The Laws on Contests & Sweepstakes

One great way to grow your business is to offer a contest or sweepstakes to current and potential clients. It creates interest in your products or services and generates valuable word of mouth. Before you begin advertising your contests and sweepstakes, however, you should be aware of the laws that regulate them. Failure to comply with the laws regarding concents and sweepstakes could land you in a heap of legal trouble.

First of all, you need to understand the difference between a contest and a sweepstakes. A content is a game in which entrants submit something that requires a skill, such as a short story or a drawing. The entries are judged based on predetermined criteria, and winners are selected by a single judge or a panel. A sweepstakes, however, is a game in which no skill is necessary, and winners are selected by random lottery. Names can be drawn out of a hat or selected through a computer program - there are many choices. Since contests and sweepstakes are obviously different, so are the laws that govern them.

The Federal Trade Commission is responsible for the regulation and investigation of games such as contests and sweepstakes. There are plenty of U.S. laws which refer to these types of games, but individual states also have their own regulations. For example, some states require that businesses register games whose prizes exceed $5,000 in value. Others require that contests and sweepstakes be registered regardless of the prize.

If you are considering running a contest or sweepstakes through your business, it is important to contact an experienced attorney who can guide you through the process. He or she will be able to provide the necessary paperwork. Some states require that you pay a fee in order to register a contest or sweepstakes, while others do not.

Next, you must consider the rules of the contest or sweepstakes. The more explicit, the better. It is almost always advisable that you hire an attorney to draft the contest or sweepstakes rules so that you can be assured that all your bases are covered. However, here are several of the basics that your contest or sweepstakes rules must cover:

1. How to Enter. You must be able to tell your contestants how to enter. Unless there are entry fees (which are also regulated), you should state that there is no purchase necessary for entry. This section should also include geographical boundaries for entrants (i.e. citizens of the U.S.; citizens of the state of Texas) and any limitations for people who might want to enter (i.e. employees of your company). Most states also require that you include an age limit for entry, which must be over the age of thirteen in most states. Some contests and sweepstakes require that entrants be at least 18. You should give the place and deadline for contest or sweepstakes entries and any other pertinent information.

2. Prize List. The second section of your contest or sweepstakes rules should include the exact prizes to be awareded, where they will be awarded and on what date. You should also state that prizes (unless monetary) are not redeemable for cash and must be accepted as-is.

3. Advertising Disclaimer. Since you are running the contest or sweepstakes in order to promote your business, you will probably want to use the winner in future advertising. The contest or sweepstakes rules should include a clause that grants your company the right to use the winner(s)' names, likenesses, photographs, etc. for use in advertisements and/or informational materials. NOTE: You will probably also want to get your winner(s) to sign a waiver before they accept the prize that states their agreement to this affect.

4. Liability Clause. You should also include a clause that waives liability for any injury or damage to persons and/or things as a result of the acceptance of the prize offered. This protects you and your company from litigation in the event of an accident.

5. Number of Entries. If you are going to allow multiple entries to your contest or sweepstakes, this section is not necessary. However, if you are limiting the entries, you must state the number of entries allowable per person. Otherwise, if someone wins after submitting more than the alotted number, you will still have to award the prize accordingly.

6. Contest/Sweepstakes Rules. Since most contests and sweepstakes are advertised on websites or in promotional materials, you should give people an address for the mailing of requests to see full official rules and guidelines.