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Online Sweepstakes and Contests As Promotional Devices
Online sweepstakes and contests are frequent devices used to promote companies and their products and services. Barry Diller's InteractiveCorp re-launched its www.iwon.com site in September 2007 with the promise of $1 million in annual sweepstakes prizes and prizes of $10,000 a day on weekdays. That Web site alone is reported to have awarded over $70 million in promotional cash and prizes since its 1999 debut. While these tools of the online promotions and marketing trade offer the promise of a cost-efficient way to target interested consumers and create a great deal of buzz, they are hardly trouble-free and myriad traps await the unwary. The Attorney Generals of several states closely regulate and monitor sweepstakes and contests and failure to conduct the campaign properly can result in regulatory enforcement actions and consumer lawsuits.
No Consideration
Lotteries in the United States are exclusively government run, where permitted, and prohibited outright in many states. A lottery has three key determinative
elements: prize, chance and mandatory consideration. In short, one cannot create a lottery as part of a legal promotion and, accordingly, must remove one of the three elements of a lottery from the promotion. In addition, care must be taken to avoid laws against gambling, which is generally defined as payment of consideration for a chance to win something of greater value. Each state has its own regulatory scheme that must be complied with, and sponsors of Internet promotions are potentially subject to worldwide exposure and liability if they solicit or accept entrants who are citizens of other jurisdictions. Therefore, all promotions should typically be expressly limited to residents of the United States, and to the states and territories in which regulatory compliance has been completed.
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