state attorneys general, it is only a matter of time before the FTC and state agencies (as well as state legislators) take an even more aggressive approach toward ensuring that sweepstakes and contests are fair to consumers.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

 

Source: Federal Trade Commission

 

 

The judges of the Canadian Supreme Court, seen here in a 2011 portrait, awarded $16,000 to a Quebec man who claimed he was duped by a Time Magazine sweepstakes. (AP Photo/Fred Chartrand, Canadian Press)

Whenever Ed McMahon joyfully announced that we had already won millions in fabulous cash and prizes, we all felt the rush of hopeful elation and the cold sting of reality. But one Quebec man who believed similar claims sued over the resulting disappointment and recently won a victory in Canada’s highest court.

In 1999, Jean-Marc Richard was ecstatic when he received a letter from Time Magazine that said “Our sweepstakes results are final: Mr. Jean-Marc Richard has won a cash prize of $833,327.” The letter went on to say that he would receive a bonus of $100,000 if he mailed in his entry form within 5 days, and, on top of all of that, he could subscribe to various magazines at discounted prices.

What Mr. Richard did not notice was the fine print that said he had won “if you have and returned the grand prize winning entry in time.” Instead, he filled out the entry form and the subscription card for a magazine and sent them to Time. In a few days he received the magazine, but not the $900 check he expected. When he called the magazine and learned that he had not won the prize, he said that he felt “embarrassed and stupid” and he promptly sued Time for deceiving him.

His case was heard in the Quebec Superior Court. The judge ruled that Time’s letter was part of a misleading and deceptive direct mail campaign and awarded Mr. Richard $100,000 in moral and exemplary damages. The judge found that Time had violated Quebec’s Consumer Protection Act as well the spirit of the French Language Charter. Time appealed the case to the Quebec Court of Appeals, which reversed the decision in 2009.

Undaunted, Mr. Richard appealed that decision to the Supreme Court of Canada. On February 28, the Supreme Court found that Time’s letter violated the Consumer Protection Act and awarded Mr. Richard $16,000. The unanimous court held “the letter’s strange collection of affirmations and restrictions is not clear or intelligible enough to dispel the general impression conveyed by the most prominent sentences. On the contrary, it is highly likely that the average consumer would conclude that the appellant held the winning entry and only had to return the reply coupon to initiate the claim process.”

The Court’s one-hundred page opinion went on to say that the “Courts view the average consumer as someone who is not particularly experienced at detecting the falsehoods or subtleties found in commercial representations. The Court also opined that the average consumer is “credulous and inexperienced and takes no more than ordinary care to observe that which is staring him or her in the face upon first entering into contact with an entire advertisement.”

While this decision is not legal precedent in the United States, it sends a clear message to anyone sponsoring a sweepstakes or contest in Canada (and particularly in Quebec) that promotions such as this must not deceive consumers. The opinion also serves as a reminder to marketers everywhere that there are penalties for deceptive and misleading advertising campaigns.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

(AP Photo/Jon Elswick)

(This post is part two of a three-part series. Part one: “Sorry, tweens: No sweepstakes or contests until you’re 13.” Part three: "FTC issues long-awaited revisions to COPPA rules.")

The Federal Trade Commission wants to bolster the law that prohibits the disclosure of children’s personal information online. The Children’s Online Privacy Protection Act (COPPA) is designed to ensure that children under the age of 13 do not disclose any personal information about themselves without their parent’s permission. The COPPA rules were adopted in 2000.  Because of the many technological changes and the increase in use of the Internet by young children since 2000, the FTC decided last year to review the Rule to see if it needed to be amended. 

As part of this process, the Commission requested comments from the public and received nearly 200 comments  from industry representatives, advocacy groups, academics, technologists, and individual members of the public in late 2011. The FTC proposed several amendments that are designed to strengthen the Rules and clarify their application to the Internet of 2012.

Some of the key proposed amendments include:

The Commission also suggests adding a requirement that if operators disclose any child’s personal information to a service provider or third party, those entities must have a reasonable procedure in place to protect the information. Operators also must retain the information only for as long as reasonably necessary and must delete it by taking measures to protect against access to the data during its disposal.

