Contests and giveaways are a sure-fire way to grow your brand, business, and audience efficiently.
Almost anything goes with a contest or giveaway as you can host them anywhere and choose a prize for your liking.
However, you will still have to be cautious when hosting them.
Your campaign has to comply with the law.
You can set the rules for your contest or giveaway, but you will still have to make sure that you are not going against the law.
This article has a quick overview of the most important legal requirements regarding contests and giveaways, which will help you get a better understanding of the law when you host your next campaign.
Types of Giveaways
You should always specify the type of promotion that you are hosting. If you are hosting a giveaway, then make it clear to participants that they are entering a giveaway.
If a person enters a giveaway, only to find out that they are now required to compete for the prize, it can potentially eliminate any trust you had with that person.
There can also be legal repercussions for not clearly stating the type of promotion you are running (or for falsely stating the promo type).
The most common types of promotions are:
People enter sweepstakes so they can stand a chance at winning a prize. The winner of a sweepstake is, for the most part, chosen out of a lucky draw (or picked out at random).
There is no entry fee for sweepstakes, nor are people required to purchase something to enter.
The common (or most popular term) for sweepstakes is a giveaway. It’s common for brands to host giveaways because of its popularity on social networks.
If you are looking to host a giveaway of your own, it’s crucial that you Do Not charge people to enter.
You should host a giveaway that allows people to enter for free. There are various entry methods that you can use, which will be covered in more detail in this article.
People take part in contests to compete with one another with the hope of coming out first and winning a prize. In most cases, a winner is determined by their skill or effort made to reach the first place.
With a contest, people upload media such as a photo or video as an entry method. A winner is usually determined by skill or merit.
Unlike giveaways, contests do not work on chance. Contestants must apply their skills and expertise to be able to compete with other contestants.
Unlike giveaways, some contests will require users to make a purchase before they can enter. Starbucks famously held a ‘white cup contest’ that required users to doodle on an empty coffee cup that they purchased from the store.
Want to learn how to create your own viral Facebook contest?
A lottery is a prize drawing that requires a purchase or payment to enter. In other words, people will have to buy a chance to win the prize.
Lotteries are considered to be highly regulated. Most private lotteries are illegal by state law.
Because lotteries have substantial cash prizes, there is room for fraudulent activities. Because of this, it is recommended that you don’t host your own lottery and use a giveaway or contest instead.
No Purchase Necessary Laws
When setting up your next campaign, you must ensure that you are not in violation of any No Purchase Necessary Laws.
These are laws that prevent brands from requesting a purchase or payment from users to enter the contest.
This also applies to other forms of consideration, such as monetary and non-monetary (time and effort put in by entrant that benefits the sponsor).
- Giveaway (sweepstakes) – A campaign in which the winners are picked at random. You are prohibited from requesting entrants to make a purchase.
- Contest – A campaign in which winners are picked based on merit and are also skill-based.
So, when hosting a giveaway, it’s crucial to set up a non-monetary entry method. You, as the sponsor, cannot benefit financially with every giveaway entry.
With a contest, you can ask for purchases or other forms of consideration. For example, a Facebook photo contest that requires all contestants to submit pictures of themselves using your product.
In this case, contestants will have to purchase your product so they can combine it with their skill to take part in your contest.
AMOE – Alternate Method of Entry
Sweepstakes in the US are required by law to have an Alternate Method of Entry (AMOE or Alternate Means of Entry).
If the sweepstakes do require a purchase to gain entry, then the rules must also list a ‘no purchase’ (AMOE) entry method.
Some of the most common AMOE is:
- Mail – In the past, people used to physically mail letters or entry forms to the brand’s PO Box address. Now, people can simply email their entries to an email address that is set up to receive entries for the promotion.
- Phone call and text – Another popular entry method from the past that is slowly phasing out. This method allows people to gain entry by phoning or texting the brand that’s hosting the promotion.
- Social media – This entry method allows users to gain entry by engaging with your brand on social media. It’s one of the most popular and efficient entry methods, which is why most brands prefer this method.
