“Are you sure you want to do this?” That’s always my first reaction when someone comes to me wanting to do a contest or giveaway on social media.
Contests make for great content, but just because everyone’s doing it doesn’t mean it’s as simple as slapping up a new status update. Here’s a cautionary tale for you -- Fellow lawyer and marketing whiz Kerry Gorgone cites a recent spat between retailer Cole Haan and the Federal Trade Commission (FTC) over a Pinterest contest:
Accessories retailer Cole Haan received a warning letter from the Federal Trade Commission (FTC) after they asked people to enter a contest by creating a Pinterest board called “Wandering Sole,” then pin 5 photos using the hashtag #wanderingsoles.
Cole Haan did not require people to disclose that their pinboards and posts posts were an entry to win a $1,000 shopping spree. In the FTC’s view, this madethe hundreds of Pinterest posts hashtagged #wanderingsoles into undisclosed endorsements.
Because the FTC had never publicly addressed social media contests this way before, they did not fine Cole Haan, but now that they’ve clarified their standards regarding social media contests, brands and bloggers can no longer claim ignorance. This will make it easier for the agency to fine the next company or influencer that gets it wrong.
Don’t be the next business or blogger on the Summer Jam Screen. There are a number of legal considerations to be aware of before launching your great online contest campaign.
First things first, let’s get our terminology straight. Are you running a contest, a sweepstakes, or a lottery?
- A “sweepstakes” is a promotion where the prizewinner is determined by chance and the participants exercise no control over the outcome, like a random drawing.
- A “contest” is a promotion that involves skill or effort rather than chance – it relies on the participant’s skill or ability to perform a certain task. Contests may include voting or judging criteria to choose a winner. An example is uploading a photo in an iPhone photography contest to be judged by Steve Jobs.
- Both sweepstakes and contests are legal to operate if you adhere to some of the rules I’ll mention below but running a “lottery” is illegal under state laws. There are three elements to an illegal private lottery: 1) the contest requires purchase, payment, or other consideration such as buying an item or ticket to enter; 2) there’s an element of chance involved; and 3) there is a prize up for grabs.
Once you’re firmly out of lottery territory, you should focus on the issues that could potentially turn your fun, traffic-generating contest into a legal liability.
Follow the laws of your state as well as federal laws that regulate online gambling. Many states regulate promotional campaigns based on where the participant lives. For example, in New York and Florida, if the total approximate retail value of all prizes is over $5,000, the sweepstakes will need to be registered and bonded in those states or their residents of those states will be disqualified. Check the regulations for each state in which your contest is open to participants and consult an experienced attorney before conducting a contest.
Include the magic words. These should look familiar to anyone who has every entered an online contest and for very good reason. Be sure your contest rules include the following sections/phrases:
- Official Rules
- "No Purchase Necessary"
- "Purchase does not enhance chance of winning"
- "Void where prohibited"
- Details regarding non-monetary consideration
- The identity of the host/promoter
- Entry procedures, beginning/ending dates, including time and time zone
- Eligibility requirements
- An explanation of all methods of entry
- A clear description of the prize(s)
- Method of selecting a winner
- Date winner(s) will be chosen and notified
- Clear judging criteria
- Publicity rights regarding use of Winner's and Participant’s information
- Liability limitations
- Odds of winning
- Physical address, not a PO Box
Using social media to host a winning campaign requires consideration of generally applicable federal and state laws for online contests, as well as laws related to advertising, privacy and data security. Plus businesses must ensure that their promotions comply with requirements of the various social networking sites. It seems like everyone is doing a contest these days but if they’re doing it lawfully, they’ve taken these considerations and more into account and probably have a lawyer on hand to make sure everything is in top shape. Careful attention to how you set up your contests will ensure smooth operation and avoid legal pitfalls.
Disclaimer: This information is for educational and informational purposes only. The information is not offered as legal advice or counsel of any type and should not be relied on as such. No representations or warranties, express or implied, with respect to any information on this site are created. The content herein does not create an attorney-client relationship. It is recommended that you consult with an attorney licensed in your state who can review all the relevant facts and issues of your case.