Finally, the FTC recommends strengthening its self-regulatory “safe harbor” programs by requiring these groups to audit their members at least once each year and report the result of those audits to the Commission.

It is difficult to predict when the FTC will adopt these amendments. But Commission staffers have mulled the public comments since November 2011, so it’s likely the amendments may be presented to the Commissioners in the fairly near future.

The Sweepstakes Law Blog will let you know as soon as the FTC releases the rule changes. 

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

(This post is part one of a three-part series. Part two: “FTC strengthens law protecting children’s personal information." Par three: "FTC issues long-awaited revisions to COPPA rules.")

Now that one-year-olds have mastered iPads, it’s clear that children will be interacting with the Internet more and more — and at a younger age.

Back in the late 1990s, the federal government demonstrated remarkable prescience about this technological shift and created strict rules that govern the information websites collect on underage users. It’s because of that law, the Children’s Online Privacy Protection Act (COPPA), that so many sweepstakes and contests exclude children under the age of 13.

COPPA went into effect in April 2000. The law is designed to give parents control over the information that is collected online from their children. However, the rule applies only to children who are under the age of 13. It covers all operators of commercial websites and online services directed at children under 13 that “collect, use, or disclose personal information from children.” The rule also applies to operators of general-audience websites and online services if they have actual knowledge that they are obtaining, using or disclosing personal information from children under 13.

The rule contains a number of specific requirements. For example, operators covered by the rule must:

1. Create a comprehensive privacy policy that clearly describes how they handle children’s personal information and post this policy on their website;
2. Notify parents and obtain “verifiable parental consent” before collecting information from children, subject to several so-called “email” exceptions that allow an operator to obtain parents’ consent via email in certain situations;
3. Offer parents the option of consenting to the operator collecting and internally using the child’s information while at the same time prohibiting the operator from disclosing their child’s information to third parties;
4. Allow parents to access their child’s collected personal information as well as the right to review the information and have it deleted;
5. Give parents the opportunity to prevent the further use or collection of their child’s personal information online; and
6. Protect the confidentiality, security, and integrity of information collected from children under the age of 13. 

COPPA also bars operators from forcing children to provide more information than is reasonably necessary before allowing them to participate in online activities.

The Federal Trade Commission aggressively enforces the COPPA Rule; violators can be fined up to $11,000 per violation. In addition, states and certain other federal agencies, such as the Department of Transportation, have the authority to enforce COPPA as it pertains to their jurisdictions.

Because of the complications and expense of complying with the COPPA requirements and the risk of large fines for even an inadvertent failure to comply, it’s not surprising that many sponsors of sweepstakes and contests decide to exclude participation by persons under 13.

The FTC is currently in the process of amending the COPPA Rules in an effort to keep the regulation up to-date with the technological developments and increased usage of the Internet by children that have occurred since 2000. The second article in this series will discuss the FTC’s proposed amendments.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

People generally understand they have to give up their names and contact information when entering a sweepstakes or contest. How else can they get their hands on that widescreen TV or trip to Aruba?

But how a sweepstakes sponsor collects those names, numbers, addresses and e-mails — and what they do with that information — could have significant regulatory fallout for a company.

Sponsors of sweepstakes and contests need to be aware that personal information received from entrants is subject to both state and federal privacy protection statutes.

But these statutes aren’t uniform and a wide variety of requirements may apply. At a minimum, sponsors need to determine what information they can collect; how they can collect it; what they need to tell contest entrants about how the information will be protected and used; and the entrant’s rights to review, edit and delete the information they submit.

The Federal Trade Commission, the primary federal agency charged with enforcement of privacy rights, has established regulations that pertain to personal information collected from entrants in sweepstakes, contests and other online promotions. The FTC also enforces numerous other statues and federal regulations, such as the CAN-SPAM Act, that often apply when a promotion is advertised or available on the Internet.

