How to Run Online Contests and Social Promotions without Getting in Legal Trouble

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Are you certain that your drawing for a free e-book or forum membership isn’t an illegal lottery? What about all those contest entry pins that contain copyrighted images? Are your contest entrants aware that they are actually endorsing your products by tweeting about them?

You can be sure that all these questions are certainly on the Federal Trade Commission’s mind. In fact, Section 5 of the FTC Act devotes considerable attention to social media contests and product/service endorsements as a condition of contest entry.

But it’s not only the FTC that should have you concerned. Contests, sweepstakes and other promotions and/or giveaways come with a whole bunch of legal rules and regulations. Here are some of the biggest:

Illegal lotteries

Lotteries are technically illegal unless otherwise approved (and regulated) by the state. What defines an actual lottery? Three conditions must be met:

  1. There is a cash or other prize.
  2. There is a chance of winning the prize.
  3. Winner consideration increases based on entrant payment or barter.

In other words, a classic lottery works by having contestants pay money or exchange something of value (like a social media post) in order to be considered for a chance to win a prize. This is also why many corporate or charity sweepstakes list the following disclaimer:

lottery rules

By knocking out one of three conditions of the classic lottery, this contest stops being an actual lottery and (more importantly) doesn’t break the law. Another way to skirt around the illegal lottery issue is to ensure that all contestants are winners, as this sales promotion notes:

sales promotion

Because all “contestants” here are, in effect, doing a “pay to play,” it’s imperative that all of them “win” the gift card.

Sneaky endorsements

It’s pretty obvious that when a celebrity touts the benefits of some weight loss program, she is probably being paid to endorse the product. However, not all endorsements are that obvious. When not properly disclosed, endorsements have a way of getting merchants in some unexpected trouble.

In the case of Cole Haan, it all started with the company’s social media promotion of its shoes via Pinterest and Twitter. In exchange for one entry to a sweepstakes awarding a $1,000 shopping spree, contestants were asked to pin five images from the company’s Pinterest board as well as “favorite places to wander” images. Contestants were to include the #WanderingSole hashtag in every pin. The most creative pin won the spree.

According to a warning letter sent by the FTC to Cole Haan, the sweepstakes created an incentive for contestants to endorse the company’s products without a full disclosure of the contest to other consumers. Thus, other Pinterest and Twitter users could wrongly assume that the pins were being placed by objective third parties when in fact the persons involved were actually receiving an incentive to endorse.

Fortunately, for Cole Haan, the FTC did not pursue the matter further because it had taken no official stance on whether a contest entry could be interpreted as a material connection that required disclosure.

However, because the FTC is likely to tighten its definitions, you are better off disclosing any actions required for a contest entry as a material connection. For example, this can be done by naming your Twitter hashtag or Pinterest board as #MyBlogSweepstakes or My Blog Sweepstakes, respectively, and having all contest entries go there. In essence, there must be some way for a third party viewer to easily determine that you are running a contest and the posts/tweets/pins are contest entries.

Copyright infringements

With everyone re-posting images and quoting content left and right, it would seem unlikely that you’d be hit with copyright infringement, right? Especially when it’s your contestants doing the possible infringing, not you.

Think again.

Copyright law is very real and, if infringed upon because of a promotion you’re running, likely to bite you too. Also, many fair and common use copyright exemptions only apply when the use is not for commercial purposes. So, it’s one thing if you take an re-use a Wikimedia Commons image on your self-published poetry blog. But if you take and use the same image on your affiliate product page, you could get into legal trouble.

Now, you might be extremely careful about not infringing on copyright law when posting to your own blog, social media sites, etc. However, how can you guarantee that your contestants take similar precautions?

In short, you can’t.

Fortunately, there are ways to work around this issue, such as by publishing your own personal content, for example. Another tactic that many businesses take is to have the contestants create their own personal content- check out the following current promotion by Culver’s:

culvers promotion

Be smart about online contests and promotions

You know that saying, “Ignorance of the law is no excuse”? Yeah, the same truth applies here as well. Being blissfully unaware that your online contest or other social promotion is inducing your viewers to break the law is not only going to get you in trouble, but your contestants as well. As the owner of the contest or promotion, you are inherently responsible for any illegal activity.

Therefore, brush up on FTC’s Section 5 and copyright laws. And avoid getting those embarrassing (and potentially expensive) warning letters.

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