Here’s a quick disclaimer. This is not specific legal advice, this article serves as an educational resource only. You should always speak to an attorney about your specific situation to get the best advice for you. If you’re looking for representation you can contact me here.

Contests and sweepstakes on social media can feel like a goldmine- free or low cost exposure to people through their friends and family? What better way to reach new customers is there?

Social media contests are so ubiquitous that it seems like there must be nothing to them: you have a contest, pick a prize, pick a winner, and you’re done! But they’re not really as simple as they seem. 

Plenty of internet contests have gone wrong due to a lack of preparation, foresight, or luck.

The UK’s Natural Environment Research Council launched an online poll to name a research vessel, and the public popularly voted for the name Boaty McBoatface. Funny, but not helpful to the NERC.

Taylor Swift set up a contest to perform at the U.S. school that earned the most votes, and the internet took over. If Taylor Swift had followed through on the results of the contest she would have been performing at a school for the deaf.

A small regional paper company with a whimsical manager ended up paying out five winning tickets to a single client and took a hosing after failing to limit each contestant to one winning outcome.

Failing to take into account the mechanics of running a contest, the details of who the winner will be, how they will receive their winnings, and what the legal implications are can lead to embarrassment at worst, and lawsuits at best. These notes should help get you thinking about how to run your upcoming contest or sweepstakes.

Big Picture Questions
Before getting into the nuts and bolts of how you should run a contest you should ask yourself why. Will this bring new customers? Will this educate consumers about how to use your product? Will a new product be developed from this contest? 

• Will this contest fit into our mission and values?
• Do we have a brand media strategy that is prepared for a contest?

If you’ve thought long and hard whether this is a must for your company, then you’re probably ready to hear about what running a contest will entail.

Hiring Experts
You might be considering hiring an outside company to help you with your contest, or maybe you’re hiring new team members. Here are some points to suss out with the potential hire.

• Do they know what they’re doing?
• Have they done it before?
• What info are they collecting and how are they using it?
• Are the right agreements in place, NDA, security?
• Are they big enough to indemnify you?

Perhaps most important question for shopping out consultants is, “Are they big enough to indemnify you?” If they fail to perform on their contract; if they can’t provide adequate security for attempts to manipulate the contest; if a consumer sues; if the FTC sues – your indemnity contract means nothing when they are unable to actually financially support the indemnification. 

Contest Formats
How should your contest look? Is it a “share for an entry” post? A luck of the draw game? Customers will be quick to point out flaws in your contest if you fail to run a fair contest. Here are some considerations for various forms of contests and sweepstakes. 

• Avoid voting
  • Voting fraud at worst, customer complaints at best
• Contests of skill that require specific criteria are good options to limit your liability
  • Ex. Highest score in a game
  • Ex. First to get all questions correct
• Vague criteria can be good to create wiggle room for the outcome, such as artistic contests where a panel of employees judges entries based on:
  • Visual appeal
  • Innovation
  • Feasibility
• Don’t accidentally encourage fake accounts – you could end up violating a platform’s terms

You want to make sure that your customers and participants in the survey believe that you’re trying to hold a fair contest that engages them in the game.

Dealing with Winnings
You’ve determined who’s going to run the contest. You’ve determined how the contest will be run. Now, you need to make sure your contest doesn’t run afoul of the law.

• If the winner gets over $600, you should issue a 1099
• If the prizes value over $5,000, in the aggregate, then you will have to register in several states for the contest to be legal in those states
  • Registration requires paperwork and bonds for the protection of consumers
  • Failure to register can result in penalties or bans
• Prizes must be described accurately
  • Approximate Retail Value must be accurate
  • Don’t be “cute” about it
    • The winner of a radio contest for “100 Grand” gave the winner a “100 Grand” candy bar
    • Toyota prize for most up-sells from waitress gave the winner a Toy Yoda

Winners
How you pick the winner is just as important as determining the rules for the contest. Make sure you put some forethought into how the winner selection will play out.

• When determining the winner, make sure to stick to the rules and process you set out at the beginning of the competition
• When notifying the winner, give yourself time – let them know they won, but don’t say what level
• Clear the winner
  • Ensure they meet qualifications
    • To that end, have entrants accept an affidavit of eligibility (usually very general)
  • Be wary of publicly seen winners, always investigate before publicly announcing a winner
    • Person with multiple warrants; person with face tattoos of swastika
• What is your plan for the winning entry?
  • Did you give yourself the rights to a commercial?
  • Can you use the winners entries in future marketing materials? How about the losing entries?

Some Final Notes and Best Practices

• Have a contingency plan
  • What will you do if a piece of the contest fails?
• Formal rules are the terms of a contest
  • Can’t stop a lawsuit but solid rules can be a strong defense
  • Must include the rules at all relevant points
    • Ex. No purchase necessary, legal residents of the 50 states and DC, 18 or older, ends on xx/xx/xxxx. to enter and for official rules including odds and prize description visit URL. Void where prohibited.
• Check platform rules
  • Twitter, Google+, Facebook, etc. (email is also a platform)
• Be clear in your rules
• Never change the rules once the contest begins
  • If someone gets upset over the change you could face a lawsuit
  • You could no longer have a contract because you have an entrant who is in a contest without having agreed to new terms
• Be prepare to send takedown notices for creative entries that infringe on others’ intellectual property
• If you design a contest to be ugly, it will get ugly
• Be prepared to address concerns of winners
  • Ex. If there’s supposed to be one winner, but somehow multiple winners occur, you’re still responsible