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Beware privacy regulations when collecting entrant information

February 10, 2012

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.

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.