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Sweepstakes and Contests: Drafting Rules

and Procedures to Avoid Liability and LossStatutory and Regulatory Compliance; Litigation

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TUESDAY, DECEMBER 3, 2019

Presenting a live 90-minute webinar with interactive Q&A

Barry M. Benjamin, Partner, Kilpatrick Townsend & Stockton, New York

Brandon J. Huffman, Founder, Odin Law & Media, Raleigh, N.C.

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Sweepstakes and Contests: Drafting Rules and Procedures to Avoid Liability and Loss

2019 Strafford Webinars

Kilpatrick Townsend

Barry M. Benjamin

[email protected]

Odin Law & Media

Brandon J. Huffman

[email protected]

▪ Games of chance → Gambling, Lotteries

▪ Gambling / Lotteries are State law based regulations.

Feds generally hands off, but do regulate the marketplace.

▪ Only States can:

Run legally authorized lotteries

Permit / regulate gambling

Via the state constitution which prohibits the sin of gambling

▪ States also regulate consumer games of chance via prize and gift disclosure statutes / regulations.

▪ Most of what we do is try to bottom line a crazy quilt of Federal and 50 state laws and regulations

7

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▪ Sweepstakes – a game of chance, random draw, prizes awarded via random chance

▪ Skill Contest – prizes awarded via evaluated skill of entrants

▪ Fundraising lingo – bingo, raffles, casino night, all illegal - conducted for charitable purposes, and permitted only in absence of enforcement

Language you need to know:

8

▪ 1954 – Sup. Ct. decides FCC v. ABC (watch and win ok)

▪ Federal: 1999 - Deceptive Mail Prevention and Enforcement Act (39 U.S.C. § 3001(a) et seq.)

▪ Federal: US Postal Service laws and regulations

▪ State Lottery laws, consumer protection, and prize and gift statutes

▪ State, e.g.: Colorado – Col. Res. Stat. §§ 6-1-303, 6-1-801, et seq.

▪ State, e.g.: Texas – Tex. Bus. & Comm. Code Ann. §§ 40.001, et seq.

In addition, a number of governmental agencies are tasked with oversight of this area:

Fed: (1) United States Postal Service

▪ (2) Federal Trade Commission

▪ (3) Federal Communication Commission

▪ (4) Department of Justice

State: (1) State Attorneys General

▪ (2) Local District Attorneys

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▪ For a private company to run a legal sweepstakes:

▪ Do not violate the Lottery or Gambling laws

▪ Lottery = 3 elements

1. Prize

2. Chance

3. Consideration

▪ To be legal, a promotion must eliminate one of these three elements

Sweepstakes - Construction

1010

• Any “Games of Chance”

– Sweepstakes or Random Drawing

– In-pack game

– Under the cap game

– Pre-selected winning number

– Scratch and win

• Prize = Something of Tangible Value

– Cash, etc. (what about “loot boxes”?)

– NOT Bragging rights or publicity

Sweepstakes – Construction (Cont’d)

1111

▪ Chance = Random prize award• Not skill based prize distribution

• Not a price discount that everyone gets

▪ Examples• Random Drawing

• Random seeding of winning game cards

• Random pre-selected winning numbers


1212

• “Consideration” – Two types

– Monetary Consideration

– Non-Monetary Consideration

• Examples of Monetary Consideration:

– Entry fee

– Product purchase

• e.g. – Require image of product in picture to be uploaded


1313

Non-Monetary Consideration – both of: (a) Substantial time or effort by the consumer, that

(b) benefits the Sponsor in some direct way

– Note – no promotion has been challenged on non-

monetary consideration grounds in the past 20 years

• Travel to a location

• Disclosure of sensitive proprietary information

• Disclosure of credit card information or social security number

• Requiring entrants to receive text messages as a condition of

entry may constitute consideration


1414

▪How to Eliminate the element of Consideration• Provide at least one complete FREE method of entry

• Other methods of entry, consideration OK (e.g. buy candy bar OR send in a 3x5 card for free game piece)


1515

Example:

– Sponsor runs athletic competition, too many applicants

– Sponsor says “Pay $50 for chance to run in race, we

will randomly select entrants to run.” (and if you don’t

get to run in the race, you don’t get your money back)


1616

▪ May 13, 2015: World Triathlon Corporation (Ironman) Forfeits

More Than $2.7 Million in Lottery Proceeds

▪ DOJ/FBI settlement

▪ Ironman says it has run entry into the competition in

a "substantially similar manner since 1983”

▪ Thousands of athletes purchased multiple entries.


