Overview
In today’s fast-paced and highly regulated landscape, understanding the legal framework surrounding promotional campaigns is critical. A creative, engaging promotion can quickly turn into a liability if it’s not compliant with federal and state laws. Staying ahead of these legal requirements can be the key to avoiding costly missteps and ensuring campaign success.
During this webinar, Ellie Atkins and Reese Poncia discussed the legal considerations for different types of promotions. They also shared practical strategies for reducing risk while making the most of your promotions.
Top takeaways included:
- Avoid running an (illegal) lottery. In many states, lotteries are illegal or highly regulated. Therefore, sponsors structure their promotions as a sweepstakes or contest instead. A lottery consists of three elements: chance, consideration, and a prize. Sweepstakes and contests differ from lotteries in that sweepstakes do not require consideration to enter and contests do not rely on chance to determine the winner. To ensure a sweepstakes does not require consideration, sponsors can offer an alternative method of entry that allows participants to enter for free.
- Establishing comprehensive official rules before the promotion begins is essential. A promotion’s official rules serve as the contract between the sponsor and the promotion’s entrants. Thus, the official rules should be carefully crafted to ensure they clearly set forth the salient terms, including requirements for eligibility, how to enter, prizes, and more. Sponsors should also ensure that short-form rules appear wherever the promotion is advertised.
- Social media highlights the importance of thoughtful intellectual property protections. Some promotions may require entrants to submit user-generated content (UGC) (e.g., a contest requiring entrants to submit a creative photograph of the sponsor’s product). UGC implicates many intellectual property considerations, and sponsors should ensure they have the right to use UGC as well as any third-party intellectual property included therein.
- Promotions are subject to Federal Trade Commission (FTC) regulation. The FTC ensures companies do not engage in unfair or deceptive acts and practices, and monitors promotions for fraud and deception. The recent Next-Gen case is a cautionary tale of the daunting monetary and equitable remedies the FTC can garner from a company’s ill-managed promotion. Further, the FTC’s reach extends into regulating social media posts and influencers who act in concert with company promotions. If an influencer does not properly disclose connections to a company for any product they endorse, both the influencer and the company can be held accountable.
