Authors: Salma G. Granich, Glenn J. Light, Karl F. Rutledge
The impact of social media is undeniable in today’s society. Whether it is utilized for personal use, maintaining family connections, or capitalizing on the latest trends, social media is interwoven into the fabric of society. These opportunities are not; however, limited only to individuals. Social media can be an invaluable marketing outlet for all businesses. It allows companies the opportunity to advertise their products and services to large audiences, connect with the public, and strengthen their brand. Of note, promotional sweepstakes are a highly effective marketing tool that companies can utilize to achieve optimal results.
With the availability and convenience of promotional sweepstakes, also comes numerous opportunities to run afoul of the law (e.g., violations of gambling prohibitions, absence of official rules, failure to comply with state registration/bonding requirements or ignoring requirements of social media platforms). This article aims to call to your attention, a few of the more common pitfalls to be aware of when offering a promotional sweepstakes.
Legality of Promotional Sweepstakes
Most states have commonality in that they typically define gambling as any activity in which the following elements are present: (1) the award of a prize, (2) determined on the basis of chance, including a future contingent event outside of their control, and (3) where consideration is required to be paid. If any one of these elements is removed, then the activity is generally lawful. The key focus of this article is the removal of the element of consideration.
While there are some promotional sweepstakes that are completely free to enter (i.e., no one pays to participate), more commonly, promotional sweepstakes involve participation by purchase of a product or service. In the latter case, to remove the element of consideration and avoid the general prohibition against lotteries, companies offer an alternative method of entry, in order for participants to enter for free (“AMOE”), for those that do not want to buy the product or service being promoted. While most entries into the promotional sweepstakes will be through the purchase of the promoted product/ service, the use of the AMOE is generally an effective mechanism of legally eliminating the consideration element.
However, when offering an AMOE, there are a few key considerations to be mindful of. First, when utilizing an AMOE, the company must disclose the existence of the non‑purchase method of entry in a clear and conspicuous manner. Often the words “no purchase necessary” are displayed prominently on all promotional sweepstakes advertising materials. Secondly, non-paying participants must have “equal dignity” with paying participants, (i.e., equal opportunity to enter, to win and to win the same prizes). For example, when utilizing a mail in AMOE entry form to request free entries, a grace period should be implemented following an entry deadline to allow for ample time for mailed in requests to be considered, thus ensuring equal dignity with paying participants.
Additionally, a paying participant cannot get a disproportionate number of entries when compared to non-paying participant. Further, non-paying participants also should have equal chances to win all prizes offered. That is, separate prize pools may invalidate the AMOE, because the non-paying participants would not have the opportunity to win the same prizes. Likewise, non-paying participants should not face greater odds or obstacles to winning the prizes. Any material disparity (actual or perceived) can invalidate the use of an AMOE.
