Sweepstakes promotions can be a legal gamble

A lot of consumer companies market their products with sweepstakes or other games. But as the A&P grocery chain found out recently, there are a lot of legal issues that shouldn’t be left to chance.

The grocery company offered what it called the “A&P Frozen Food Month 2013 Sweepstakes,” and advertised that customers who bought $50 worth of frozen-food products would automatically be entered in a contest to win $350 gift cards.

The New York Attorney General’s office complained. In the end, A&P settled the case by paying more than $100,000 in fines and hiring a new compliance officer.

What did A&P do wrong?

The law says that there are two types of contests: those involving skill (such as a bowling tournament) and those involving chance (such as a sweepstakes or a random drawing).

If a for-profit company offers a prize to the winner of a random drawing, that’s technically considered a “lottery,” which is illegal. The only way to avoid being designated a lottery is to make the contest completely free to enter. But if a consumer can’t enter without buying $50 worth of food, then the contest isn’t free.

Now, A&P actually did allow people to enter the contest without buying any food. It said so in the fine print of its sweepstakes rules, which were published online. However, because the information appeared only in the fine print and wasn’t posted in the grocery stores where the contest was advertised, New York said this wasn’t good enough.

Another legal problem that sometimes comes up in consumer contests (but wasn’t involved in the A&P case) occurs when a company offers a third party’s product as a prize. For instance, some smaller companies might want to run a contest in which the winner gets an iPod or a gift certificate to Starbucks.

But if you do this, it’s very important to get the third party’s permission to offer the prize and to use its name in the contest materials. Otherwise, you might have violated the trademark rules.

Many companies are quick to complain about the use of their products in contests. While you might think they’d be flattered, in fact they’re very worried about being associated with contests and advertising materials over which they don’t have control.

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