1717

▪ Post a product review, receive an entry to win

▪ Post a picture with your child eating our chicken nuggets, receive

entry to win

▪ Play free game to build up points; use points to either receive

merchandise or enter to win

“Hidden” Consideration Issues

1818

1. Official rules

2. Abbreviated rules

3. Registration in FL, NY, RI if nec’y

i. Registration, surety bond, fees

ii. After complete: Winners list

4. Winner Notification

5. Winner Declaration (includes release of liability)

6. 1099-Misc if prize over $600 (need ssn)

Documentation

1919

• “Official Rules”

• The terms or official rules of a promotion

are a contract with the consumer

Sweepstakes – Drafting Official Rules

2020

• After Launch – Rules are binding

• Why? Consumer reliance

• Just like a contract – one side cannot unilaterally

change the terms

• Do not say: “Sponsor reserves the right to

change the terms of these rules at any time for

any reason”

Sweepstakes – Drafting Official Rules (Cont’d)

2121

Carefully draft rules at the outset

Everything is in your favor before launch –

FORESIGHT

CAREFULLY DRAFT AHEAD OF TIME


2222

The Big Fundamental

“No purchase necessary”

Start and End DatesStart Date = entry begins

End Date = entry ends

End Date is NOT:

When winner selected; When winner contacted; When prize awarded; any other time


2323

All entry methods

– Pay entry (look inside wrapper!)

– AMOE = “Alternate Method of Entry”

– Send a 3x5 card to [ADDRESS] or a stamped, self

addressed envelope


2424

Be complete

• If necessary, state what IS NOT included

e.g. trips, automobiles, transportation to event

Be accurate

• Don’t exaggerate

• Don’t be funny – people don’t “get it”

• (Toyota Contest)


2525


2626

Prize Value

– Approximate Retail Value (ARV)

– Measured by value to CONSUMER, not cost to

Sponsor

– Do not exaggerate value –

• False advertising


2727

DISASTER STRIKES!

Ingrate - “I’ll take the difference in cash”• Trip prize – ARV stated as $10,000.

• Winner receives airplane tickets, hotel bill, tickets to event, etc., and

will see actual cost.

• Actual cost turns out to be $5,000

• Practical Tip = Let the prize sell the promotion, not the ARV


2828

• Sponsor - issue 1099 tax form for prizes over $600

– Need winner’s social security number

• Non-cash prizes – problematic

– Win a Porsche!

– Non-cash prize - cash substitution NEED NOT equal ARV

• Odds of Winning statement required

– Game piece games - “1:___”

– Random drawing – “Odds of winning depend on the number of eligible

entries received”


2929

Quick Quiz:

Is it Ok to extend the end date?


3030

DISASTER STRIKES!

• Extending the End Date – DON’T DO IT

• It is going so well, we want to extend it

• It is going so poorly, we want to extend it

• Why?

– Reduces the odds of winning for the consumer

– Changes the official rules

• Practical Tip: Run a second promotion similar to the first, with

new/different prizes


3131

Quick Quiz:

12 year old wins ESPN NCAA March Madness bracket contest. Ok?


3232

DISASTER STRIKES!

– Apr. 8, 2015: ESPN Creates Own PR Disaster by Refusing to Pay 6th

Grader for NCAA Pool Victory

– 12 yr old Sam Holtz of Illinois wins $20,000 in ESPN bracket challenge.

– Problem: Rules say 18 and over only.

– Practical Tip: Adhere to the official rules.


3333

• Abbreviated Rules

– Space constraints known

– Include “Material Terms”

• “No purchase necessary”

• End date

• Eligibility limitations (usu. “50 US/DC”)

• Where the heck are the full rules? (URL)

• Sponsor’s name


3434

• Florida and New York

– Over $5,000, with Bond

– Advance filing deadlines:

• Florida – 7 days – enforced vigorously

• New York – 30 days – not enforced vigorously

• Rhode Island

– Retail promotions only

– Over $500, no Bond, no advance filing

– Not vigorously enforced

Sweepstakes – Registration and Bonding

3535

Skill Contests

3636

▪Distinguish from Sweepstakes and other games of chance:

• Select winners on objective criteria, not by chance

• Essay Contest

• Bake-off

• Trivia contest

• POPULAR VOTING = Skill?

