Sweepstakes and contests on a brand’s social channels are a great way to gain followers. If you’ve done either, you know that many rules are in place and those rules have a lot of gray areas. If you’ve run a contest or sweepstakes and hearing there are actual rules about doing this is news to you, listen up! You don’t want to inadvertently get yourself, company or brand into trouble.
The rules confusion is exactly why the folks over at Shortstack asked their legal team to help them compile an easy to comprehend rules template for businesses and brands to follow. And if you don’t believe the gray areas, Shortstack CEO Jim Belosic said the template took a year and a half to construct:
Initially the blog post was meant to give vague rules, but no one on our legal team wanted to touch it. We ended up massaging that article to give good ground rules.
According to Shortstack’s template:
- A sweepstakes is a campaign in which entrants can win a prize based on chance. No purchase, payment, or other consideration is permitted, and the winner is picked at random. The element of consideration must not exist in a Sweepstakes. Caution: consideration is anything of value the contestant must give up to participate, monetary or nonmonetary, and can exist if the contestant must expend substantial time or effort that benefits the sponsor. For example, some states have determined that providing contact information is consideration if the information is to be used for marketing purposes.
- A contest is a campaign in which effort, skill, or merit, is required to enter to win a prize. For example, you may require people to upload a photo or video in order to enter. The winner is determined by voting or other judging criteria. The element of chance must not exist in a contest.
- A lottery requires purchase, payment, or other consideration (the contestant has to buy something, such as a ticket), chance, and a prize. Note: Private lotteries are illegal under state law. Moreover, under federal law, it is illegal for U.S. citizens to even participate in a foreign lottery. Do not run a lottery.
Top tips for contests and sweepstakes
Outside of the template, Belosic offered more insight on the dos and don’ts of giveaways:
- Do limit who can register for your sweepstakes or contest. Most businesses don’t limit who entrants are, adding that it’s important to set certain restrictions like limiting to people only in the U.S. if you are a U.S.-based company or brand. Even age restrictions are important. He suggests the 18+ rule.
- Don’t use voting to determine the winner. Use voting to determine your Top 10 entrants. The final winner should be selected by judging or at random. Also, watch out for voting groups and vote trading organizations that are used to inflate voting results. “We pride ourselves on limiting voting fraud,” he said of Shortstack. “It can get pretty hairy.”
- Do reserve the right to make someone ineligible for a prize. The best practice is to vet the person before you make an announcement to ensure they meet eligibility requirements, like age and location.
- Don’t give away large cash prizes. Cash prizes must be bonded with the state over a certain amount to ensure it’s legal to give away. Also, you will need to send out a 1099 for tax purposes if the prize is over a certain amount. For example, Wheel of Fortune will send out a 1099 if someone wins a car, because the winner must pay the tax on that. Check with a tax expert to determine that amount.
- Don’t give away things like iPads. “People will enter just win and may never set foot in your store,” Belosic said. “Make sure the prize has relevance and value to your brand.”
- Do give away an experience. “The whole goal is to have really good engagement and have people talking about it,” he said. If you’re a restaurant give away a dinner for two prepared by the chef would be an “experience.”
Ultimately, contests vary so much so there is no off the shelf paperwork. Belosic says to look at contests you’ve entered:
I’m not saying steal or copy their rules, but if someone locally ran a successful contest you should look there for guidance. … If no one you know has run contest locally there might be a reason.
Image courtesy of Shutterstock.
