Social media sweepstakes and contests appeal to consumers’ sense of fun, drive to compete, and impulses to share their experiences. Brands love them because they are inexpensive to implement since brand influencers, loyalists, and evangelists doing the lion’s share of the publicity work.
Some prize promotions have a low level of consumer engagement (e.g. “like” us on Facebook for a chance to win), focusing on spreading awareness of the brand. If a brand wants to deepen the connection with its followers, it may launch a promotion that requires a few steps to enter, such as Twitter trivia contests or favorite photo contests.
In their most complex form, social media prize promotions mix consumers’ social presence with real world experiences. Games like scavenger hunts or Vine video contests ask consumers to merge their lives with the brand’s marketing message. Regardless of the level of consumer engagement, certain common legal mistakes can expose a brand to regulatory scrutiny and lawsuits.
Mistake #1: Running an illegal lottery. Marketers often solicit user-generated content from consumers and select the best entry as a winner. Public popularity may be a driving force in winner selection. Yet, public judging may also introduce chance into the game, converting it from a legal skill contest into an illegal lottery.
In addition, in some random draw games, brands do not structure a clear alternate method of entry, rendering these sweepstakes illegal. In still other cases, sponsors have not clarified if they are running a sweepstakes or skill contest, and they inadvertently ignore registration and bonding requirements in certain states. While consumers delight in the instant rewards of social media games, they are complaining more to regulators about deceptive or illegal games. Indeed, the category of “Prizes, Sweepstakes and Lotteries” ranked fifth on the FTC’s complaint list in 2012. Regulators are paying attention to these games.
- Action Step: The most important step a brand can take is to ensure its games’ legality. The structure of social media games often defies neat classification as a sweepstakes or contest. The marketing team should consult with legal counsel at the concept stage to ensure the structure of the game is, in fact, legal.
Mistake #2: Forgetting the Rules. Rules protect the sponsor in the event something goes wrong in the promotion (e.g. a virus infects the entry platform, yielding multiple winners or contestant submits off-color entry that the sponsor wants to reject). Unfortunately, too many marketers act casually in this area. They may copy other rules they see on social media without doing their own legal vetting.
They may improperly trust their administrative agency to draft the rules, or they may post inconsistent rules on different platforms. By failing to draft one set of comprehensive rules, brands invite ambiguity into their promotions and increase their legal risk. In addition, because of limited text space on social media, game sponsors often make incomplete disclosure of the rules. The FTC’s newly updated DotCom Disclosure guidelines require all material terms of an offer “unavoidable” and clearly and conspicuously disclosed. (For more discussion of these guidelines and their implications for digital advertising, click here.) We will start to see the FTC enforcing its new guidelines in the coming months.
- Action Step: Draft rules under the guidance of legal counsel and discuss how to disseminate those rules in space-constrained venues.
Mistake #3: Trading “likes” or “tweets” for sweepstakes entries. The FTC has made it clear that offering sweepstakes entries in exchange for mentions in social media creates a material connection between the promotion sponsor and the consumer. The onus falls on the brand, and to some extent its agencies, to ensure that consumer’s testimonials disclose that such a material connection exists. Otherwise, the brand may find the FTC investigating it for violating its 2009 Endorsement and Testimonial Guidelines. This risk is particularly prevalent with low engagement prize promotions. (Click here for case studies and legal analysis of these FTC guidelines.)
- Action Step: Confirm with legal counsel if disclosures are necessary. Provide concrete, easy, and mandatory steps to ensure entrants disclose their material connections to the sponsor when entering a sweepstakes.
Mistake #4: Choosing winners without background checks. In the age of social media, bad publicity spreads quickly. Companies should remember that the winners they choose reflect on their brand’s reputations. Brands typically would not want to publicize an association with a criminal or a political extremist. Accordingly, they should draft rules that permit, at the sponsor’s sole option, background checks for potential winners of high-end prizes. Then, they should conduct these checks for any potential winners of prizes that might generate publicity. In addition, sweepstakes and contest sponsors should not confuse employment background checks with prize promotion background checks. The latter are much more comprehensive and require a qualified private investigator’s assistance.
- Action Step: Draft sweepstakes and contest rules to provide an option for background checks. Legal counsel can provide appropriate language. Review the process with a qualified private investigator so the background check can be built into the timetable for awarding prizes that will generate media attention.
Mistake #5: Ignoring intellectual property and other third party rights. Marketers hoping to engage consumers by taking advantage of trends often turn to newly popular social media sites like Vine. At the same time, they do not stop to consider how these new formats may create legal exposure for them from existing laws. When running a photo or video contest, for example, regardless of the platform, the brand should remember to obtain releases prior to posting not only from the photographer/videographer but also from every individual in the photograph/video. Failing to do so may expose the brand to claims of violation of rights of privacy or publicity, copyright infringement, or other legal causes of action.
- Action Step: Before a brand launches its first promotion on a new social media site, it should consult with legal counsel to determine how that site creates exposure for possible third party legal claims.
Mistake #6: Ignoring global risk. With increased globalization of marketing and social media blurring boundaries, more social media sweepstakes and contests are multinational. At the same time, brands frequently ignore the crucial step of clearing the games in their target international venues. Just north of the United States, in Canada, the laws regulating sweepstakes and contests require sponsors to choose winners differently. Rules need to be drafted and publicized with different mechanisms. So, too, each country in Europe, Asia, or South America may have different laws governing these games.
- Action Step: While a complete international vetting program is undeniably expensive, brands would be well advised to clear their promotions in their target markets and limit entry eligibility to those venues.
Mistake #7: Attaching to a cause. After most natural or man-made disasters, cause marketing inevitably increases. Brands may have a genuine desire to help or they may attach themselves to a cause in an effort to drive brand awareness and sales. Regardless of the motive, they should be aware that regulators are watching. In the wake of Hurricane Sandy, New York’s Attorney General announced its best practices for transparent cause marketing. After the Boston Marathon bombings or the recent Oklahoma tornadoes, the FTC tweeted that consumers should beware charity scams. Even if the prize promotion is lawful, a regulator may notice another legal error because cause marketing attracts regulators’ attention.
- Action Step: Before engaging in cause marketing, a brand should inquire of its legal counsel what regulations might affect the structure, implementation, and marketing of its promotions.
Mistake #8: Forgetting to clear trade promotions. Sweepstakes and contests that are open to the trade or within an organization may not be subject to state registration and bonding requirements, but they must still be lawful. In addition, social media may bring them into the public eye, especially when something goes wrong. Consider the Taco Bell photo contest and the employee who posted to his personal page a photo of him licking a batch of taco shells. Social media users quickly decried Taco Bell, concerned about its employees’ food handling practices.
- Action Step: Consider whether aspects of a trade promotion may inadvertently slip into the public eye and ensure that the brand has adequate legal protection in the contest rules and its employee manuals to manage the fallout.
While social media creates simple and fast tools for creative communication, it also enhances the likelihood of errors going viral, multiplying risk and exposure for brands who have not undergone a thorough legal vetting process. While a social media sweepstakes or contest may be a small line item in the marketing budget, its associated costs can skyrocket if a mistake results in legal accountability.
Copyright Kyle-Beth Hilfer, P.C. 2013
DISCLOSURE: This article does not constitute legal advice. If you have specific questions about a sweepstakes, contest, or other consumer offer in social media, please contact this post’s author or another attorney.