Sunday, December 11, 2011

Illinois Businesses - Know the Rules Before Running Your Promotional Sweepstakes or Giveaway

A sweepstakes or giveaway can be an effective promotional tool for a wide variety of businesses.  With the hyper-prevalence of social media, it is more feasible than ever for a business to reach a far and wide audience and potential market for its products or services.  If you are considering tapping into the power of social media to offer a promotional giveaway, it is important to know the rules first.  The rules are governed by 1) the law and 2) the policy terms of the social medium, which you are typically required to follow by their terms of service.  In Illinois, the applicable law is the Illinois Prizes and Gifts Act, 815 ILCS 525/1, et. seq (the Act).  Check your local jurisdiction elsewhere.

The Act applies to any written promotional offer made to a person in Illinois or used to induce/invite a person to come to Illinois to claim a prize or conduct business in Illinois, or to contact an agent in Illinois.  In other words, its reach is very broad.  There are some exemptions provided in Section 35 of the Act (sale of books/videos/periodicals, sale through a contract plan, sales by catalog, timeshares, etc.).  The Act forbids misrepresentations about winning a prize and requires the award be made no later than 30 days after representing that a person has won a prize. A consumer can bring a civil action for an intentional violation of the Act and recover "the greater of $500 or twice the amount of the pecuniary loss," plus reasonable attorney's fees and court costs.

Of particular interest, the Act requires sweepstakes/giveaway offers to make nine disclosures.  In summary, these are:
  1. The true name(s) of the sponsor and principal business address,
  2. The retail value of each prize,
  3. "No purchase necessary,"
  4. A purchase will not enhance odds of winning,
  5. A statement of the odds,
  6. Any requirement that the winner pay shipping or other charges to get or use a prize,
  7. Describe any restrictions to get the prize,
  8. Describe any limits on eligibility,
  9. Additional statements required for multiple round contests, enhanced odds, etc.
For social media contests, the rules of the medium may also pose restrictions.  For example, here are Facebook's guidelines.  Note in particular here that Facebook prohibits using/requiring Facebook functions to register or improve odds of a sweepstakes promotion.  This means, for example and contrary to a practice that seems to be growing, that businesses are not permitted to hold a promotion whereby applicants are asked to "Like" a Facebook page to enter the contest.  

If you are considering running a promotional sweepstakes/giveaway for your business, do the research upfront to ensure that you are following the rules of your jurisdiction, and check with your attorney to keep in safe harbor.  If you have been burned by a sweepstakes that turned out to be a "bait and switch," you may have a legal claim against the promoter/sponsor under the Act. Ask an Illinois attorney about your particular situation.  

I'd like to credit Illinois attorney Erin E. Wright, of DLA Piper, LLP, for her excellent piece on this topic in the Illinois State Bar Association newsletter "Corporation, Securities & Business Law Forum" earlier this year.  





1 comment:

  1. Can I speak to someone in regards to this raffle law? I am trying to form a business that evolves around this, and I would highly appreciate some feedback.

    DiamondNightChicago@Gmail.com

    ReplyDelete