Skill Contests

3737

▪ Is a game skill based or chance based?• Majority of states: Dominant element

• Minority of states: Any Chance

• Long line of cases interpreting:

• Backgammon

• Billiards

• Pinball Machine

• Poker

• Three card monte

Skill Contests

3838

• Consideration OK in most states

– Difficult question whether consideration permitted,

depending on the state

– State laws are old and poorly drafted

• Some states consideration (pay to play) is

prohibited – void these states

Skill Contests (Cont’d)

3939

• DISASTER STRIKES!

– Tie-breaker, after true skill contest = flip a coin.

– Congratulations – you now have a game of chance

– Practical Tip: All aspects of how winners are selected

and prizes are awarded must be skill based

Skill Contests (Cont’d)

4040

SWEEPSTAKES AND SKILL CONTESTS

• Popular Voting Contests– If giving away prizes of ANY value based on popular voting, EXPECT

voter fraud

– Require voters to register?

– Prohibit automated voting, use of voting exchange sites

– Can be tough to police – IT dept. may just ‘suspect’ problem

– Don’t display vote results in real time

41

Sweepstakes and Skill Contests

Many promotions now running on social media

platforms– Facebook, Twitter, Pinterest, YouTube, etc.

– Your social media accounts and pages are ALWAYS

subject to the platforms’ good graces. Follow their

rules.

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Analysis: Skill v. Chance

Fantasy Sports –

One game versus

Compete over course of a season

SKILL OR CHANCE???

43


Fantasy Sports – Big Change in 2006

▪ Unlawful Internet Gambling Enforcement Act of 2006. • Bush Admin. DOJ, attempt to clarify that Internet gambling is prohibited.

▪ FS Industry strong enough to include an exemption for Fantasy Sports.

▪ Def. of FS Key: Prize Value established in advance, not by # of entrants.

▪ Winning outcomes reflect the knowledge/skill of participants.

▪ Outcome determined by individual statistical results in multiple real world sporting events.

▪ No winning outcome based on outcome of score of any game or combination of games or on any single performance of an individual athlete in a single real world event.

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Fantasy Sports – State Gambling Laws

▪ Navigate state gambling statutes.

▪ Skill Analysis.

▪ Gambling statutes include skill contests exemptions.

▪ Bet or Wager Analysis.

▪ Some states have expressly deemed fantasy league games to constitute unlawful gambling.

▪ White v. Cuomo, Oct. 26, 2018 – NY State law outlaws Fantasy Sports.

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Analysis: Prize – Does it have value?

Loot Boxes

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LOOT BOXES

a/k/a “What’s an online prize anyway?”1. Video games - boxes of digital items with unknown value can be obtained either through

game play or through purchase with real world currency. “What’s in the Box?”

A. Magic sword

B. Methril armor

C. Invisibility cloak

D. Pixie dust

E. Wand (Stupid, amiright?)

2. Free to play video games have used loot boxes to monetize. The idea that video game players may use real world dollars to buy real (but virtual) items.

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LOOT BOXES

a/k/a “What’s an online prize anyway?”

1. Are virtual goods akin to mere bragging rights?

2. There are third party marketplaces for virtual items, not operated by or benefiting the video game operator.

3. FTC held a workshop to analyze Loot Boxes

4. UK says not illegal; Belgium and Netherlands banned some loot box activities.

5. Other consumer protection issues involved, e.g. no posted odds of winning coveted prizes.

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So…What is a PRIZE?

Does a virtual item have “Value”? Factors to consider:

1. How player acquired virtual currency (earned through game play or paid with cold hard cash)

2. What can you do with them: cash out for $$$, or just use to acquire virtual goods / services

3. Use it where – on issuer’s site/game only, or whether third party marketplace exists

4. Definition of “thing of value” in specific state’s gambling law

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A little more on Loot Boxes

• Recent Developments in Loot Box law• California (bill – dead, warning labels on games w/MT)

• Hawaii (bill – minimum age (21) to buy loot crates)

• Minnesota (bill – minimum age (18) to buy loot crates; also disclose odds)

• Indiana (bill – AG asked to look into loot crates: “predatory”, “prey on children”, “gambling”)