- Online entry forms – People can gain entry to a giveaway by completing an entry form on a website.
- In-person entry – When people are allowed to submit their entry in-store or at an event.
It’s compulsory by law to include all alternate methods of entry in the rules of your sweepstakes.
Any user that uses alternate methods of entry to your sweepstakes must also have the same odds of winning as the rest of the entrants.
In the above giveaway, users can gain entry (and additional entries) for every person they tag in the post. The brand also clearly states ‘no purchase necessary’ in the post.
If you are unsure about setting up an alternate method of entries for your giveaway, then it’s best to simply run a promotion that does not require a purchase to enter. You can instead use other actions that are useful to you, like tag a friend in this post (from the example above) or visit our website.
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The Importance of Having Official Contest Rules
It is essential for any giveaway to have its own set of ‘official rules”.
Having rules will ensure that your giveaway runs smoothly. Rules can protect you, and even your entrants should an issue arise during or after the giveaway.
It is also essential that the rules are easy to find and not difficult to understand.
Official rules for a giveaway can be made up of rules set by you. However, the rules you set must comply with both the guidelines of the platform you are hosting the giveaway on (e.g. Instagram) and the law of your country.
Social networks like Instagram state that they will not be liable if an issue or dispute occurs during or after your giveaway.
Because of this, you should not rely on the social network to intervene during any issues or disputes.
Your own official rules will assist you in decreasing the risk of liability.
It is also crucial that you make sure you follow the rules of the law. Setting rules that are considered illegal in your state can impact negatively on your brand.
For this reason, it is advised to consider legal advice when establishing rules for your contest (or when drawing up terms and conditions).
What Do You Include in Official Contest Rules?
When creating the official rules for a giveaway, you should try and include the following:
- Giveaway dates. This includes the opening date and closing date of the giveaway, as well as the date when winners will be chosen.
- A description of the prize, including its retail value.
- Determine how winners will be chosen.
- Determine how winners will be contacted. For example ‘winners will be contacted via email.
- The platform will be used to announce the winners. This can be your website, social media, or an email sent to all participants.
- Contact details of the brand hosting the giveaway. This includes a complete name and address.
- The location where the giveaway is being hosted. Also, determine who will be able to take part in the giveaway (e.g. a giveaway that is restricted only to U.S. residents).
- Minimum age required to enter the giveaway.
- Determine how a winner will receive their prize and when. If you plan on delivering the prize to the winner, then specify the estimated time of arrival.
- When hosting a giveaway on social media, always state that the giveaway is in no way sponsored by that social network.
VYPER has a terms and conditions generator which can populate some general rules for your campaign. This will help cover the basics.
Q&A Contest Rules
No, you can not force someone to pay to enter a giveaway of sweepstakes as this would make your campaign a lottery that would be heavily regulated by state governments.
The laws around giveaways and contests differ according to state, country, or region. If you are unsure about the law regarding giveaways in your country, then it is best to seek legal advice first before you host a giveaway.
No, this will be in violation of the ‘No Purchase Necessary Law’ which restricts brands from requesting a purchase to gain entry. You can host a contest that requires people to purchase a product that will be used along with their skills to take part in the contest.
Contests and giveaways are fun and engaging campaigns that allow brands to grow their brand effectively. However, there are laws and regulations that you must abide by when hosting your campaign.
These are laws that are set by your country or state. You must research the laws and requirements around giveaways set by your territory before you start your next campaign.
NB. This post is meant to bring awareness to the laws regarding contests and giveaways. VYPER is not qualified to give legal advice regarding these laws. Its always recommended that you consult with a lawyer first before drafting out the rules of your contest or giveaway.
Jack Paxton is the co-founder of VYPER, a marketing tool that helps brands build email lists, social followings, and revenue using viral giveaways, referral, and reward programs. After millions of dollars spent testing different marketing strategies at his marketing agency. He then also co-founded Hyax a fast, conversion & design-focused course and funnel builder for creators.