How to Avoid Legal Complaints about Consumer Contests

Consumers love sweepstakes, but they hate being deceived by illegal and false promises of prizes. Once again, the FTC has released its annual list of Top Consumer Complaint areas. In 2013, “Prizes, Sweepstakes and Lotteries” ranked sixth with 89,944 complaints. While the category fell from third place in 2011, the number of actual complaints remained similar, hovering near 100,000 complaints. This number represents a dramatic increase in the number of complaints from 2010 that saw about 64,000 complaints when the sweepstakes category ranked fourth. While identify theft remains the number one source of consumer complaints to the FTC, prize promotions continue to be a source of aggravation for consumers, and the FTC continues to take their complaints seriously. (For a more in-depth look at a previous FTC’s annual list, click here.)

While the FTC did not offer detailed analysis of the consumer complaints it received this year, it is likely that many consumers felt they had been lured into giving away personal information or spending money with no payoff.  Even if the underlying sweepstakes or contest concept had been legal, it could have been the advertising and marketing messages for these prize promotions that caused confusion.

When structuring a prize promotion, whether it is a sweepstakes, contest, or a premium offer, marketers should work with their legal team and remember the following best practices:

• Review the structure of the promotion to ensure it is not an illegal lottery or does not violate other laws. Bring the concept to your legal team early so there is time to tweak it as necessary to minimize risk while accomplishing your marketing goals.
• Vet the advertising and marketing for the promotion. Too often, brands forget that each promotional piece for the prize promotion, including social media posts, may require disclosures. These disclosures must conform to the FTC’s DotCom Disclosure Guides’ requirements.
• Ensure that all affiliate marketers are using approved and legal advertising and marketing techniques. Your affiliate marketers can wreak havoc with the legality of your promotion if left to their own devices. New York’s Attorney General recently proved the point in its Operation Clean Turf sweep of affiliate marketers for deceptive endorsements and testimonials. The regulator levied over $350,000 in fines for nineteen companies.
• Safeguard consumers’ personal information. The Target data breach underscores the necessity to build data security measures into your prize promotions and prepare for a breach. Fallout from a data breach includes reduced sales, lawsuits, and regulatory investigations. With 46 states regulating data security, it is imperative that brands consider the implications of collecting personal information when doing their prize promotions. Entry forms should request the bear minimum o f information. In addition, marketing staff should confer with legal and IT professionals before deciding whether they are going to keep the data or erase it from their systems once a winner has been chosen.