Sweepstakes to sales calls

In April 2011, the manufacturer of Rascal Scooters paid $100,000 to settle FTC charges that the company used a sweepstakes to gather phone numbers and place telemarketing calls to more than 3 million people on the national Do Not Call Registry. The individuals entered a “Win a Free Rascal” sweepstakes and later received unwanted sales calls.

The case highlights the importance of attaching a comprehensive privacy policy to every sweepstakes or contest. The FTC requires that sponsors have a privacy policy in place that addresses the types of information that will be received in connection with promotions.  The privacy policy should be posted prominently on the sponsor’s website and linked to the official rules and all advertisements or promotional materials used to market the sweepstakes or contest.

Because of the number and complexity of federal and state regulations related to privacy issues, a few general best practices have evolved relating to these types of promotions:

       • Include a specific provision relating to promotions in the sponsor’s privacy policy.

       • Only collect information that is essential for entering a promotion.

       • Allow entrants to inspect, edit and remove their personal information from sponsor’s database.

       • Notify entrants clearly of the restrictions on the use of their personal information.

As if complying with various state and federal regulations is not challenging enough, if the promotion is available to children under 13, the sponsor must also comply with the stringent requirements of the Children’s’ On-Line Privacy Protection Act. COPPA requires (among other things) that the sponsor obtain verified consent from a minor’s parent or guardian before the minor can participate in any way in a sweepstakes or contest.  In fact, COPPA prohibits the sponsor from communicating with a minor until parental permission is received and confirmed.

Thompson Coburn has developed an interactive sweepstakes and contest program known as the “Sweepstakes Creator,” that helps clients design, create, and implement sweepstakes and contests that will comply with all of the federal and state laws and regulations that may apply including COPPA. This comprehensive program  provides clients with official rules, disclaimers for advertisements, publicity and liability releases, state registration filing and other materials needed for their particular promotion. For more information, call any member of the Sweepstakes Team.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

You can see the U.S.A. in your Chevrolet. But if you’re a radio station, you can’t run an online contest for Chevy without using proper airtime to announce the contest’s material terms and conditions.

That’s the expensive lesson a group of  radio stations in Los Angeles learned last month when the Federal Communications Commission hit Clear Channel Communications with a $22,000 fine.

The January 20 case reasserted a previous case involving Clear Channel in which the FCC exerted its regulatory jurisdiction over online sweepstakes and contests that are advertised on radio. Before those decisions, the FCC only regulated sweepstakes that were conducted by a station on-air. 

Most radio stations are familiar with the FCC regulations that apply to sweepstakes and contests.  They consist of only two sentences and are fairly straightforward:

• A licensee that broadcasts or advertises information about a contest it conducts shall fully and accurately disclose the material terms of the contest, and shall conduct the contest substantially as announced or advertised.  No contest description shall be false, misleading, or deceptive with respect to any material term.  47 C.F.R. Section 73.1216.

Several subsequent footnotes explain these regulations even further and detail what types of information radio stations must disclose and how the disclosures need to be made. The rule’s primary requirement is that the station must provide the material terms of the sweepstakes in a reasonable number of on-air announcements.

The FCC has enforced these mandates aggressively, hearing numerous cases since the regulations were adopted in 1976. In fact, these cases cropped up so often that the Commission’s rules established a fine of $4,000 for each violation found.

Virtually all cases decided by the FCC to date have involved a sweepstakes or contest that a station has promoted and conducted on-air. For that reason, many FCC practitioners assumed that sweepstakes and contests implemented in stores, magazines, newspapers or online didn’t fall within the FCC’s jurisdiction.

The Clear Channel case appears to have changed all of that.

Contest complaint

In 2008, a handful of Clear Channel stations in Los Angeles advertised an online contest where listeners could film their own Chevrolet commercials and submit them online.

A contest participant filed a complaint with the FCC alleging the contest was rigged because the winner submitted his video after the contest deadline and that Clear Channel awarded the prize to a friend of a station employee.

The case focused on whether the stations had disclosed the material terms of the contest; whether the contest was implemented according to its official rules; and whether the rules had been complied with, noting that two sections of the official rules were inconsistent – suggesting that these were two different closing dates.

