Must-Know Legal Contest Rules For Running an Online Giveaway

Must-Know Legal Contest Rules For Running an Online Giveaway

Thinking about running a giveaway for your next marketing campaign? We don’t blame you.

When implemented thoughtfully, social media contests and sweepstakes can still make for a winning strategy. One that works to build awareness, strengthen an email list, and increase your brand’s potential for going viral.

And while launching an online contest and watching your fans engage with it can be fun, it’s important to keep things kosher from a legal standpoint. Sponsored promotions come with their own set of legal restrictions and regulations. 

The legalities around contest rules can be pretty confusing, which is why it’s important to understand what’s at risk for your business when they’re not adhered to.

Whether for a giveaway on social media or the homepage of your website, there are contest rules to be aware of. Let’s talk about some of the legal considerations to keep in mind when planning your next online giveaway:

The Three Types of Giveaway Promotions

Not every giveaway promotion is created equal. In fact, they often fall into one of three distinct categories:

  1. Sweepstakes
  2. Contest
  3. Lottery

It’s important to distinguish between the three when building out plans for your brand’s promotion. The tactic that you choose will determine how a promotion is run and the legal contest rules that go along with it.

Sweepstakes

A sweepstakes is a giveaway that results in entrants winning by either chance or luck. It doesn’t require skill or methodical selection.

The host simply chooses a winner (or winners) by drawing randomly from the pool of entries. No element of consideration must be permitted from the act of purchases, payment, or likes.

Contests

On the other end of the giveaway spectrum are contests. Counter to sweepstakes, contest winners are chosen based on merit, effort, or skill.

In other words, a host will require people to do something — more than just submitting a form — in order to be considered an entrant. “Doing something” may involve taking a photo, creating fan art, recording a video, or something else entirely. Winners can either be selected based on predetermined criteria or public votes.

Lottery

With this type of promotion, entrants are required to pay money for a shot at winning. They may either purchase an item, buy tickets, submit receipts from purchasing, or something else along these lines.

Typically, the more someone pays, the higher their chances are of winning. Because of this, lotteries are highly regulated and should involve counsel from your legal team before implementing. There’s a chance it may not even be a promotion you can pursue on account of the fact that private entities are not allowed to run a lottery under US federal law.

What Type of Giveaway Should You Run?

Despite the complex legal rules that can accompany a giveaway promotion, there are plenty of examples out there of brands doing them right. The biggest thing you need to be aware of — whether you opt to run with a sweepstakes or contest — is to avoid unintentionally creating an illegal lottery.

Lotteries, as mentioned above, come with their fair share of legal issues. And the level of regulation associated with them makes steering clear a wise decision for your brand’s marketing team.

To qualify as a lottery, a giveaway must have three elements:

  • A prize
  • Chance (i.e. pure luck)
  • Consideration

Consideration, in the case of a lottery, will involve an entrant paying for something, purchasing something, or doing something in return. This is not to be confused with a contest where entrants need to be judged or voted for in doing something.

This idea of consideration is where brands often fall into a trap. 

It’s important to note that requiring someone to “Like” or “Follow” you on social media counts as a lottery-based consideration. As is asking someone to do something (e.g., watch a video, complete a survey) and report back to the host.

According to the US Federal Lottery Law, states enact their own laws in regulating a lottery-based promotion. Representatives are usually delegated to a special lottery board or commission to administer said regulations. Many countries also have their own national lottery and rules for deeming them illegal.

To avoid running an illegal lottery on behalf of your brand, make sure to remove one of the three elements mentioned above: either chance or consideration.

The Importance of Official Contest Rules for Running an Online Giveaway

Once you’ve landed on the type of promotion to run, your next step should be to draft out an official contest rules template or mechanics. This should be a centralized place where any interested party can find easy answers, in the event that any issues with the promotion arise.

Your official contest rules should include a set of clear guidelines for entrants to follow and understand relative to their participation — including their eligibility to enter. Make them easy to find.

The reality is that most entrants will never read this fine print. But that doesn’t mean you don’t need them, especially since they serve to lessen any possible liability risks down the road. 

Once they’re posted, leave them be. You should never change your official rules after a promotion launches.

Making Your Official Contest Rules for an Online Giveaway

As you create an official set of rules for your online giveaway, make sure to include the following:

  • No purchase necessary: this eliminates the element of consideration mentioned above in relation to lotteries.
  • Eligibility: provide detailed information around who is eligible to participate. This can be determined by location and/or age.
  • Duration: make sure to include dates relative to when the giveaway begins and ends.
  • Sponsors, affiliates, and promoters of the giveaway.
  • Prizes: give an accurate description of the prizes. Make sure to include retail value, the type of prize, and the odds of winning the prize (or each prize for multiple winners).
  • Mechanics/method: lay out, in complete detail, how people will be entered into the giveaway. You’ll also want to provide transparency into how winners will be selected.
  • Criteria for judging/voting method.
  • Liability limitations.
  • Privacy and publicity regarding the usage of participants and winner’s information.

Social Media Giveaway Rules

If you’re going to run a sweepstakes or contest, social media platforms are some of the best places to do so. However, these channels are quickly becoming more strict — especially with regards to the collection and use of user data.

Here are some things to keep in mind before running your social media giveaway:

Facebook

When running a giveaway on Facebook, you must include: official rules, eligibility, and an acknowledgement that Facebook is not a sponsor or associated in any way with your branded promotion.

You can legally ask participants to enter by liking or commenting on a post; submitting personal information in an entry form; submitting a photo, video, or text-based content; or voting. 

What you can’t ask them to do, however, is inaccurately tag themselves on a photo they aren’t in or incentivize people by using Facebook features (e.g. asking for a false review).

Twitter

If you’re launching a promotion on Twitter, avoid creating multiple accounts or posting the same Tweet for it repeatedly. You’ll also want to follow their general guidelines around safety, privacy, authenticity, and third-party advertising.

Instagram

The promotion guidelines for Instagram require you to include official rules and comply with applicable laws and regulations. Similar to Facebook, you shouldn’t ask entrants to inaccurately tag themselves in photos. Your giveaway rules should also acknowledge that the promotion isn’t sponsored or affiliated with Instagram in any way.

Final Thoughts: Understanding Legal Rules and Regulations Around Running an Online Giveaway

In the United States, contests and sweepstakes are regulated by the following entities:

  • US Post Office
  • Federal Communications Commission
  • Federal Trade Commission
  • Internal Revenue Service
  • Department of Justice

Promotions are regulated according to state law, so understanding compliance relative to your business’ location is crucial in running branded contests or sweepstakes. Do the research, build out your giveaway rules accordingly, and make sure they’re made easily accessible at launch to avoid inadvertently putting your company at legal risk down the line.

When you’re ready to take the next step with your contest, download the Simple Giveaways plugin.

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