by Leonard A. Bellavia, Esq.
Many businesses wish to capitalize on the holiday shopping season that seems to grow longer each year. A few holdouts like Nordstrom continue to resist “Christmas Creep” by refusing to decorate its stores until after Thanksgiving. Most, however have succumbed and instead have promulgated a “holiday arms race” among their retailing peers. Many businesses seek to tie their local marketing into the shopping season fervor by offering some kind of giveaway. Your well-intending marketing plan can quickly run afoul of state and federal law if you are not mindful of how you may or may not promote an in-store giveaway.
Can you run an advertisement that states, for example, that the consumer will receive a free iPad with the purchase? No. The FTC explicitly states that when products are typically sold at a price arrived at through negotiations, a business cannot advertise an item included with the sale as free. The laws of many states have similar provisions against advertising something as free when it is included as part of a negotiated transaction. If you still wish to include an item with the purchase, you may do so. However, you should check with experienced legal counsel before structuring your advertisement to make sure your message is compliant with state and federal law.
Instead of a giveaway like the one mentioned above, some businesses choose to hold a contest or sweepstakes. Contests typically require the participant to compete for prizes or gifts on the basis of skill or skill and chance, conditioned wholly or partly on payment of some value. Think of a ring toss at a carnival as an example of a contest. Sweepstakes allow participants to win solely by chance without having to pay any kind of value or have a particular skill to win the prize. Examples would be “liking” your business’s Facebook page to enter into a drawing for an iPad or having an in-store registration for a drawing to receive a prize. A poorly run sweepstakes can mean major headaches for your business. Sweepstakes must be open to all who wish to participate and entries cannot be treated differently from one another. That means you must treat an entry from a participant who did not purchase a product from you the same as one who did. Making any kind of payment, like entry conditioned upon a particular purchase, is a prerequisite to participate in the sweepstakes turns your sweepstakes into a lottery. As you may guess, lotteries are typically illegal if run by private entities.
Besides offering entry to everyone and treating entries equally, there are other steps you can take to keep your sweepstakes from causing you legal woes. You should disclose conspicuously in advertisements, point-of-sale material and entry forms that no purchase is necessary to participate, explanation of your entry procedures, identity of the company running your promotion, eligibility requirements, prizes and their estimated value, methodology for determining who wins, the odds of winning, the beginning and ending dates of the contest, and where one may obtain a winners list. Detail is critical; a disclaimer that states “see us for details” is not sufficient. Do not ask participants to complete lengthy and time consuming entry forms or arduous registration processes. Some jurisdictions equate this burden on the participant as “payment” to participate, thereby turning the sweepstakes into a form of a lottery. Finally, do not rely on a marketing company to keep your advertisements compliant with the law. You are held responsible if they make a mistake when administering your giveaways, including contests and sweepstakes.
Contact us at 631-224-7000 if you have any questions about whether the giveaway you are planning for the upcoming holiday season complies with state and federal law.