The FCC found that Clear Channel had violated Section 73.1216. The Commission also upped the usual $4,000 fine to $22,000, based on Clear Channel’s “previous violations of the Commission rules” and a further finding that Clear Channel has “substantial revenues” with which to pay the fines.

This decision teaches us that if you’re advertising a sweepstakes or contest on the radio, be extra careful to make certain that all material terms are disclosed, that a sufficient number of on-air announcements are made, and that the contest or sweepstakes is conducted in accordance with the official rules. If the sweepstakes or contest does not meet these criteria, there’s a much greater chance that the FCC will come knocking and initiate some type of enforcement action.

Of course, operating in accordance with the rules and alerting entrants to the material terms of the sweepstakes or contest is sound advice when creating any sweepstakes or contest. But that advice is perhaps more critical now than ever because the FCC has expanded its jurisdiction to include promotions that have long been considered outside of its purview.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

The "America's Got Talent" judges celebrate with 2011 show winner Landau Eugene Murphy Jr., second from left. The judges include, from left, Piers Morgan, Sharon Osbourne and Howie Mandel (Via AP Images/Trae Patton)

Sweepstakes law stretches further than you’d ever imagine. It even affects Simon Cowell, the prickly English media mogul behind hit television shows like “America’s Got Talent.”

How did Simon stumble upon the pitfalls of sweepstakes law? It all has to do with the concept of “consideration.”

A past Sweepstakes Law Blog post described the criteria states use for determining if a sweepstakes constitutes an illegal form of gambling. Here’s a reminder: Three elements must be present — chance, prize, and consideration — for a sweepstakes to be illegal. In most instances, sweepstakes sponsors can avoid concerns about illegal gambling by eliminating consideration. 

But it’s not always easy to determine what may or may not be considered consideration. 

Some states define consideration as “money or other benefit conferred by the player for the opportunity to gamble.” Obviously, requiring a person to pay money or make a purchase to participate in a sweepstakes constitutes consideration. However, many states have adopted much broader definitions, and some states view virtually any expenditure of a participant’s time and effort as consideration. 

For example, Florida regulators stated that consideration “need not involve money or anything of monetary value.” Rather it “may consist of a benefit to the promisor, or a detriment to the promisor,” or if the promisee “does anything which he is not bound to do, or refrains from doing anything which he has the right to do.” 

Iowa defines consideration as “a substantial expenditure of effort.”  While the Iowa Legislature exempted certain acts of participation — including completing a registration form, obtaining a blank entry form or participating in a product demonstration — many common entry activities and requirements must be analyzed on a case by case basis to determine whether they require “substantial effort,” as defined by the Iowa statute.

Is getting online 'consideration'?

Another consideration quandary pops up when deciding whether  it constitutes consideration to require a person to go on to the Internet to enter a sweepstakes.  Many argue the Internet is so ubiquitous and accessible that requiring someone to enter online can't be considered consideration.  Others argue equally forcibly that only about 70 percent of Americans have Internet access at home, so not everybody can enter an online sweepstakes or play a game free of charge. They also argue that while most U.S. residents are familiar with use of the Internet, some  still may not be comfortable registering for a sweepstakes online. 

Those opposing viewpoints cropped up in a 2011 lawsuit filed against “America’s Got Talent” by television viewers who entered a show promotion. The viewers alleged that charging a 99-cent premium for votes cast by text message constituted consideration by the sponsor of the television program. The suit also alleged that the purported “alternate means of entry” via the Internet is not available to all persons who wish to enter the sweepstakes and therefore not all persons may play the game for free. This case in U.S. District Court for Central California, settled before it went to trial.  However, the complaint argues that allowing entry only by Internet makes the promotion illegal gambling.

Are Vermonters always exempt?

There are also more misconceptions about state requirements when it comes to other issues of consideration. For example, there is a longstanding belief that sponsors can’t  require Vermont participants to provide postage when requesting copies of sweepstakes rules and winners lists. For example, last month the Sprint Center arena in Kansas City launched a contest where fans could enter to win tickets to upcoming live concerts and events, including shows for Brad Paisley, George Strait and Sesame Street Live. The contest’s official rules dictated that Vermont and Washington residents can omit postage when requesting contest rules or a winners list.

