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FCC expands its reach to online sweepstakes and contests

February 2, 2012

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.

This post was written by retired Thompson Coburn partner Dale Joerling. If you have any questions about the topics discussed in this post, please contact Thompson Coburn partner Hap Burke.