No Purchase Necessary Laws and Your Sweepstakes

Sweepstakes and contests can be an effective way to achieve your business and marketing goals. However, there are many different legal considerations when running a contest or sweepstakes. In the United States and many other countries, contests, sweepstakes and giveaways that include a prize are subject to strict legal scrutiny.

One of the most important legal factors to keep in mind when running a sweepstakes or contest is No Purchase Necessary Laws. These laws regulate how consumers are able to enter promotions where a payment or consideration is part of an entry method, and they ensure that there is a level playing field for all entrants. Without proper legal administration, your promotion could violate the law or be considered an illegal lottery.

What are No Purchase Necessary Laws?

No Purchase Necessary Laws are enforced by State Attorneys General, the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), and even the United States Postal Service (USPS). These laws and regulations govern promotions with a prize and draw boundaries around entry requirements to create equal parity forall who wish to enter. Promotions with a prize, such as sweepstakes and instant win games, cannot require a purchase to participate unless there is another way to enter. Requiring a purchase could violate these federal and state laws and could result in fines, and other legal consequences.

What is a Lottery?

A lottery is a promotion that requires entrants to make a purchase or requires a significant amount of consideration to win a prize. This includes paying for additional or improved chances of winning.

In the United States, lotteries are generally run by state governments or Native American Tribes and operated as a means to generate revenue – such as for schools or social services. Outside of government or tribal run lotteries, any promotion that follows this structure is illegal. To help you understand how to structure a promotion that does not constitute an illegal lottery, we’ll walk through these three key points that identify a lottery:

1. The promotion gives entrants a chance at winning money or a prize with value.
2. Winners are selected by chance, at random.
3. Participants must make a purchase or provide some other type of consideration.

What is Consideration?

Promotions that require a purchase to enter and have no free way to enter are referred to as lotteries. I. Lotteries are legal; however, they are strictly regulated.

Consideration is a legal term that means the exchange of something of value and can be either a monetary provision or non-monetary action.

Monetary - Financial contributions such as purchasing a product, buying a ticket, or paying for general entry into the promotion.

Non-Monetary - Steps for entry that require a significant amount of time or effort. Examples might be asking entrants to visit multiple locations that are far away from each other, generate content using the products of the sweepstakes sponsor, or sit through a long sales presentation. There are many other actions that could rise to the level of “consideration” and an experienced promotion lawyer can help you make that determination.

To avoid violations of No Purchase Necessary Laws and ensure a legally complaint promotion, you must remove one or more of the elements above that define a lottery. By walking through the types of promotion campaigns you can run, we can outline different ways to avoid hosting an illegal lottery.

Running a Giveaway / Sweepstakes

Sweepstakes and giveaways are a type of promotion that can easily circumvent No Purchase Necessary laws. What distinguishes sweepstakes and giveaways from an illegal lottery are three key features.

• All entrants, regardless of making a purchase or not, are given a chance at winning the prize.
• Winners are selected randomly.
• There is an option for anybody to enter the promotion without making a purchase or providing consideration.

Notice that while this closely resembles a lottery, there is a clear distinction. No purchase is necessary to enter the promotion, and every entrant is given equal opportunity to win, regardless of monetary factors. This is what separates a legal sweepstakes from an illegal lottery.

Running a Contest

Contests differ from sweepstakes and giveaways because the winners are not chosen at random. They typically require a level of skill on the part of the entrants. For a promotion to be deemed a contest, winners must be chosen on merit or skill rather than randomly. Contests are judged using specific criteria by either the sweepstakes sponsor, specialized judges, or a sweepstakes administrator such as Realtime Media (RTM.com). You can even incorporate public voting on a subset of the best entries, in certain circumstances.

To view some of the contests that RTM has worked on in the past, go to our case studies page. Below are the most common forms of contests that are run by companies:

• Photo Contests
• Video Contests
• Recipe Contests

Contests can be an effective way to promote your brand. Contests can encourage users to interact with brands' social media channels and create User Generated Content that you can later leverage. Expanding your reach to new audiences while remaining genuine and interacting with your customer base are ways in which running a contest can help impact your goals.

