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
wants to enter a giveaway without a prize?
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.
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:
alternative method of free participation.
area of the sweepstakes and/or who is eligible to participate in the
date and scheduled termination date of the sweepstakes.
name and address of the sponsor and promoter of the contest.
of prizes, the accurate description of each prize, the retail value of each
prize and the odds of winning each type of prize.
all prizes offered will be awarded and how the prizes will be awarded.
of selection of winners and when a determination of winners will be made.
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
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
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.