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Sweepstakes and Promotions During a Pandemic

In the context of the coronavirus pandemic, many companies have turned to online sweepstakes and promotions as a means of both promoting their brand and showing support to coronavirus relief efforts. Certainly, sweepstakes and promotions can be an effective way to achieve these dual purposes.   As we previously reported, brands that have hastily run promotions without thinking through the consequences of various events have run into a firestorm of negative publicity as well as potential class actions.  Making sure that the promotion incorporates the items below can help ensure that a promotion is legal, properly structured, and contains appropriate protections for the brand.

i. Official Rules

        All sweepstakes, promotions, and contests must have a set of properly structured official rules. The official rules should establish the terms and conditions of the promotion, including who is eligible to participate, the start and end dates, how to participate, how winners will be selected, what the prize is, how many prizes are available, and the odds of winning. If the promotion is taking the form of a contest, the rules should also include the specific judging criteria by which entries will be assessed.

We also recommend using the official rules to address potential things that could go wrong.  For example, in addition to the material terms, the official rules should also include a release of the company against any claim associated with the promotion, a limitation of liability provision stating that the company is not responsible for when the promotion cannot run as planned, the right to cancel, suspend, or modify the promotion in the event that it cannot run as planned, and the right to substitute the prize for another prize of equal or greater value if the publicized prize is not available. During these uncertain times, a complete set of official rules will work to troubleshoot potential issues that may arise. In addition, it is important to include abbreviated rules on any promotional advertising. These abbreviated rules should include the material terms of the promotion and a link to the full official rules.

ii. Force Majeure Provisions

         When launching a promotion in the COVID era, companies should take into account the fact that governmental restrictions may greatly impact entry and potential prizes. For example, instore-related promotions or those that require interaction with other people will be a challenge for the foreseeable future. The same considerations apply to prizing. Companies running promotions during this time need to consider what will happen if a prize cannot be awarded. For example, if the prize is an overseas trip, the official rules could allow for cash alternative in the event that such a trip is not possible. A properly structured set of official rules should account for these potential issues.

iii. Privacy Considerations

        There are certain aspects of privacy compliance that may be relevant in the online sweepstakes and promotion context. For example, the California Consumer Privacy Act (“CCPA”) requires compliance for companies collecting data from over 50,000 California residents. The collection of personal data from this number of California residents may be an unintentional consequence of a hugely successful, viral sweepstakes. If this were to happen, a previously excepted company would need to take prompt steps to come into compliance with the CCPA. Further, companies should ensure that they have a robust and accurate privacy policy in place, particularly prior to engaging in a sweepstakes or contest where they will be collecting personal information from participants. It is important for companies to be clear on how they are going to use and store this information.

iv. FTC Disclosures

        The FTC Endorsement Guides state that material connections between a brand and an endorser must be disclosed. This disclosure requirement is applicable in the context of an online contest. For example, when a participant is required to post a tweet or Instagram comment as part of obtaining an entry in a promotion, the fact that they are doing so as part of a promotion needs to be disclosed. A common way of doing so is requiring entrants to include a disclosure hashtag in their post, like #Contest or #Sweepstakes.

v. State Registration and Bonding Requirements

         An additional potential concern with sweepstakes promotions is the requirement to register and bond in certain jurisdictions.  Florida and New York both require chance-based consumer promotions with a total prize value of $5,000 or more to be registered and bonded. In Florida, the sponsor must register the sweepstakes and post the bond at least seven (7) days before the start of the sweepstakes, and must file a winner’s list within 60 days of the date that winners have been determined. In New York, the sponsor must register the sweepstakes and post the bond at least 30 days before the start of the promotion, and must file a winner’s list within 90 days of the promotion’s conclusion. Rhode Island requires registration of promotion offered by retail establishments with a total prize value over $500.  Florida, in particular, continues to vigilantly enforce the timely registration and filing requirements. 

Conclusion

        Brands promoting sweepstakes and contests, particularly during the pandemic, need to take into account the fact that so many things can be beyond their control. Before launching any promotional marketing campaign, it is critical to construct a robust set of rules that will outline how the promotion will run, how data will be handled, what happens if the promotion cannot operate as planned, and establish a dispute resolution process to account for any potential issues that cannot be resolved quickly.

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