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29 Franchise L.J. 3 (2009-2010)
Playing the Game by the Rules: A Practical Guide to Sweepstakes and Contest Promotion

handle is hein.journals/fchlj29 and id is 3 raw text is: Playing the Game by the Rules: A Practical Guide to Sweepstakes and Contest Promotions TYWANDA H. LORD AND LAURA C. MILLER ontests and sweepstakes are popular promotional tech- niques used widely in franchising. If handled correctly, they can be effective tools to generate consumer inter- est, revenue, and brand awareness. If handled improperly, how- ever, they can have expensive and embarrassing repercussions, ranging from negative publicity to civil and criminal liability. This article provides an overview of key legal issues to consider when structuring, conducting, and advertising such promotions, as well as practical advice for complying with applicable state and federal laws and regulations. STRUCTURING PROMOTIONS- STATE LOTTERY LAWS Lottery is generally defined as any game in which the elements of prize, chance, and consideration are present.1 Most states reserve the right to conduct lotteries and penalize nongovern- mental entities for conducting games that feature all three ele- ments of a lottery.2 By eliminating any one element, i.e., prize or chance or consideration, a franchise system can legally spon- sor a promotional game without violating state lottery laws. A prize can be anything of value awarded to the winner of a game.3 Money, trips, cars, event tickets, and electronics are typical prizes awarded. Because it is the prize that entices consumers to participate in promotional games, eliminating the element of prize is not a good option for those seeking to avoid state lottery laws. Either chance or consideration is typi- cally eliminated, depending on the preference of the sponsor, because this can be done without compromising the allure or success of the game. Games of Chance A game of chance is one in which the sponsor gives away a prize to a winner who is chosen by a random event outside the winner's control.4 Games of chance take many forms, including sweepstakes and instant-win games. Because games of chance necessarily include the elements of prize and chance, the spon- sor must ensure that participants are not required to provide consideration to participate. Thus, the sponsor must be able to identify those activities that constitute consideration and must offer participants a free alternative method of entry (AMOE) when consideration is present. Tywanda H. Lord is a partner with Kilpatrick Stockton LLP and practices in Atlanta. Laura C. Miller is an associate in the firm 's Winston-Salem office. Their practices concentrate on litigation, prosecution, and counseling related to advertising, trademarks, and unfair competition. Identifying and Eliminating Consideration Consideration is present when the sweepstakes participant gives the sweepstakes sponsor money or something of value and receives an opportunity to play the game.' Con- sideration is most certainly present when the purchase of a product or service is required for entry in the sweepstakes. Not all consideration Tywarda H. Lrd involves the payment of money or the purchase of a product or ser- vice; consideration may also be found in nonmonetary methods of entry if a substantial degree of effort by the participant is required. When a prospective contestant must complete lengthy surveys, make multiple trips to a store loca- tion, refer a friend, or otherwise devote a substantial amount of time in order to participate in a sweep- stakes, consideration likely is pres- Laura C. Miller ent.6 On the other hand, activities requiring minimal effort, such as listening to the radio, watching a television program, or visiting a single store on one occasion, without being required to make a purchase or pay a fee, likely are not consideration.' If consideration is involved in the sweepstakes, there must be a free AMOE. As the name suggests, a free AMOE allows participants to enter a sweepstakes without purchasing a prod- uct, paying money, devoting a substantial amount of time and effort, or otherwise giving anything to the sweepstakes spon- sor in exchange for the opportunity to participate. Frequently used free AMOEs include submitting an entry form by mail or obtaining an entry form by calling the sponsor.8 On its face, offering a free AMOE to eliminate the element of consideration from a sweepstakes seems fairly simple, but sweepstakes sponsors often fail to appreciate the full range of circumstances that can constitute consideration. Moreover, the advent of new technologies used to enter sweepstakes can add to the difficulty of identifying consideration. For example, com- pleting and submitting an entry form online is now a commonly used and widely recognized free AMOE. At one time, however, the State of Florida took the position that entering a game via the Internet constituted consideration because of the cost asso- ciated with subscribing to an Internet service provider.9 Florida has since changed its position, acknowledging that Internet Summer 2009 U Franchise Law Journal 3

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