• Washington (bill – state gambling commission will determine if LC are “gambling” / age to access)

• Federal (bill – banning pay-to-win and kids microtrans)

• Belgium (LC in FIFA 18, Overwatch, and CS:GO are gambling)

• Netherlands (Gambling regulators found multiple devs w/ LC in violation of existing law, Valvetargeted)

• China (Disclose drop rates for winnable items)

• Japan Law for Preventing Unjustifiable Extras or Unexpected Benefit and Misleading Representation (ban on kompugacha)

• South Korea (Korea Association of Games Industry self-regulation; discloses drop rates; South Korean FTC fines of nearly $1M for misleading advertising around loot crates)

• EA, Square pulling games; Epic, Psyonix changing practices

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Loot Boxes (cont’d)

• First Amendment

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• First Amendment

• FTC & Loot Boxes - Discussion August 7th, 2019

• Academics, industry, consumer watchdogs

• Same morning, ESA announcement:• Nintendo, Sony & Microsoft commit:

mandate loot box odds disclosure before 2021

• Same pledge by a number of publishers on any platform

• (Lawyers believe in coincidences but I don’t think this is one of them.)

• Video online; gameindustry.biz summary article: • https://bit.ly/2U3ORQt

• A lot of “level setting”

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• Advocates:• lower cost;

• self-regulation;

• First Amendment;

• “narrative integrity”

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• Advocates:• lower cost;

• self-regulation;

• First Amendment;

• “narrative integrity”

• Concerns• Are games manipulating odds to maximize monetization?

• Information asymmetry re virtual currency, discounts

• “Feels” like, gateway to, gambling

54

Entries – Age Considerations

Issues with Children

• COPPA (more to follow)

55

Entries – Age Considerations

Issues with Children

• COPPA (more to follow)

• Rescission Laws/Minors and Capacity to Contract

56

Children, cont’d

CARU self-regulatory guidelines: “Sweepstakes and Contests:

• Advertisers should recognize that children may have unrealistic expectations about the chances of winning a sweepstakes or contest or inflated expectations of the prize(s) to be won.

• The prize(s) should be clearly depicted.

• The free means of entry should be clearly disclosed.

• The likelihood of winning should be clearly disclosed in language readily understandable to the child audience. Disclosures such as, “Many will enter, a few will win.” Should be used, where appropriate. 12

• All prizes should be appropriate to the child audience.

• Online contests or sweepstakes should not require the child to provide more information than is reasonably necessary. Any information collection must meet the requirements of the Data Collection section of the Guidelines and the federal Children’s Online Privacy Protection Act (COPPA).”

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Entries: Geographic Considerations

• Don’t assume the foreign laws regarding Sweepstakes/Contest, mirror those of the US (even Canada)

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• Don’t assume the foreign laws regarding Sweepstakes/Contest, mirror those of the US (even Canada)

• Sampling of Foreign Laws on Sweepstakes:• Canada – Games of chance prohibited. All winners must pass a skill test (gen.

math problem)• Quebec – all rules, advertising, etc. must be in English and French.• Mexico – Prizes over USD 5,000 must be delivered in presence of Mexican

authorities.• Brazil – prohibited unless permission is granted by Ministry of Finance. • Sweden – Games of chance require permit from the Swedish Gaming board.

Games of skill permitted. • Netherlands – Games of chance prohibited if purpose of promotion is collection of

personal data. Individual prizes cannot exceed EUR 2,500. Total prizes for promotion cannot exceed EUR 100,000.

• Ireland – Games of Chance if purchase is required, unless sponsor is non-profit charity.

• Italy – Promotion just be registered, bonded and rules must be reviewed by Italian attorney. Winners must be selected in the presence of an Italian Notary Public or Officer of the Chamber of Commerce. If selection of winners is done electronically, must have expert certify that result generation of the system cannot be altered.

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• Don’t assume state laws regarding Sweepstakes/Contest, mirror those of your state

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• Don’t assume state laws regarding Sweepstakes/Contest, mirror those of your state

• Sampling of State Laws to consider• Arizona – Sponsors of contests which require the purchase of a product

must pre-register with the Arizona Attorney General. Ariz. Rev. Stat. §13-3311.