But this requirement is not correct. According to a letter Thompson Coburn received from the Vermont Attorney General’s Office, sweepstakes sponsors need not allow Vermont participants to omit postage on requests for official rules, so long as sweepstakes participation does not require such a request.

The determination of what constitutes consideration is further complicated by the fact that each of the 50 states have their own definition of consideration.  And those definitions are subject to change at any time as a result of amendments to state statutes or regulations, new case law, or changes in the enforcement priorities of the state’s attorney general.

For all of these reasons, it is crucial to pay close attention to consideration requirements and ensure that the sweepstakes truly has a free alternate method of entry.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

President Barack Obama lunches in early January 2012 with four supporters who won his re-election campaign's "Lunch with Barack" fundraising sweepstakes and traveled to Washington D.C. for their prize. (AP Photo/J. Scott Applewhite)

Several weeks ago, President Obama texted me.

The text didn’t include any “LOLs” or photos of First Dog Bo, but it did invite me to enter a sweepstakes for a chance to win a prize that included lunch with President Obama and Vice President Joe Biden. It also encouraged me to make a donation to his campaign. (As always, there’s no such thing as a free lunch with politicians.) I passed on the sweepstakes, but also realized that this was one of the first times a political campaign committee had personally invited me to enter a sweepstakes — and through my cell phone, no less. 

It’s no secret that more businesses use sweepstakes and contests each year. This growth has accelerated dramatically thanks to the public’s widespread access to the Internet. Businesses use the Internet to host these promotions because they increase publicity about their products; streamline the  design and implementation process; and, perhaps most importantly, provide the email addresses of potential customers. Those three advantages are as desirable to political campaigns as they are to businesses.

Apparently, the President’s initial sweepstakes must have been successful because he has sponsored two more since. Previously, the Democratic Senatorial Campaign Committee sponsored a sweepstakes where the top prize was a photo opportunity with First Lady Michelle Obama.

The benefits of Internet sweepstakes have not escaped the campaign committees for the president’s Republican rivals. Mitt Romney’s campaign committee sponsored a sweepstakes in which the prize was lunch with him and his wife at a Massachusetts burrito restaurant. Like the president, Romney encouraged donations to his campaign, but specifically added that donations weren’t required to enter the sweepstakes. One unique factor of the Romney sweepstakes is that 25 “potential” winners were selected by random drawing. However, following that selection, (and after security clearances) the sponsor got to choose one winner from that group as “best representing, in the sole judgment of Sponsor, Mitt Romney’s support across the country.”

While not a political candidate, radio pundit Rush Limbaugh also recently used a sweepstakes to promote the sale of his bottled tea products. Not to be outdone, the prize he offered was allowing the winner and several friends to sit in on a broadcast of his radio program from his studio in Southern Florida. 

Click below if you’re interested in viewing the official rules for all three of these sweepstakes. 

• “Dinner with Barack” sweepstakes
• “Grab a Bite With Mitt” promotion
• Rush Limbaugh’s “Two if By Tea” sweepstakes

Each set of rules contains the required “no purchase or contributions necessary” disclaimer, although there may be some question as to how “clear and conspicuous” that notice is presented in the official rules and the email advertisements or messages.

I expect we will see many other candidates in both national and local races use sweepstakes and contests during this election year. It will be interesting to see how campaign committees frame sweepstakes and what prizes will be available. Let us know if you see any novel approaches.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

Do sweepstakes need to be registered? Yes. In fact, there are three states that require certain types of sweepstakes be registered before they can be implemented in their state. These states’ regulations include significant fines for companies that fail to comply.

Virtually all state laws define illegal gambling as having three basic elements – prize, chance and consideration. All three of these elements must be present for a promotion to be considered gambling. The job of sweepstakes creators is to eliminate one or more of these elements from every sweepstakes they prepare.

