Is your online sweepstakes or contest legal?

by Gray Reed & McGraw
Contact

You have read that user generated content contests, Facebook sweepstakes and other interactive promotions can really drive traffic to your site.  While easy to do and effective, have you thought about the legal side of it?

A longer article from Michigan lawyer Gabriel Karp can be found here on the ins and outs.  For the purpose of this post, you need to focus on one main question: 

IS MY SWEEPSTAKES A LOTTERY?

I know you are thinking of course it is not a lottery.  After all, you are not giving away millions, just a chance for a free hamburger.  You still need to take a closer look. 

A lottery consist of three basic elements:

1.  You are offering a prize which can be anything of value.

2.  The game is based solely on chance with winners chosen at random.

3.  To participate, the consumer has to provide some consideration.

If you have all three of those, then you have a lottery. 

If the winner is based on the best submitted video or post, then it is not a game of chance.  You just need to make sure you actually judge the submissions.  That is what the law usually calls a contest and would cover UGC the same way it might cover the longest field goal.

If no one has to provide any consideration to participate and you simply chose at random winner of out of all the submissions, then you have what the law usually calls a sweepstakes.  

The third element is what may trip you up.  Consideration is the legal term for something of value that is exchanged between two parties to an agreement.  Most of the time, consideration is money.  That is easy and that is the Megamillions-Powerball-I’ll never-win-but-if-I-do-I-promise-to-be-good-lottery.  The consumer pays $1 (consideration) to be chosen at random (chance) for a big pot of money (prize).   Lotteries are generally illegal.

Non-monetary consideration

Consideration can be things other than money as long as it provides value to the other person.  An argument could be made that providing private sensitive personal information in exchange for a free hamburger could be considered “consideration.”  It is unlikely simpling “liking” a company’s Facebook page would be, but we don’t always have clear guidance on the issue. 

According to Gabriel Karp’s article from 2010, “approximately 33 states have statutes or caselaw stating nonmonetary consideration is not deemed consideration for purposes of lottery laws.” 

The safest thing you can do to avoid any issues (in addition to hiring counsel to review your program) is to allow consumers to do an alternative method of entry.  Perhaps, I don’t want to “like” your page or give you my email address, phone number, physical address and give you access to my contacts list on my iPhone.  You should allow the consumers who want to enter the sweepstakes to send in the postcard with the information you need to notify them so you can always say people could have entered without providing anything of value to you. 

Why all the fine print?

To make matters worse, each state usually has different laws that apply.  Here are the Texas statutes on contests and sweepstakes.  Not only that, if you are running promotions on Facebook, Twitter or Google+, they have their own rules. 

Now you know whyt there is all the fine print or fast talking at the end of the promotion.  You can blame the lawyers.  We’re used to it.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gray Reed & McGraw | Attorney Advertising

Written by:

Gray Reed & McGraw
Contact
more
less

Gray Reed & McGraw on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.