• Colorado, Maryland, Nebraska, North Dakota, Vermont – No contest or sweepstakes may require entrants to make a purchase or provide other forms of consideration to enter the promotion as a condition of allowing the person to receive, use, compete for, or obtain a prize or information about a prize.

• Michigan and Virginia – requiring entrants to visit a store constitutes consideration and is prohibited in sweepstakes.

• Rhode Island – requires registration for prizes over $500 if the promotion takes place at a retail location.

• New York and Florida – Require a bond and pre-registration for prizes over $5,000.

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Entries: Privacy Issues

• Include Privacy Policy or PP reminder in Official Rules–make sure rules/procedure are consistent with policy.

• CCPA and GDPR- Depending on the characteristics of the sponsor, promotion, entrants and how the personal information of entrants will be used, CCPA and/or GDPR compliance may be an issue.

62


• CCPA - In general, the CCPA will soon apply to a “business” that:• does business in the State of California,• collects personal information (or on behalf of which such information is collected),• alone or jointly with others determines the purposes or means of processing of that

data, and• satisfies one or more of the following:

• annual gross revenue in excess of $25 million,• alone or in combination, annually buys, receives for the business’s commercial purposes, sells,

or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices, or

• derives 50 percent or more of its annual revenues from selling consumers’ personal information.

• a “business” can be a “sole proprietorship, partnership, limited liability company, corporation, association, or other legal entity that is organized or operated for the profit or financial benefit of its shareholders or other owners” or any entity that controls or is controlled by a business that meets the requirements.

63


• CCPA - In general, the CCPA will soon apply to a “business” that:• does business in the State of California,• collects personal information (or on behalf of which such information is collected),• alone or jointly with others determines the purposes or means of processing of that

data, and• satisfies one or more of the following:

• annual gross revenue in excess of $25 million,• alone or in combination, annually buys, receives for the business’s commercial purposes, sells,

or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices, or

• derives 50 percent or more of its annual revenues from selling consumers’ personal information.

• a “business” can be a “sole proprietorship, partnership, limited liability company, corporation, association, or other legal entity that is organized or operated for the profit or financial benefit of its shareholders or other owners” or any entity that controls or is controlled by a business that meets the requirements.

• GDPR – currently applies to any company collecting data on EU citizens (even ip addresses)

64

Equal Dignities

• Equal Dignities- Sweepstakes that involve consideration must provide an AMOE on an “equal” basis to non-paying participants to negate consideration. The concept of “equal dignity” to validate a free AMOE in a flexible participation sweepstakes has been shaped by case law in regard to (i) method of entry, (ii) opportunity to win, (iii) claiming prizes, and (iv) prizes awarded.

65

Equal Dignities


• Tylenol and CVS –• Tylenol overemphasized the purchased-based method of entry (i.e. Buy

Tylenol) and placed AMOE in fine print. • Court ruled free entry method was not equally available to all entrants

• CVS automatically entered customers into sweepstakes when they purchased certain products. Also had AMOE on their website (not in their store).

• NY atty gen argued that visitors to the store who wanted to enter sweepstakes didn’t have same opportunity as those who purchased CVS products.

66

Equal Dignities


• Tylenol and CVS –• Tylenol overemphasized the purchased-based method of entry (i.e. Buy

Tylenol) and placed AMOE in fine print. • Court ruled free entry method was not equally available to all entrants

• CVS automatically entered customers into sweepstakes when they purchased certain products. Also had AMOE on their website (not in their store).

• NY atty gen argued that visitors to the store who wanted to enter sweepstakes didn’t have same opportunity as those who purchased CVS products.

• See also - Mid-Atlantic Coca-Cola Bottling Co. v. Chen, Walsh, & Tecler

• Even a game with a free AMOE may be deemed a lottery if the promoter fails to widely publicize the availability of free entries.

67

Equal Dignities: Opportunity to Win

• Non-paying entrants should not have greater obstacles to winning the prize. Paying and non-paying entrants should have the same odds of winning.

• Black North Assocs., Inc. v. Kelly (NY)• Illegal lottery where a sponsor’s vending machine charged $1 and

dispensed game pieces for prizes from $1 - $500, but also offered free game pieces upon request at the bar counter or by mail, and where there was a sign stating the no purchase was necessary.

• Decision turned on the fact that free entrants were limited to a game piece a day, while those paying could purchase as many game pieces as they wished.

