(Promo)

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:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

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:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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 Davis & Gilbert LLP, New York, NY. He can be reached at 212-468-4909.