How to Set Up Your Next Online Giveaway

You see them all the time online - loop giveaways on Instagram in exchange for followers, campaigns for likes on Facebook. But did you know that there are laws and rules that govern these marketing tactics? Read on to learn how to structure your next online giveaway.

What are the different types of social media promotions?

There are three main types of promotions include lotteries, sweepstakes, and contests. Although these terms are used interchangeably, they actually have very specific legal meanings.  They also should not be confused with giveaways or promotions – which are marketing terms used to generally refer to lotteries, sweepstakes or contest.

LOTTERIES:  A lottery is a prize drawing where people pay money for a chance to win a prize. It is important to know that only states can run lotteries – non-state-operated lotteries are illegal, so you should avoid structuring your promotion as a lottery.  The following elements must exist in order for a promotion to be a lottery: (1) consideration, (2) chance, and (3) a prize.   In the context of promotions, consideration is something of value given in exchange for the opportunity to participate in the promotion.  Consideration can be monetary (an entry fee or requirement to purchase) or non-monetary (a significant amount of time or effort that the participant must expend to the benefit of the sponsor).

To avoid an illegal lottery designation, one of the three elements -- consideration, prize, or chance -- must be omitted from your promotion.  Since a promotion without a prize will likely not receive much interest, removing the elements of consideration or chance are the best ways of avoiding operating an illegal lottery.

SWEEPSTAKES:  Sweepstakes are prize giveaways where the winner is chosen by chance. Unlike a lottery, a sweepstakes does not require consideration in order to participate. Many of the giveaways we see on social media, like loop giveaways or product giveaways are actually sweepstakes.  The sponsor of the giveaway is giving a prize, like a free piece of jewelry, in exchange for a follow, a comment, or a like, for example.

CONTESTS:: Contests are prize giveaways where the winner is chosen based on some merit, skill, knowledge, creativity, judgment or expertise.  The main difference between a sweepstakes and a contest is that the contest participants must use at least some skill to win the prize and may have to pay some value to participate in the contest. So for example, if the winner of a prize is chosen based on submission of the funniest comment or most inspirational photo, it requires some level of skill and therefore the promotion would be characterized as a contest.

What requirements do you have to include in your promotions?

Each state has different laws and procedures for operating promotions. The challenge of operating a promotion online is that you must still comply with the laws and restrictions of each state (and country) in which your promotion is conducted, which arguably is every state and country. Here are some guidelines that are generally applicable to most U.S. states and should be included at a minimum when planning your promotion.

For sweepstakes and contests, you must have official rules that are clearly and conspicuously displayed on your website.  Provide a link to your official rules when you announce your promotion on social media platforms.  Make sure not to change these rules during the course of your promotion. You should also indicate:

  • The dates and times (with time zone) when the sweepstakes/contest will start and end.
  • The manner in which winners will be selected and notified and where and when a list of winners can be obtained.
  • ny eligibility requirements/exclusions, such as any age or geographic limitations. (Ex. Open to U.S. residents only, age 18 or older.
  • The sponsor’s name and business address
  • A description and approximate retail value of each prize, and the odds of winning each prize.
  • “Void where prohibited” statement.

For sweepstakes, you should also indicate:

  • An alternate method of entry (“AMOE”) that does not require consideration (the payment of money or significant effort). This is because with the element of consideration present, a sweepstakes can be characterized as a lottery. AMOE entrants must have an equal chance of winning as the purchasing entry. Include a statement that “no purchase is necessary” and a “purchase will not improve one’s chances of winning.”

For a contest, make sure you also indicate:

  • The number of rounds or levels of the contest, the cost (if any) to enter each level, and the maximum cost (if any) to enter all rounds. Note that some states prohibit purchase requirements for contests.
  • Whether subsequent rounds will be more difficult to solve, and how to participate.
  • The identity or description of the judges and what objective criteria is being used to judge the entrants and what weight given to each criteria.

Additional Requirements

Some states also require that sponsors register and post a bond with the appropriate state authorities. For example in Florida & New York, if prizes in a game of chance exceed $5,000, they must be registered and a bond must be posted. In Rhode Island, registration is required for games of chance conducted through retail outlets with prizes in excess of $500.  Sometimes it may be simpler to exclude residents of these states from participating in your promotion than to comply with these extra state-specific requirements.

When you conduct your promotion online, you’re opening it up to participants all over the world.  This means that you must also comply with each country’s rules regarding promotions.  As the laws of each country vary widely, you may consider limiting participation in your promotion to U.S. residents only. Otherwise you will want to hire counsel in the country where you want to run your promotion to ensure compliance with local laws.

Do giveaway rules differ for every social media platform?

Federal and state laws govern the rules for sweepstakes, contests, and lotteries.  However, when you use a social media platform, you agree to comply with that platform’s Terms of Service. A common mistake I see people make is failing to comply with these terms. Here are the guidelines for the more commonly used social media platforms:

When planning your promotion, make sure to read and comply with the guidelines of the social media platform where you will be running your promotion.  Also, revisit and review the platform’s guidelines regularly as their terms may have changed since the last time you reviewed them.

What are some important things to keep in mind whenever you’re dealing with giveaways on social media?

When you’re running a promotion online, it not only requires compliance with laws governing contests and sweepstakes, but it also implicates a variety of other laws as well.  These include laws regarding privacy and the collection of personal information, consumer protection laws, and marketing and advertising laws.

One common mistake I see bloggers make is failing to properly disclose when an advertiser has sponsored a blog post or giveaway. For example, if an advertiser or brand pays or gives a blogger something of value to promote their product to the blogger’s audience, the blogger should clearly and conspicuously disclose that relationship to its readers with a statement like “Company X sent me [name of product] to try, and I think it’s great” or “This post has been sponsored by Company X.”

This post was originally written for The Bloguettes.