Shelley Gregory, President of Media Matched, Inc.

Judging by the number of Americans who participate in sweepstakes and other promotional contests, a company owner wanting to generate business might consider hosting some type of giveaway contest as a promotion for its product or service. Advertising the contest can make the promotion even more effective, but a business owner should know the rules before initiating such promotions.

The Federal Trade Commission has federal oversight over contests on behalf of the tens of millions of Americans who participate every year. But the FTC also advocates for the public when the contests seem rigged and offers sponsors advice about how to run a contest without running afoul of the law.

The two most important aspects of the federal laws that pertain to contests are that the contest can’t be deceptive and participants must understand they won’t have to pay to participate — though the law does provide some exceptions to this latter rule.

Do’s and don’ts for contest sponsors

Specific rules spell out how contests can be pitched over the telephone or through the mails, airwaves or cyberspace. The Telemarketing Sales Rule, for example, outlines what can and can’t be said in a telephone solicitation for a “sweep” or contest; the company running the contest must reveal the odds of winning or explain how those chances are computed.

Solicitations sent by mail must abide by the Deceptive Mail Prevention and Enforcement Act. One no-no of snail-mail contests is telling people they’re winners when they’re not or sending something that looks like a check without clarifying that the check isn’t valid.

Many sweeps sponsors are drawing entrants via the Internet as costs to sponsors are minimal. Besides being required to comply with all federal and state laws that pertain to sweepstakes and contests, though, the business running an online contest must also comply with the Children’s Online Privacy Protection Act if children under 13 can participate.

The point of a contest is to select winners by chance; it can’t require that a contestant buy a product or pay a fee (including taxes or shipping and handling costs) to improve his or her odds of bringing home the prize. The law does allow sponsors of skills competitions to charge contestants to enter, but these types of competitions are poor venues for business promotions.

Legitimacy is everything

The last thing a business wants when planning a promotional contest is to get attention by breaking the law. So the FTC urges businesses to consult its website or an attorney in the state where it’s based for the freshest information about how to run a legitimate event.

Being and looking legit includes using the sponsoring business’s name in all solicitations of contestants. Besides identifying itself, the sponsor should provide participants an easy way to get in touch — including making contact to get their names taken off the mailing, emailing or telephone list.

The appeal — no matter what form it takes — should spell out the contest terms, deadline, rules and odds of winning.

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