Sweepstakes and contests are effective marketing tools used by businesses to promote new products, attract customers and increase sales. Promotions of this type are becoming increasingly popular due to the rise of social media. Sweepstakes and contests are often easier to implement, less expensive, and more effective in promoting a company’s products than methods used in a pre-social media age.
Businesses that choose to run either a sweepstakes or a contest in a promotion must ensure they comply with all relevant laws and policies. There are three main areas of concern for business owners: illegal lotteries, disclosure of official rules, and social media requirements.
Lotteries are illegal unless operated by the state, and companies that sponsor illegal lotteries may be subject to civil and/or criminal penalties. A lottery consists of three elements: a prize is awarded, winners are determined based on chance, and participants must submit a consideration (something of value that must be given for participation), which may be monetary or non-monetary .
To avoid running an illegal lottery, it is important to run either a sweepstakes or a competition. A sweepstakes consists of a game of chance in which the winners are won by a random process such as B. a random draw can be determined. Sweepstakes requires a free entry method, such as B. Sending a 3×5 postcard to the company or sending an email. In contrast, a contest is a contest or game of skill in which the participants must exert some degree of skill or effort to participate.
Accounting can be very difficult as most states consider certain non-monetary requirements to be allowances. Low-risk eligibility requirements include short survey questions, downloading the application if the application is free, or requiring a social post or comment on a free platform. Note that it is illegal in Ohio to require a single store visit to enter a sweepstakes or contest.
All Promotions must have Official Rules. These rules must be readily available to the public, included in any marketing related to your promotion, and clearly set forth the following disclosures: eligibility, prize details, method of entry, start and end dates, odds of winning, any relevant deadlines, the name of the sponsor and details of the prizes, including the approximate retail value of the prizes. In addition, when designing their Official Rules, companies should consider the following specific issues: Limitation of Liability for User-Generated Content, Posting Permissions/Wavers, Promotions Targeted at Children, and a Modification or Termination Clause.
It’s important for businesses to comply with each social media platform’s terms and conditions before incorporating their use into their advertising. In general, platforms require the promotion to comply with their own official rules, all applicable laws, the rules of the platform (e.g. their terms of service) and include a full disclaimer and acknowledgment that the promotion is not supported by the platform. However, all social media platforms have platform-specific requirements. For example, Instagram asks the company not to flag content inaccurately, while Facebook doesn’t allow companies to require friend connections to manage such as:
Finally, if a business chooses to use influencers to promote its sweepstakes or contest, it must ensure that the influencer complies with the Federal Trade Commission’s Influencer Guidelines, otherwise additional liability may arise.
While sweepstakes and contests are not new, they are growing in popularity due to social media. When implementing these tools in a promotion, businesses must ensure that they take active steps to comply with all applicable laws and policies, including the rules and requirements set out on individual social media platforms. Failure to do so can result in significant penalties – and you shouldn’t leave that to chance!