Contests. Sweepstakes. Prizes. Liability? Oh my!

by Susan Getgood on October 3, 2007 · 7 comments

in Business Management,Marketing,Social media

Contests on blogs. Everybody loves them. The blogger loves them because they often bring new readers. Readers love them because they might get free stuff and a mention on a popular blog. Companies who donate prizes love them because their products are mentioned on the blogs.

It’s a win for everyone.

Except, what if someone has an issue with the contest? What’s the liability of the blogger if someone complains about how the contest was run? It seems so odd to ask this question, given the overwhelmingly positive spirit of most contests on blogs.

I’ve done a contest with some friends through my personal blog Snapshot Chronicles, and it was nothing but fun – for me, for my friends and for the people who entered.

Then again, the prizes, while cool, weren’t of excessively high value. Camera cases, photo frames, pens and ball caps [thank you again Photojojo and HP], not trips to Europe and TVs. This is generally the case with most blog contests; the prizes are desirable but nothing to sue over.

Well, maybe not. Remember, there are folks who enter contests as a revenue stream, not just as a fun activity. For them, it is serious business. And the value of the prizes continues to rise.

What happens if someone decides it wasn’t fair, and decides to raise a stink? What is the liability of the blogger? How can she protect herself? Does the company donating the prize have any liability?

Companies who run contests, large and small, spend a lot of time and money reviewing terms and conditions. Bloggers cannot do the same, but my blogging colleague David Wescott and I decided to do a little research and offer some guidance.

I spoke with Donna DeClemente, a marketer who specializes in helping companies with contest promotions, and David spoke with Stephanie Himel-Nelson, who blogs at Lawyer Mama among other places. Read on for my post and go to David’s blog It’s Not A Lecture for his post.

My interest was both professional and personal. Let’s cover the professional first. If you have a product that is relevant and exciting for the blogger, and you can give him something to give away on his blog, do it! Makes everybody happy, and I love making everybody happy. I recommend this to clients that have appropriate products, and am in the middle of such a project right now – more soon – which is one of the reasons I started thinking about this issue.

Personally. While I do not do contests on this blog, I have done one on Snapshot Chronicles, and absolutely intend to do more. And I like my house, so I’d prefer to keep it. Do I have any liability when I run a contest?

Let’s hear from an expert. I met Donna DeClemente, who blogs at Donna’s Promo Talk, at BlogHer. She attends the promotional marketing law conference sponsored by the Promotional Marketing Association every year to stay up to speed with the regulations, and helps companies and bloggers like my friend Yvonne DiVita create contests and draft Official Rules.

I asked her about the different types of contests.

Donna: A sweepstakes is a random drawing that anyone who meets the eligibility requirements as written in the “Official Rules” may enter. Contests are different from sweepstakes. They are not just games of chance. The winner of a contest must provide a degree of individual skill or uniqueness. A contest also takes more work since all entries must be judged and/or evaluated. A raffle is a type of lottery in which prizes are awarded to people who pay for a chance to win. They are strictly to be used only as a fundraising tool by a non-profit organization. The rules vary greatly from state to state and should be reviewed carefully. A qualifying organization usually must complete an application. Raffles also are not allowed to be conducted or advertised over the Internet. (See David’s interview with Lawyer Mama for more on lotteries-SG)

Give me some general guidelines for holding a contest or random drawing.

Donna: The sponsor of a contest or sweepstakes, whether a company or an individual, assumes full responsibility for the contest. It is very important that a set of “Official Rules” be drafted and everyone who is eligible to enter have access to the rules. Once you have a set of Official Rules, you must follow these rules and not change them during the course of the contest. If you stick by them, then you should be clear of any liability if someone claims fraud or misrepresentation. For example, see the Lipsticking.com sweepstakes.

The key elements that must be included in the rules include the official sponsor, eligibility requirements, the start and end date and time of the promotion, description of the prize(s) and their value, and how to enter. (For example, as Lawyer Mama found when she dug into the issue, some states have very strict disclosure and eligibility requirements and you either have to meet them, or exclude residents of those states from your sweepstakes or contest. Explains why sometimes you see a national contest with various state exclusions or differing terms for different states – SG)

What about the company donating the prizes? Does it have any liability?

Donna: If a company is donating a prize(s) for the promotion and is not the sponsor, than they are not liable. However, it is up to them to provide a detailed description of the prize and the true ARV (average retail value). For anyone that receives a prize worth $600 or more, you must create a 1099 and the winner is liable for taxes.

Should a blogger seek legal advice about her sweepstakes or drawing?

Donna: If you are worried about the potential consequences or your program is really complex or unique, you should absolutely seek advice. But you really need to make sure that any lawyer you retain is up to speed on promotional law, and most small business and personal lawyers are not. They can do the research, but you are probably better off consulting a specialist. I’d recommend that people start by consulting a promotional specialist like me, because we can also help with other aspects of the sweepstakes like fulfillment and contest structure. Typically, I can handle most issues that come up, but if we do need a lawyer, I work with two expert promotional lawyers on a regular basis.

Check out Donna’s blog and Web site for more information on running a contest on your blog or Web site. And if you have any doubts or questions about a contest you’d like to conduct on your blog, especially if you have a very high value prize, get advice. A specialist like Donna can help, but at the end of the day, if you are doing something very unique, it is probably worth the call to a lawyer. The legal fee pales in comparison to the nuisance of a lawsuit if you have to deal with, in the words of Fake Steve, a “frigtard.”

Some additional resources, courtesy of Lawyer Mama:
http://www.wcsr.com/default.asp?id=534&objId=31
http://promomagazine.com/legal/marketing_staking_states/
http://www.gambling-law-us.com/State-Laws/California/
http://www.ct.gov/AG/cwp/view.asp?A=1772&Q=282452
http://www.dwt.com/practc/advertising/bulletins/09-05_FloridaSweepstakes.htm
http://findarticles.com/p/articles/mi_qa3629/is_199408/ai_n8713060

SUSAN IS NOT A LAWYER
This information is meant to bring awareness to the topic and is not intended to be used as legal advice. If you have questions about any of the information above or related matters, please contact an attorney licensed in your state.(Thanks, Lawyer Mama, for the disclaimer language)

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1 LawyerMama October 3, 2007 at 12:22 pm

Susan – Thanks so much to you & David for reaching out to bloggers on this topic. I know we all tend to forget that the blogosphere is “real” in many respects. Thanks for the opportunity to inform people too!

2 Average Jane October 3, 2007 at 12:50 pm

This is quite timely for me because I have a giveaway on my blog today for the first time ever. I’ll definitely bookmark this post for future reference.

3 David Wescott October 3, 2007 at 3:01 pm

Susan, you’re a real rockstar. Thanks for thinking of this and including me.

4 Donna DeClemente October 3, 2007 at 9:24 pm

Susan, thanks for creating such a thorough post on this subject. You did a great job and I’m proud to be included as “your expert”. If your readers have any questions I encourage them to contact me at anytime and just let me know they came from Marketing Roadmaps. I’m glad to help.

5 Meg H. October 4, 2007 at 12:33 am

Informative stuff! Thank you!

6 crunchy domestic goddess October 6, 2007 at 9:51 pm

wow – i never would’ve thought about this. thanks for all of the information. it’s especially relevant since i’ve started doing more contests as of late.

amy

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