68

Equal Dignities: Claiming Prizes

• Sponsors should make it as easy for non-paying winners to claim their prize as paying winners.

• Supreme Judicial Court of Mass. v. Wall, • Lottery where the sponsor was a movie theater and the drawing took

place inside the theater.

• Only paying participants could enter and hear the names of the winners being called, while the non-paying participants had to wait outside in uncomfortable conditions and non-paying winners had to find a way to discover if they had won and get through a crowd to claim their prize in the specified amount of time.

69

Equal Dignities: Prizes

• Non-paying entrants should have an equal opportunity to win all the prizes offered.

• Classic Oldsmobile-Cadillac-GMC Truck, Inc. v. State (Maine) • Car retailer had promotion where anyone who leased a new car during a

four-week period would have their monthly payments paid if the temperature equaled or exceeded 96 degrees.

• AMOE was to enter into a drawing and the winner would receive $5,000 if the temperature reached or exceeded 96 degrees.

• Court found there to be two promotions with two different prizes.

• Also significant was that everyone who entered a lease would have won their prize but only one of the non-paying entrants would have won the drawing.

70

User Generated Content

• Do entries involve uploading of user generated content?

71



• Photos/videos/written materials• Social media posts

• Reviews (additional FTC issues)

72



• Photos/videos/written materials• Social media posts

• Reviews (additional FTC issues)

• Rules regarding content of materials• Depiction of minors

• Defamation

• Obscenity

• Infringement (third-party materials, third-party marks)

• Privacy

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Selection

• Chance• All entries failing to meet the entry requirements outlined in the

official rules should be removed (for example, entries that fail to meet the age, geographic requirements, or which weren’t submitted within the specified dates or which were submitted in any other manner inconsistent with the rules).

• Winner is chosen randomly from the remaining eligible entries in the manner defined in the official rules.

• Skill• Judging standards must be outlined in the official rules and must

be clear enough for entrants to understand;

• Winners must be selected in accordance with these standards; and

• Judges must be competent to evaluate the entries based on the standards.

74

Selection: Tie?

• Official rules should be clear about how ties are to be handled.

• Avoid turning a contest into a game of chance by breaking ties in a random manner.

75

Selection: Tie?



• Solution could be to award prizes to all tying entrants.

76

Selection: Tie?



• Solution could be to award prizes to all tying entrants.

• Alternative: weighted evaluation criteria and allowing the tie to be broken in favor of the better performer on the more heavily weighted criteria.

77

Awarding Prizes

Sampling of State Laws Regarding Prize Award Procedure

• California –

• Sponsor must award and distribute all prizes 'of the value and type represented'. Cal. Bus. & Prof. Code § 17539.1.

• Sponsor must send, upon request by contestant, names of all winners, the prize won by each and, if applicable, the

correct solution and the winning solution (if different). Cal. Bus. & Prof. Code § 17539.2.

• Florida – All prizes offered must be awarded. Fl. Stat. §849.094(2)(c).

• Illinois – Prizes must be awarded within 30 days of announcing the winner. 815 ILCS 525/30.

• Nebraska – Sponsor shall not fail to award the prizes offered. N.R.S. § 9-701(3)(c).

• New York – Within 90 days of completion of promotion where the prizes offered exceed US$5,000,

sponsor must file with the Secretary of State a listing of the name and address of each winner of every

prize having a value of more than $25, description of the prize, and date prize was delivered. N.Y. Gen.

Laws § 369-e(5).

• Rhode Island – Misdemeanor offense of prizes offered are not distributed. R.I. Gen. Laws § 11-50-5.

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Winner Releases/affidavits

• Eligibility Affidavit• Verifying the entrant is legally eligible to win the prize, the

information was correct, entry was in compliance with the rules, and that entrant agrees to the terms and restrictions contained in the official rules

79




• Liability / publicity waivers• Giving Sponsor right to public winner’s name and likeness, etc.

• Note: in Tennessee sweepstakes sponsors are prohibited from requiring winners to sign “in perpetuity” publicity releases.

• Restating liability waiver in the official rules

80




• Liability / publicity waivers• Giving Sponsor right to public winner’s name and likeness, etc.

• Note: in Tennessee sweepstakes sponsors are prohibited from requiring winners to sign “in perpetuity” publicity releases.