If your promotion is a deemed a contest where the best entries will win or the most skillful wins, you do not need to worry about the No Purchase Necessary laws and running an illegal lottery because the element of “chance” in selecting the winners is not present; accordingly, you could require a purchase or entry fee. However, you should still think about whether it seems like a good idea to have a contest that requires some sort of purchase and solve for that. The Realtime Media team can help you come up with creative and effective solutions. Alternate Means of Entry (AMOE)

While it is illegal to require a purchase to enter a promotion there are still ways to encourage your customers to make a purchase. One of the most effective ways to work with the no purchase necessary laws is by using an alternative method of entry, or AMOE.

If you want your entrants to take purchase related actions, like using a special code printed inside product packaging, or uploading and validating a receipt of their purchase for entry, you also need to use an AMOE to giveall users an equal chance in winning a prize; otherwise your risk violating federal and state laws. An AMOE is an easily accessible way to enter the game of chance promotion without being required to make a purchase.

AMOEs take different forms, but most often, they exist as mail-in-entries. Interested consumers will find an address in the official rules or terms and conditions of the promotion and can mail in an entry. From there, they will be entered into the promotion, regardless of whether or not they made a purchase. It’s important to note that AMOE entrants should have the same odds of winning a promotion as a paid entrant, otherwise your promotion could violate no purchase necessary laws. Realtime media can help guide you to ensure fairness and “equal dignity” in your promotions.

For more information about AMOE, read over one of our alternative method of entry blog posts.

No Purchase Necessary Laws in the United States – state-specific rules

No purchase necessary laws in the United States vary from state to state. It is important to consider where your promotion is running so you understand which laws apply to you. In most states, if you are running a skill-based contest, a purchase or other form of consideration may be fine.

While this is true the majority of the time, there are exceptions. Colorado, Maryland, Nebraska, North Dakota, and Vermont do not allow purchases for entry for most contests and all sweepstakes. It’s important to properly understand sweepstakes laws by state, if you need assistance with your sweepstakes, contact our sweepstakes lawyers at Realtime Media.

Who Regulates Promotions in the US?

State Attorneys General

The majority of regulation and enforcement of promotions is done by state attorneys general. Each state's attorney general enforces state laws governing sweepstakes and contests. These laws often require sweepstakes to clearly disclose that no purchase is necessary and to adhere to transparency standards. They generally act on complaints from consumers. Actions can range from a simple letter of inquiry concerning a consumer's complaint to a cease and desist to hefty monetary penalties.

The Federal Trade Commission

The Federal Trade Commission or FTC is a government body whose primary purpose is to promote and protect consumer welfare and ensure fair competition in the marketplace. The FTC conducts investigations based on many factors, including consumer complaints. This includes investigating complaints of deceptive practices related to promotions that are in fact illegal lotteries. For any promotion that you run, the FTC will enforce no purchase necessary and other laws to ensure that your promotionis fully compliant. Perpetrators can be warned, fined, prosecuted, charged, and penalized by both the local and federal government.

It’s important to ensure that your promotion is fully compliant with all applicable laws to prevent legal complications and consequences.

The Federal Communications Commission

The Federal Communications Commission or FCC regulates promotions conducted via radio, television, or other communication mediums. The FCC has the authority to cease any advertising that could be promoting illegal lotteries. Additionally, they prevent advertisers from marketing deceptively. This could include misleading advertising or misleading messaging about prizes.

Quick Recap: No purchase Necessary Laws and AMOE

Promotions can be a very effective marketing tool to drive you towards your marketing and business goals. However, there are many different laws and regulations to consider before running your promotion. It’s important to understand topics such as sweepstakes laws, promotion laws, and other legal barriers that could negatively impact your company’s reputation or create legal problems for your business.

No Purchase Necessary Laws protect customers. Alternate Method of Entry can be an effective way to both drive purchase and stay legally compliant. If you require assistance with AMOE for your promotion, contact our sweepstakes administrators at Realtime Media. At Realtime Media we facilitate all aspects of promotions, from contests to sweepstakes and other brand activations. Our expert legal team can help. Reach out today for assistance.