Prize
It’s usually difficult to eliminate the prize from a sweepstakes because the prize provides the incentive for entering and the reward for winning. It’s the carrot on the stick.  However, certain sweepstakes involve a less tangible reward, such as “bragging rights” or being named “winner for the week.” These types of prizes have little or no monetary value, and likely wouldn’t be considered significant enough to constitute a “prize” under state gambling laws.

Chance
Eliminating the element of chance from a sweepstakes is also difficult unless the sweepstakes can be transformed into a contest, where the winners are not selected by chance but instead chosen based on some measurable criteria. Another way to eliminate chance would be to ensure that everyone receives a prize. Those types of promotions are structured as giveaways rather than sweepstakes and do not violate state gambling laws.

Consideration
The most common way to avoid having a sweepstakes be considered illegal gambling is to eliminate the consideration from the promotion. Virtually all states define “consideration” to include payment of money or something valuable to enter the sweepstakes or a requirement that a purchase must be made in order to enter the sweepstakes. However, in some states, even having to visit a store or take any action that a customer would not otherwise have to do can constitute consideration. However, it is generally accepted that requiring a customer to mail in his or her contact information is not consideration and a sweepstakes with that option will not be considered gambling. This explains why most sweepstakes provide a free method of entry, usually by sending a 3x5 card with the customer’s name and address or by calling an 800 number.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

As a sweepstakes attorney, one of the most frequent questions I’m asked is, “What is the difference between a sweepstakes and a contest?” The short answer: Lots. One is the manner in which the winners are determined. In a sweepstakes, winners are selected solely by chance, usually through use of a random drawing. In a contest, the winners are determined based on the entrants’ abilities to meet some pre-determined criteria put into place before the contest begins.

Another difference is that sweepstakes usually don’t require entrants to do anything to enter, other than provide their contact information. Contest entrants, however, must do something that can be evaluated using contest criteria to determine who has won.

Sweepstakes and contests also differ because unless a sweepstakes is operated as a state-authorized lottery, entrants in a sweepstakes must be allowed to participate without having to pay any money, make a purchase, or do virtually anything other than mail in their name and address. In a contest, entrants have to take some type of action to participate, such as writing an essay, taking a photo, creating a video, singing a song, selling a product, etc. Also, contest entrants, unlike entrants in a sweepstakes, may be required to pay a fee to enter.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.

The children’s animated movie “Rango,” about an adventurous lizard voiced by Johnny Depp, raked in $245 million worldwide. But a vaguely-worded sweepstakes advertisement touting the film’s DVD release recently landed its distributor Paramount Pictures in some hot water.

The problem? Paramount ran the TV spot during children’s TV programming, but only adults could enter the sweepstakes. A more clearly-worded disclosure could have saved the sweepstakes — and spared the distribution company from a public relations headache.

The ad in question aired during children’s TV programs and promoted Rango’s July 15 release on DVD. It contained colorful clips from the Rango film and a voice-over that said, “You can enter for a chance to win a 2011 Ford Escape Hybrid, a new Nintendo Wii Bundle and other great prizes.” The sweepstakes’ official rules, linked to the ad, limited entry to legal U.S. residents who are at least 18 years old, but the voice-over didn’t mention that.

On October 6, 2011, the Children’s Advertising Review Unit (CARU) of the Council of Better Business Bureaus recommended that Paramount to pull the advertisement because “children viewing the commercial might believe they were eligible to enter.” Paramount complied, yanking the TV ad and disabling the sweepstakes’ website. But the company did issue a statement saying it “respectfully disagrees with CARU’s final case decision.”

The lesson here is that ads for sweepstakes and contests need to clearly and conspicuously disclose the principal terms and conditions of the promotion. This is particularly important if the ad is directed to children or designed in such a way that it will attract children’s attention because regulatory authorities generally are concerned that children may be more easily misled by advertisements than adults. Including an abbreviated set of rules in the ad may be helpful in making these disclosures, but in some instances, it may be necessary to highlight certain key information in the ad itself or as part of the voiceover.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or djoerling@thompsoncoburn.com.