Is Your Upcoming Promotion Legal?

Good promotions can go hand in hand with your company’s marketing strategy, but promotion can have drawbacks of its own. One Florida Hooter’s restaurant discovered this in a very public manner. In 2002, a Panama City waitress won a beer sales contest the restaurant was holding among its staff members. The prize was supposed to be a Toyota. Management escorted her to the parking lot blindfolded to reveal her new prize, but when the blindfold was removed, she was handed a toy Yoda doll from the Star Wars movies instead of a new vehicle. She sued the restaurant and settled for quite a bit of money because the contest was handled inappropriately. How can your upcoming promotion avoid the same fate?

Prize, Consideration and Chance

To be considered legal, promotions cannot create a lottery. Those include three elements. The first is the prize itself. Then comes the consideration, or payment. Chance is that third element. It works like this. The participant pays for an opportunity to win a prize. So, if your participants must buy a product from you to be entered into a drawing, you’ve created an illegal lottery. To eliminate that possibility, then, you have to dump one of those elements. Obviously, the prize probably shouldn’t be the one you dump. Instead, offering another way for participants to enter without the need for payment has to be a possibility. Alternately, ensuring everyone who pays for a product receives an item is also an option. This way you’ve created a premium item giveaway where everyone gets the same thing which eliminates the need for a random drawing. Taking away the random drawing element removes the “chance” element.

Are There Other Legalities Involved?

While ensuring you haven’t created an illegal lottery is the primary thing to avoid, there are other things to watch. There are state laws that govern promotions. Some states require that prizes over a certain amount must be registered with a state regulatory agency. Platforms like Facebook also have specific requirements.

Promotions can be a great way to attract customers, but they can create real problems for your brands. When you’re ready to get serious about your company’s promotions, contact us.