When you are running a sweepstakes, it is very important to understand the legal regulations and create your sweepstake rules correctly. To that purpose, we have created this guide to aid in the creation of your official rules.
Because contests and sweepstakes run online are a great way to interact with and engage with your customers and potential customers, they have the advantage of allowing you to collect these customers’ information for future marketing purposes.
When you collect customers’ information for a promotional campaign like a sweepstakes however, you have to follow the law as far as restrictions and state regulations. These can be complicated which is why it is usually best to hire a sweepstakes company to handle all your contests, however, we offer this guide to give you an idea of how it should work.
Often there are suggested best practices used by many campaign promoters to include in your official sweepstake rules, because most likely you will be giving away a product or offering free prizes.
This is only a general list of guidelines and you should follow legal advice from a professional lawyer before running your contest or sweepstakes.
The difference between a sweepstake and a contest
The first thing to understand is there is a slight difference between sweepstakes and contests.
A sweepstakes campaign is one in which a person can enter to win a prize based on random selection. In this case, that person should not make any purchases of products, or offer any payments. They are simply picked at random. When running a sweepstakes, the company doesn’t pick someone because of a reason – they are to only pick at random. For that reason, a person cannot do anything to grab an advantage at winning. They cannot offer a bribe to the company sponsoring the sweepstakes, they cannot offer any kind of payment or buy products, offer reviews or do any such thing that would give value to the company. For that reason, in some states, they consider offering your personal information for future marketing purposes a type of benefit to the sponsor, and therefore even this is not allowed or has restrictions in those states.
A contest campaign is a campaign where a person does do something in order to win the prize. This can be something that takes skill, effort, or is based on merit of some kind. For a contest this consideration is required and then judging is involved. An example is you may require a person to tell a story or make a video, perhaps a testimonial for the product. Then the winner is decided upon by either a public vote or by judges on the sponsor’s side. For a contest, winners are not picked at random; they are considered and judged.
Therefore, you must understand the differences involved in these two types of promotional campaigns, and write your rules to fulfill the requirements of each type of campaign.
Running your campaigns on social networks
In addition, if you run your contest or sweepstakes on a social network such as Facebook, Twitter, or Instagram, you should familiarize yourself with that social network’s rules and regulations for running such a promotion. Federally, all online promotional campaigns follow some general guidelines. You cannot run a lottery or online gambling contest. You have to say things you have probably seen everywhere like “no purchase necessary” or “void where prohibited.” These kinds of statements are there for a very important reason: to protect you as the sponsor of the campaign as well as the entrant!
General sweepstake rules best practices
For a sweepstakes, because winning is by chance, you will want to say “purchase does not increase your chances of winning.”
Every campaign should identify the promoting company involved and include their physical address. The rules should include details about how the contest is determined or judged, and include an exact precise list of procedures that entrant must follow to be qualified in the contest or sweeps. It should include any and all methods of entering. It should explain eligibility requirements.
The rules should also include the beginning and ending dates/times of the contest and include time zone to avoid any ambiguity.
It is very important that the prize or prizes is described in exact detail as well. There should be no confusion or vagueness when explaining exactly what the entrant will win if they enter as well as when the winner is decided and notified.
The criteria for judging needs to be absolutely clear so that the winner chosen is understood as a clear winner. Often it is recommended that the winner selection or judging be done by an impartial third party or a company that the sponsor hires such as a sweepstakes company or marketing agency.
For legal reasons, a contest or sweeps needs to make clear what is required of the winner as far as giving away their name or personal information. Therefore in entering, all entrants will need to sign something that shows they understand what may be required, and then when a winner is determined, there is usually an affidavit the winner would be required to sign to receive the prize. At that point the winner can forfeit their prize if they choose not to sign or accept the terms.
Typically, a campaign should explain the odds of winning though this may be hard to determine depending on how many people enter the contest.
Normally there are tax considerations to contests as well – and the winner is subject to taxes which would require you to send a 1099 to the winner in the upcoming January.
You should learn about any specific state regulations and exceptions and follow them to avoid getting your contest or sweeps banned or facing legal action. Consumers are very savvy these days about their legal rights so you want to follow the law for individual states if you are running a national contest.
In order to find out about an individual state’s legal requirements, you should get legal guidance from a professional lawyer or work with a sweepstakes administration company in order to take care of this for you. This is especially important because these rules can change from time to time or be updated. You may have run a campaign two years ago, and now the laws have changed.
Hire a campaign management company
What many do and what you should consider, is to hire a sweepstakes company to cover all your administrative contest or sweeps needs. This is a great way to ensure that your sweepstake rules are done professionally and correctly and to help make your campaign as successful as possible.