10 things you need to know about promotions and contests
Contests and sweepstakes are a great way to engage customers. They are fun, easy, and can have great reach on social media.
But are you conducting them the right way?
Promotions can be very tricky because they are governed by the laws of each state and each country where you allow participants to enter. In addition, there are social media policies to comply with if you promote on Facebook, Twitter, Instagram, Pinterest, YouTube, or any other social media site. Recently, the Federal Trade Commission (FTC) also made it clear that it is watching and is willing to step into the fray if appropriate disclosures are not made with promotions.
The following are 10 things you need to know about promotions:
1. Lotteries: A promotion cannot be deemed a lottery. Lotteries are illegal and can subject your company to serious liability. A lottery includes the following elements: 1) a prize, 2) consideration (e.g., some sort of value received, such as payment, opening an account, providing information, etc.), and 3) chance. One of these elements must be removed to ensure the promotion is not a lottery. If you are running a giveaway or sweepstakes, a prize and chance are involved, so you cannot require entrants to provide consideration. Consideration, however, does not necessarily mean a purchase. If entrants are required to open an account, “like” a social media page, or provide more than nominal information, it could be considered a lottery. That’s why most promotions include a free alternate method of entry. Of course, no company really likes the free alternate method of entry, but it must be made available and entrants must be aware of it (so don’t hide it in the fine print).
2. Strict regulations: Some states and countries have relatively strict regulations for promotions. For example, Florida, Rhode Island, and New York all have registration and bond requirements for promotions above a certain value. That’s why you often see promotion rules restricting entrants from those states. If you don’t want to restrict people, learn the requirements and be sure you are in compliance.
3. Social media rules: Know the rules of the social media sites on which you promote your contest or sweepstakes. Facebook is the most notorious for having specific requirements — and for changing their rules constantly — but it is important to comply or you could risk a shutdown of your account and the loss of your valuable followers/subscribers.
4. Clear and accessible rules: Create clear rules for your promotions. Almost all state, federal, county, and social media policies require certain disclosures to entrants. So ensure the rules cover the required bases and are clear and accessible.
5. Liability: Limit your company’s liability. Sure, you’d love to give your customers a car, but make sure you have no liability if the car is defective or if the winner crashes it.
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6. Intellectual property: Cover your intellectual property bases. If entrants are submitting user-generated content to enter, make sure you own the content or have the rights to republish and use it. If you plan to advertise your promotion and winner, you’ll need a media release, so add that to your rules as well.
7. Disclaimers: Add any necessary disclaimers. In accordance with the FTC’s advertising guidelines, companies cannot allow promotions to appear to be endorsements. For example, if you ask entrants to use specific hashtags to enter the promotion, those hashtags must make it clear that it is for a promotion and that the entrant is not endorsing your product. (See FTC action against Cole Haan for its #wanderingsole $1,000 promotion on Pinterest.)
8. Maintenance of records: Retain information on winners for several years and provide access to that information to others upon request.
9. Legal counsel: Consult an attorney if you have questions.
10. Don’t be discouraged: Do not allow the requirements of promotions to deter you from using this great tool. It does take some education, but with good guidance, you can achieve very successful promotional campaigns.
Mindi Giftos is an attorney with the law firm of Whyte Hirschboeck Dudek S.C., practicing in the areas of intellectual property and technology law. She can be reached at mgiftos@whdlaw.com.
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