Can I Get in Trouble for Running a Social Media Sweepstakes or Contest?

Running a sweepstakes or contest on social media can be a great way to promote your book or your brand: it’s fun when people can actively participate in your marketing, and everybody likes a chance to win free stuff! But before you begin, it’s important to be aware that sweepstakes and contests entail a unique and somewhat stringent set of legal requirements and restrictions. Anyone who plans to run either type of promotion should make sure that it complies with federal and state regulations, as well as the terms and conditions of the social media platforms on which it will appear.

Lotteries, Sweepstakes, and Contests

The legal framework around sweepstakes and contests is based on a blanket prohibition on privately-operated lotteries. With the exception of certain not-for-profit organizations that may have state-issued waivers (i.e., schools, churches, etc.), only a governmental entity may run a lottery.

A lottery is a prize-based promotion that is defined by the presence of all three of the following elements:

· Consideration – the requirement that each participant provide the operator with either a monetary or non-monetary benefit in order to enter;

· Chance – randomness in the selection of a winner; and

· Prize – something of value that is given only to a winner.

A standard state-run lottery includes all three of these elements: each entrant pays a price for a lottery ticket (consideration), a winner is chosen at random (chance), and that winner receives the cash amount offered by the operator (prize). In order to avoid running an illegal lottery, a private party running a prize-based promotion must remove one of those three elements. Of course, removing the prize itself defeats the purpose of the promotion, and so the remaining options are to remove consideration or to remove chance.

A sweepstakes (or giveaway) is a prize-based promotion in which any winner is selected at random, and it is a legal alternative to a lottery because it removes the element of consideration. In terms of monetary consideration, this means that a sweepstakes operator cannot require participants to buy a ticket—or anything else—in order to enter. In terms of non-monetary consideration, although definitions vary from state to state, a very broad guideline is that a sweepstakes operator should not condition entry upon participants’ expenditure of any substantial time and/or effort (which may or may not be to the operator’s benefit or to the participants’ detriment), and that a sweepstakes operator should not require participants to refrain from doing anything that they otherwise would have the right to do.

You may have seen sweepstakes that seem to involve a purchase (or other consideration) as a means of entry. This is permitted only to the extent that the sweepstakes also offers an alternative method of entry that does not require a purchase. A sweepstakes operator who chooses to offer both purchase-related and non-purchase-related methods of entry must treat all entries as the same for purposes of winning odds and winner selection. And, it’s not sufficient to include a purchase-free alternative entry method if it’s not properly disclosed—companies have paid six-figure penalties for hiding their sweepstakes’ “free” entry methods deep in their terms and conditions!

A contest is a prize-based promotion in which any winner is selected based upon clearly delineated judgment criteria, and it is a legal alternative to a lottery because it removes the element of chance. This means that a contest operator cannot use random selection in any aspect of determining the contest’s winner. Participants in a contest must demonstrate some kind of effort, skill, or merit, and the contest operator may determine a winner only by evaluating those submissions using the judgment criteria set forth in the official rules.

Of course, accusations that a “contest” is really an illegal lottery are more prevalent where contests have subjective criteria (e.g., all participants must create and submit a video following contest rules, and “the best video wins”), where contests fail to demonstrate omission of random selection from every aspect of the winner selection process (e.g., a contest asks participants to submit the correct answer to a question, but fails to specify how a winner will be selected from multiple participants who all submit that correct answer), or even where contests have objective criteria that nonetheless fail to meet applicable legal thresholds for effort, skill, or merit (e.g., a contest asks participants to guess at things that cannot be known or forecasted purely by skill—like the number of marbles in a swimming pool, or the weather forecast for the next ten days). To the extent possible, anyone running a contest should eliminate circumstances like these to avoid any claims that the winner selection process involves chance.

Other Legal Restrictions

Unfortunately, basic rules about chance and consideration are not the only legal constraints that authorities have imposed upon sweepstakes and contests. Other regulations may apply, and these may vary widely from country to country and from state to state. U.S. jurisdictions, for example, may limit entry to persons 18 years of age or older (to reflect laws against advertising to minors), or they may curtail promotions involving age-restricted activities like buying alcohol or renting a car. Foreign countries, on the other hand, may require that promotions offered to their citizens satisfy language requirements, or that they remove technology-related barriers to entry. Moreover, there is a growing body of federal, state, and international law requiring operators to safeguard entrants’ personal information by implementing data protection measures and privacy policies—often with restrictions on resale of that data to third parties. To avoid any unintentional violations and associated penalties, you may wish to limit entry to your promotion to citizens or residents of jurisdictions whose governing rules are known to you.

Promotions on Social Media

If you’re presenting your sweepstakes or contest on social media, then you will need to be mindful not only of applicable laws and regulations, but also of any rules imposed upon your promotion by the platforms on which you’re running it. You might be surprised to find that seemingly benign (and otherwise legal) practices are banned by all platforms, or that they are allowed by some platforms but are prohibited by others. Asking entrants to “tag a friend,” for example, is currently permitted by Instagram and Twitter, but is not currently permitted by Facebook.

Conclusion

In light of the potential pitfalls that accompany operation of a sweepstakes or contest, anyone planning to run one should be sure to publish clear and unambiguous official rules and other terms at the outset of the promotion. (This is why the sweepstakes and contests you’ve seen on cereal boxes have so much fine print!) It’s also important not to change your official rules and other terms after the promotion period begins—doing so could expose you to significant penalties under false advertising laws or other consumer protection rules.

All this may make it seem like running a sweepstakes or contest involves an insurmountable number of compliance-related hurdles and is probably not worth the effort. But it need not be as hard as it sounds—the best approach is to retain a qualified attorney or other specialist who can work with you to implement documentation and processes that are tailored to your promotion and to the jurisdictions in which you are running it. If planned properly, a social media sweepstakes or contest can be a powerful marketing tool!

Please note that this article is for general informational purposes only, and that its contents should not be construed as legal advice. Greenleaf Book Group, LLC does not provide legal services to anyone. We recommend that you consult with your own counsel to the extent that you have any questions or concerns about your promotional activities or your use of any social media platforms.