There's no doubt that promotional tactics are an effective way to
increase consumer awareness of, and interaction with, a brand's
products, with the ultimate goal of increasing sales. No promotion,
however, can be successful if you run into unforeseen legal
consequences. The following guidelines will help ensure neither
regulators nor consumers will take issue with your next promotion:
Avoid Unintended Sweepstakes
Promotions
like “Fast 50” and “First to Respond” are considered sweepstakes,
generally requiring a comprehensive set of rules, specific disclosures
and registration in certain states. If you want to avoid a sweepstakes
and the issues involved with it, create a premium program, and ensure
that you have a sufficient quantity of items on hand to meet
anticipated demand.
Skill Contests Must Be Based on Skill
If
you're running a skill contest, different rules apply. It is critical
that the type of skill is known to participants, that they have the
opportunity to exercise their skill and that the determination of the
winner be based predominantly on skill. Promotions that involve
choosing a winner based on the sponsor's discretion or solely through
audience voting are not skill based.
Remove Consideration
An
illegal lottery consists of all three elements of prize, chance and
consideration. For a chance-based promotion to be legal, therefore,
consideration must be eliminated. This can be as simple as implementing
a no-cost alternate method of entry with equal dignity to the purchase
method.
Wireless Promotions Have Special Issues
There
will always be some cost to a consumer for engaging in a text message
promotion. Whether the relatively nominal cost of sending and receiving
regular text messages, or the larger costs associated with premium text
messaging, any promotion involving the use of a wireless device as the
primary entry mechanism must have an alternative method of entry to
avoid violating the lottery laws.
Beware of Consumer-Created Content
Lately
hailed as the holy grail of promotion tactics, consumer-created content
has its own issues. First, you may not be able to control what
consumers do with or say about your products. Implement a screening
process before posting content. Second, you have no control over the
integrity of submissions, and you have no idea whether or not the
content is original to the consumer. Content taken from third parties
could lead to unavoidable copyright infringement lawsuits.
Draft a Set of Rules
Official
rules have long been upheld as an enforceable contract between the
sponsor and entrants, helping to stave off potential legal problems.
Stick to the Rules
Once
you've drafted a set of rules, stick to them. Changing rules in a
material way while the promotion is running can lead to significant
issues with regulators and consumers.
Train your Employees
No
promotion is safe from regulatory scrutiny if employees are not
familiar with how to implement it. Both CVS and A&P found this out
the hard way when the New York State Attorney General took action
against both of them for failure to post rules in-store and to permit
consumers to enter without making a purchase. Train your store managers
and employees how to post rules, make rules available for those who ask
and permit entry without a purchase.
Avoid Negative Publicity
While
the publicity usually comes after a winner is chosen, avoiding it can
be taken care of in the planning stages. Much of the recent negative
publicity has involved unintended consequences to the winners. For
example, an inability to pay sales tax on the prize, or announcing a
winner before eligibility requirements are confirmed.
Deal with Potential Winners Appropriately
Picking
the winner and awarding the prize should be the easy part, but this is
where most promotions go wrong. Ensure you have appropriate mechanisms
in place to confirm that winner's notices only go to the winners. A
common problem is telling people that they have won when they haven't.
Don't tell someone that they have won until after you are sure that
they meet the eligibility requirements and have complied with the rules.
Joseph Lewczak is a partner in the advertising, marketing, and promotions department of New York-based Davis & Gilbert LLP.
