Sweepstakes and online advertising

As businesses try to attract viewers to their websites, social media pages and online ad campaigns, online contests have become more prevalent.  The opportunity to win a prize can provide consumers with an incentive to visit an advertising page, view a video, reply to a survey or take other action.  Businesses who offer contests must  be aware of the applicable state laws that regulate sweepstakes, contests and lotteries.   In the online world, which knows no state boundaries, this means that businesses may need to consider many different state laws — register with state authorities as needed — because the online world knows no state boundaries.

However, the various state laws do exhibit some common themes.  In general, a sweepstakes or contest includes the elements of a prize, and randomness or chance.  If the contest also requires consideration, then it may be considered an illegal lottery in many states.  Consideration is not limited to payment, but can also include a requirement that the user perform certain tasks (such as a purchase a product, or even visit a website multiple times).

In order to comply with the laws of various states and avoid registration requirements, advertisers who implement online contests should keep multiple rules in mind:

  • clearly post the official rules of the contest;
  • provide a means of entry that requires no fee or other consideration;
  • ensure that employees of the contest sponsor (and their families) are not eligible to participate;
  • clearly describe the type and number of prizes that will be awarded;
  • explain how and when the winner will be notified; and
  • publish the closing date for submission of entries.
Many states also prohibit highly regulated industries — such as tobacco, firearms, motor fuel sellers, timeshare sellers, and financial service providers — from offering sweepstakes.  In addition, although not required by state contest law, sponsors should consider obtaining advance consent from all entrants to use their names and likenesses when announcing the winners.
Finally, when offering a promotion that involves a third party social media or other website, the sponsor must consider that website’s terms of use.  For example, Facebook’s promotion guidelines prohibit Facebook users from offering promotions other than through an app.  In addition, Facebook does not permit contests that are used to attract “likes” to business pages and posts.  Further, contest winners may not be notified through Facebook.  Google+ is similarly restrictive, as the Google+ Contest and Promotion Policies simply prohibit businesses from running contests, promotions and sweepstakes on a Google+ page.  The Policies state that a business may display a link on Google+ to a separate site where a promotion is hosted, so long with the promotion complies with other conditions of the Policies.

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