Anyone with a teenager at home knows that the U.S. is quickly becoming as text-obsessed as Europe and Asia, increasingly depending on these brief snippets of dialog for daily communication. And as a promotional tool, texting is getting hotter by the day. Entertainment studios, electronics companies, packaged goods manufacturers, QSRs…brands across the spectrum are launching programs that let consumers participate in live voting, trivia games and sweepstakes.
Why all the buzz via cell phones? Because the results are often stupendous. A recent Alltel sweepstakes, which featured a $1 million prize and additional entries each time a text, picture, video or instant message was sent, garnered a whopping 71 million wireless entries in a matter of weeks. The portability and near ubiquity of wireless devices make them an ideal tool for promotions on the run and consumers on the go, often to concerts, sports venues and bars.
As with any new promotional tactic, there is a learning curve for the best practices of how an offer is disseminated. The popularity of text messaging certainly does not minimize the legal risk, and the same regulations apply to wireless sweepstakes and contests as do to traditional promotions. So, what issues do you need to keep in mind when structuring a wireless sweepstakes?
‘No purchase necessary’ still rules
Promotion veterans know the mantra of the Standard Lottery Rule — if you have all three elements of prize, chance and consideration, you have an illegal lottery. By simply removing the element of consideration you can create a valid and legal chance-based consumer promotion. “No purchase necessary” is the phrase we live by for sweepstakes promotions, and the concept is no different in the wireless world, which has a couple of “consideration” issues of which to be wary.
Don’t assume that because the cost of a text message is less than the cost of a postage stamp that requiring entry via text message is permissible without an alternate means of entry. The cost of an individual text message is now somewhere in the neighborhood between 5 cents and 10 cents (although it can be higher, and consumers often pay a monthly fee for a bundle of text messages), while the cost of a First-Class postage stamp is 39 cents. Permitting consumers to enter a sweeps using a method cheaper than mail should be compliant with the law.
Consider this: to enter using a wireless device, a consumer must purchase the device and sign up for a service plan, both of which have a substantial cost. A regulator will likely take that into consideration in evaluating whether or not a text message method of entry, without a valid free method of entry, is legal. Consider also, that we know the cost of a First Class postage stamp is not viewed to be “valuable consideration” under applicable state laws, but we have no similar guidance for text messages. Therefore, until we receive clear direction from the states on this issue, you should always include an alternate means of entry via regular mail or e-mail for all of your wireless promotions.
Align premium text messages with free-entry
Premium text-message promotions are gaining ground, but present a new wrinkle. Charging a premium to enter a sweeps seems like a great idea for both sponsor and wireless carrier, since the incremental revenue above the cost of a normal text message can be split and is usually pure profit.
But…under the Standard Lottery Rule you cannot charge someone to enter a sweepstakes, so most sponsors also offer some free form of entry, usually by mail. However, if the entrant receives nothing of value for that premium message, other than the sweepstakes entry, there is still a potential violation of the Standard Lottery Rule. Indeed, regulators have taken action against sweepstakes sponsors where the item that had to be purchased in order to automatically enter had little or no real value, even though there was a no purchase alternate method of entry.
It is therefore imperative to ensure that those consumers entering a sweepstakes using premium text messaging receive something of value comparable to the premium charge they are paying.
You can charge fees to bid at auction, but…
Reverse auctions are an offset of the premium text message issue. Popular in Europe, these are a type of fee-based auction in which participants pay an entry fee and the item is awarded to the winner who has the lowest unique bid at the close of the auction. With wireless devices, bids are typically accomplished using a premium text message.
In the U.S., reverse auctions are an illegal lottery since all three elements of prize (the item), chance (the randomness of being the lowest unique bid), and consideration (the fee) are present. Some U.S. companies that use reverse auctions comply with the law by permitting entrants to bid without paying the fee. This is okay, with the caveat that, as with any premium text-message sweeps, those entering using a premium text message receive something of value comparable to the cost of the premium message.
Official rules are your best wireless accessory
Don’t forget that consumers must have the ability to review the official rules of a sweepstakes or contest prior to entering. Most wireless text message promotions being held today are heavily marketed in traditional media and on the Internet, giving sponsors ample opportunity to disclose the abbreviated and official rules of a promotion to all consumers who want to view them.
Promotions conducted solely on wireless devices or in venues, provide a unique challenge. The mere fact that there is limited space or time to display rules is not a defense to the requirement that consumers be able to review them. Accordingly, for these types of promotions, sponsors will still need to find a way to get the rules in consumer’s hands, either by providing access through the wireless device or at a location that is easily and conveniently accessible, given the nature and location of the promotion.
Send yourself a SPAM alert
Finally, the CAN SPAM Act and the Telephone Consumer Protection Act (TCPA) can impact your wireless promotion. While the FCC’s rules for wireless e-mails under CAN SPAM do not generally apply to SMS messages, such rules do apply to text messages sent to any name included on the FCC’s wireless domain names list. The list is available at FCC.gov; it includes domain names such as bellsouthwirelessemail.com and messaging.sprintpcs.com.
The rules also apply to messages sent using Internet-to-phone SMS technology when they include an Internet reference in the address to which the message is sent or delivered, whether or not the reference to the Internet domain is displayed.
Under the FCC’s rules, for applicable messages, a person cannot send a commercial e-mail to a wireless device without the “express prior authorization” of the addressee, which must include specific disclosures and otherwise meet certain defined parameters.
The TCPA, on the other hand, prohibits using automatic dialing and/or announcing devices (including predictive dialers) or artificial or prerecorded messages to make calls to any wireless device where the called party must pay for the charge, unless the telemarketer has received prior, “express consent” from the called party. The FCC has specifically stated that this prohibition encompasses text calls, including all SMS text messaging calls, to wireless phone numbers. While there is no definition of “prior express consent” under the TCPA, the FCC has indicated that there will not be a violation of the rule if a text message is sent to an address of a wireless device that was provided as one at which the party receiving the message wished to be reached.
However, if a wireless number or address is captured by a Caller ID or an ANI device without notice to the subscriber, the subscriber would not be considered to have given an invitation or permission for such messages.
For most wireless promotions involving SMS messages, neither the CAN SPAM Act nor the TCPA should be an issue. The CAN SPAM Act simply does not apply, and under the TCPA there is a strong argument that by entering a sweepstakes using a wireless device, a consumer is providing his or her wireless address as the preferred contact point, since there is no other method of reaching them. However, a promotion sending text messages to an Internet domain on the FCC’s list will need to comply with the CAN SPAM Act if such message includes commercial content. To avoid having to comply, simply limit your messages to those that are necessary for the promotion; don’t include any further marketing messages; and finally, your message should fall under the transactional or relationship message exemption under the act.
Whether you are contemplating a wireless promotion or midway through, don’t hesitate to move forward. You are now equipped with a basic understanding of the regulations that apply, enforcement trends and, most important, risk-avoidance guidelines. Take them — or you act at your own risk.
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.
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