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Tweaking your way to disaster: Why you should use caution before modifying a company-wide sweepstakes

August 14, 2012

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.

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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.