How Your Sweepstakes Rules Can Protect You

Here’s a great court case that proves the power of having well-drafted rules for your contest or sweepstakes. Even better, the court case involves a plaintiff unsuccessfully suing the FTC.

In 2012, the FTC launched a contest inviting each contestant to submit an “innovative solution that blocks illegal robocalls on landlines and mobile phones.” The rules contained detailed explanations of how the FTC would judge the entries and select a winner of the $50,000 prize. Approximately 800 contestants formulated methodologies to block robocalls, and in April 2012, the FTC announced two winners. One contestant, David Frankel, sued, unhappy that he was not a winner. His complaint alleged that the FTC had not implemented the contest according to its own rules. In particular, Frankel alleged that the winners’ solutions could only work with caller-ID and that robocallers could easily evade that technology.

Frankel sued the FTC claiming breach of contract and injunctive relief, seeking to have his entry rescored. In August 2014, the US Court of Federal Claims ruled that he could proceed with his claim for breach of contract, but dismissed his claim for rescoring. In his breach of contract claim, Frankel alleged that the FTC rules had not enumerated that “filtering-type solutions” were necessary to make it the finalist stage of the competition. While Frankel didn’t use such solutions in his entry, all the finalists did.

In August 2015, the Court of Federal Claims dimissed the case. The FTC pointed out that its rules had clauses that stated its decisions were final and binding in the contest and that entrants released the FTC from all liability. Indeed, the court held for the FTC saying that there had been no material breach that involved some fraud or gross mistake in the FTC’s application of its rules.

The case upholds the validity of rules for sweepstakes and contest operators. These rules create a contract with the entrants, and thus, courts generally uphold their contents unless the entrant can show some true bad faith in executing the promotion.

The case also reminds brands who run promotions that well-drafted rules are an essential part of risk mitigation. Thus, sweepstakes and contest organizers would be wise to not copy blindly rules they find on the Internet or rely on their agencies who do not have legal teams to draft their rules.