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Social Media Promotions and the Law - 10/25/2011 -

Are you thinking of using social media contests? Do you understand how the law could impact your activities?

By Sara Hawkins

What could be so hard about telling people you’ll give away something if they sign up for your newsletter or leave a comment or like your page or follow you on social media? The fact is, sponsoring or hosting a giveaway comes with rules and regulations that many don’t know or understand.

The Three Types of Giveaways

There are three types of promotions used to give things away: sweepstakes, contests, and lotteries. While they often go by many different names (giveaway, raffle, drawing), legally all promotions fit into one of these three categories.

There are three things the law looks at to determine if your promotion may be an illegal lottery.

1. Prize—who wants to enter a giveaway without a prize?

2. Chance—pure luck! You could get around this by having some skill or voting requirement, but that is often difficult to manage or greatly limits the number of people who will enter. If you want to run a contest, you must omit this aspect.

3. Consideration—something of value given by entrants to the giveaway sponsor. Often it’s money, but it doesn’t have to be. Depending on what you require entrants to do, you could be pushing the envelope on this element. Each state may have its own particular definition, making it very difficult to manage.

When it comes to the online space, there are few things more valuable than followers/likers/ friends (or whatever they’re called at the moment). As such, requiring someone to "like” you or "follow” you could be construed as "consideration”. Even more important, asking an entrant to go to a third-party site, navigate to find a product or service, and then report back to your site is even more likely to be deemed consideration, placing your giveaway into the classification of illegal lottery.

Because technology is moving much faster than the laws that govern, we’re in uncharted territory. Keep that in mind when figuring out what you’ll have people do for entry. Your best bet is to always have a means of "free” entry and then consider "optional entries.”

Why Official Rules are So Important

Every sweepstakes, contest, or lottery must have "official rules,” and they should be easy to find. While the majority of people will never read the official rules, without them the sponsor greatly increases the risk of liability.

Place a link to the rules where it's easy to find. Having a link to the rules in an easy to find and conspicuous place not only helps people find them, it also encourages people to read them. Official rules must always include:

· "No purchase necessary.”

· The alternative method of free participation.

· Geographic area of the sweepstakes and/or who is eligible to participate in the sweepstakes.

· Opening date and scheduled termination date of the sweepstakes.

· Complete name and address of the sponsor and promoter of the contest.

· Number of prizes, the accurate description of each prize, the retail value of each prize and the odds of winning each type of prize.

· Whether all prizes offered will be awarded and how the prizes will be awarded.

· Manner of selection of winners and when a determination of winners will be made.

· Where and when a list of winners can be obtained.

Of course, there are other disclosures that should be made such as signing of releases, restrictions, and misdirected entries. But if you hit the minimum, there is some compliance and protection. One other aspect of the official rules is that once they are posted and published, they must be followed exactly.

Giving Away Expensive Things

Most giveaways have pretty minimal value—an eBook, $25 for an online store, a free product. But if the value of your prize is $600 or more, keep in mind that you will need to take an extra step (possibly several).

If the prize winner is subject to U.S. taxes, a Form 1099 will be required in January of the following year. This means you will need to collect not only the name and address of the winner, but also his/her social security number. That’s even more reason to maintain a high level of professionalism because asking people for this type of information carries with it great responsibility.

Hosting giveaways can help grow your association and its social media following. However, it’s not as simple as it sounds. To protect your organization, make sure to define what you’re doing and follow the legalities.

Sara Hawkins is a lawyer and blogger at http://www.savingforsomeday.com/blog-law/. Look for a more detailed article from Sara Hawkins on the legal ramifications of social media contests in an upcoming issue of Signature magazine.


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