It’s important to ensure that the promotions you run are in compliance with local, national, and international laws. Failing to do so can result in fines, penalties, or even lawsuits! That’s why it’s essential to understand the laws that apply to giveaway promotions before yours goes live. Here’s what you need to know to run a successful giveaway campaign in the United States.
What’s a Giveaway?
It’s incorrect to call a giveaway a contest because the prizes are not being awarded based on merit. Giveaway is not a legal term, but the closest equivalent is a sweepstake where entrants win a prize randomly. You can use the term giveaway for promotion, but the term sweepstakes should be used for your rules and regulations.
The “No Purchase Necessary” Rule
One of the most basic rules for any sweepstakes is that no purchase is necessary to enter. You can set it up so people that make a purchase are automatically entered, but you must also have a way for people to enter that do not make a purchase. It’s important to make sure that the “no purchase” entries are easy to do, and not intended to discourage participation.
How Much Can You Give Away?
There is no legal limit on how much you can give away, but the higher the amount the more complicated it can get. For example, if your prize is worth more than $600, you must file a 1099 form with the IRS. New York and Florida require that you register and bond your sweepstakes if the value of your prize is $5,000 or more.
The Sweepstakes Rules Page
You must have a prominently displayed rules page with the following information clearly presented:
How to enter the sweepstakes with and without purchase;
- The prize and its value;
- Start and end date;
- Date winner will be selected;
- Method for selecting winner;
- Eligibility criteria (such as over 18;)
- How the winner will be announced.
You may not change your rules once they are posted, absent a global catastrophe.
Giveaway Do’s and Don’ts
DON’T charge a fee to enter
Charging a fee converts your sweepstakes into a lottery, which has extensive and rigid laws and regulations that you’re better off avoiding. This means that you can’t charge for shipping or handling.
DON’T giveaway these products
Giving away alcohol, tobacco, gasoline, insurance, or financial seminars is fraught with restrictions and regulations. It might be possible to meet the specific requirements necessary for these products, but it’s not likely to be worth your time and energy.
DO generously validate entries
If an entrant makes a trivial mistake on the entry requirements, consider it valid anyway. For example, if entrants are asked to name their favorite song, but name a movie instead, consider it valid.
DON’T extend the deadline
The sweepstakes is a contract with its entrants and changing the deadline would be an improper modification. If your sweepstakes gets no entrants, start a new one.
DO award a prize no matter what
You are responsible for awarding the prize you announce. If a sponsor reneges on providing a product for free, you will need to buy it and provide it to the winner, so make sure that your contract with the sponsor is solid.
Don’t Assume It’s Legal Because Others Do It
You’ll see some giveaways that provide ways to earn additional entries by doing extra things. This is illegal! You cannot prefer one type of entry over another. It’s always best to keep your giveaway as simple as possible to avoid legal or regulatory problems.
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