• Restating liability waiver in the official rules

• Releases to include in official rules• Liability “By participating in the sweepstakes, participants agree to

release, discharge, and hold harmless sponsor…….”

• “Sponsor is not responsible for lost, late, stolen, illegible… entries”

• Internet or system failures

81

Liability - Public

• Penalties for Federal Law Violations -• FTC enforcement action under Section 5 of FTC Act – remedies

include injunctions, civil penalties and audits

• DMA – US Postal Inspection Service – temporary restraining orders, injunctions, civil penalties up to $2 million dollars.

• FCC – minimum fines of $4,000 for each violation.

82

Liability - Public

• Penalties for Federal Law Violations -• FTC enforcement action under Section 5 of FTC Act – remedies include

injunctions, civil penalties and audits

• DMA – US Postal Inspection Service – temporary restraining orders, injunctions, civil penalties up to $2 million dollars.

• FCC – minimum fines of $4,000 for each violation.

• Penalties for State Law Violations (sampling)• Arizona – violations = class I misdemeanors

• California –• violations amounting to unfair business practices -> injunctions, civil penalties up

to $2,500 per violations;

• violations of illegal gambling law -> fines from $100-$1000 and 6 months in jail

• Colorado – civil penalties up to $10,000 per violation

• Florida – civil penalties up to $1,000

• Massachusetts – fines up to $2,000 or 1 year imprisonment

• NY- violations are Class B Misdemeanors

• Texas – civil penalties between $5,000 and $50,000 per violation

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Liability - Civil

• Actions by Government Entities• Tylenol and CVS cases

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Liability - Civil


• Actions by Competitors• Burger King v McDonalds- Burger King franchisees sued McD’s

under the Lanham Act for continuing to run its monopoly promotion even after learning that the games were rigged.

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Liability - Civil


• Actions by Competitors• Burger King v McDonalds- Burger King franchisees sued McD’s

under the Lanham Act for continuing to run its monopoly promotion even after learning that the games were rigged.

• Actions by Unhappy Participants• Big Fish Casino (Kater v Churchill Downs)- Washington law

defines gambling as: “the staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the person’s control or influence, upon an agreement or understanding that the person or someone else will receive something of value in the event of a certain outcome.”

• 9th cir ruled that the game’s free game chips are a “thing of value” in the context of Washington Gambling law, making these games fall under the category of illegal gambling.

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Protecting yourself from mistakes

• Cases where too many winners are picked due to clerical, typographical, or other errors.

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Protecting yourself from mistakes

• Cases where too many winners are picked due to clerical, typographical, or other errors.

• Ways to Avoid:• Clearly state the method of winner selection

• Clearly state the number and value of prizes to be award

• Include disclaimer: “ the sponsor is not responsible for any printing or typographical error in any material associated with the sweepstakes.”

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Insurance

• Prize indemnity insurance / sweepstakes indemnity insurance

• Odds of winning low; potential pay out high

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Insurance



• Can be for games of chance (triggered by happening of event beyond participant’s control) or skill (ex. Amateur making a hole in one in golf tournament (note Canada))

• Furniture and Football

• Furniture store in Baltimore offered a promotion where anything sold between Jan 31 and Feb 3 would be free if a Ravens player returned the Superbowl opening or second-half kickoff for a touchdown. Luckily they bought insurance, because Jacoby Jones did just that and the store ended up owing its customers about $600,000.

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Insurance



• Can be for games of chance (triggered by happening of event beyond participant’s control) or skill (ex. Amateur making a hole in one in golf tournament (note Canada))

• Furniture and Football

• Furniture store in Baltimore offered a promotion where anything sold between Jan 31 and Feb 3 would be free if a Ravens player returned the Superbowl opening or second-half kickoff for a touchdown. Luckily they bought insurance, because Jacoby Jones did just that and the store ended up owing its customers about $600,000.

• If the insurer fails to pay the Sponsor is still on the hook

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Questions?

Brandon J. Huffman

Odin Law and Media

@brandonjhuffman

[email protected]

Barry M. Benjamin

Kilpatrick Townsend & Stockton

[email protected]

(212) 775-8783

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Documents

New Sweepstakes and Contests: Drafting Rules and Procedures to …media.straffordpub.com/products/sweepstakes-and-contests... · 2019. 11. 27. · Sweepstakes and Skill Contests Fantasy