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BUSINESS LAW TODAY
Re-Gramming, Hashtagging, and Like-Gating:
Sweepstakes in the New Digital Age, and How
New Laws May Actually Improve Your Promotions
By Tsan Abrahamson
The basic tenets of promotions and advertising law have remained relatively static for
decades. The widespread use of handheld
digital devices and social media as a contest
and sweepstakes delivery platform, however, is a proverbial game-changer, opening
companies to both new and exciting ways
to reach consumers, but also to potentially
greater legal liability (and perhaps even social suicide) if they don’t set up their promotions properly. State attorneys general, the
FCC, the FTC, and social media platforms
are catching up to creative marketers who
are using new technologies, and we are all
reinterpreting the old statutes. Even for the
seasoned sponsor, the new world order can
mean encountering new barriers to creating platform-compliant and legally sound
promotions.
The concern over new legal developments
in a changing world is not new. With each
development in technology comes the initial
hysteria around how companies can comply
with new “outrageous” rules. And while new
rules often result in frantic responses from
marketing departments, history tells us the
sky isn’t actually falling, and won’t. In fact,
navigating through the myriad new guidelines may be tedious, but the new landscape
may actually facilitate increased participation in promotions. Moreover, compliant
companies who think critically and creatively about how to manage promotions and adhere to new guidelines may actually increase
customer satisfaction, and drive sales.
The Old Rules Still Apply
The new digital paradigm has left standing the same old rules on contests and
sweepstakes. A contest remains a game of
skill, which means chance elements must
be minimized or eliminated for the contest
to be legal. A sweepstakes is still a game
of chance, meaning the winner must be
drawn randomly, and – effectively – without a measure of skill or significant forms
of consideration (some states confine consideration to monetary payment, but many
states construe consideration more broadly
to include a benefit to the sponsor or a detriment to the entrant). The digital world did
not change the basics, but as new technologies emerge, the rules require new interpretation and clarification.
Adapting to a Smartphone World
The issue of consideration has resurfaced
in the new age of smartphones and social
media. In the late 90s when the World Wide
Web began to appear on desktops everywhere, and Internet connectivity was largely
available (but not ubiquitously utilized), lawyers debated whether allowing only online
entries constituted a form of consideration
because the enticement of the prize would
compel a consumer to buy a computer. Most
attorneys recommended to their clients that
Internet-only sweepstakes also offer an alternate method of entry (AMOE), such as a
call-in number or a mail-in option.
The issue of Internet connectivity being
a form of consideration is largely now put
to rest, and the pervasiveness of Internet
availability to all through low-priced inhome connections and public locations like
libraries means companies no longer have
to provide a mail-in alternative to the Internet promotion. Nevertheless, smartphones
and social media have raised new questions
about consideration.
Consumers without Internet connectivity
can walk into any library and use a comput-
Published in Business Law Today, September 2015. © 2015 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any
portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
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er for free to enter an online promotion, but
if a promotion is offered through an app,
or if the promotion requires the entrant to
take a photograph using his or her smartphone, does a company have to offer an
AMOE? Additionally, some social media
platforms, like the immensely popular Instagram and Snapchat, only allow consumers full use capacity through an app on their
smartphones.
And while Internet connectivity can be
attained for free, many smartphone owners
have data plans that charge for connectivity. Does the cost to the consumer of entering the contest or sweepstakes from a
smartphone constitute consideration sufficient to warrant an AMOE? What about the
requirement – by itself – that the consumer
own a phone, or download the app to his
or her smartphone in order to enter? Would
such an act be considered consideration under state law? The devil is often found in
the details of the promotion.
While reasonable minds can differ on the
answers to these questions, many promotions attorneys counsel their clients that
the mere taking of a photograph, the downloading of an app, or the use of some of a
consumer’s data is not likely to trigger consideration concerns in most cases, and thus,
an AMOE is not warranted. There are some
notable exceptions to this general rule.
If a promotion sponsor receives a direct
financial benefit from smartphone data use
(such as a telecommunications or phone
company), an AMOE should be considered.
Promotions requiring a paid app should
also offer an AMOE, or should be limited
to entrants who downloaded the app prior
to the start of the promotion. If a promotion requires the download of an app plus a
substantial sign-up procedure, has a lengthy
unsubscribe process, or requires consumers
to enter a credit card in order to complete the
sign-up, offering an AMOE is appropriate.
Companies also frequently fail to align
their smartphone promotions with their
online privacy policies. Many smartphone
promotions require consumers to take a
picture (such as a “selfie”) that the sponsor
may store and use in subsequent advertising, yet the company’s privacy policy often
provides that no personal data will be used
or kept. Similarly, in geofencing promotions where location data from an entrant
will be taken by the sponsor, consumers
often need to opt-in to terms specific to the
promotion, because most privacy policies
do not cover this option.
The nature of the promotion can trigger
multiple issues. For example, selfie promotions, especially those that require an entrant to take a picture with the sponsor’s
product could trigger consideration issues
as well as privacy issues. And some people just don’t want their face plastered on
a company website, notwithstanding their
loyalty to the brand. Companies can respect
consumer privacy concerns and eliminate
the potential consideration element by offering – as an AMOE – the option of taking
a photograph of the product in a store, or
lifting it from the sponsor’s website.
Vote Farming, Incentives, and Texting:
Inadvertently Creating an Illegal
Promotion
Sponsors want social engagement. Consumers want legitimate promotions. The two can
clash.
Companies that offer skill contests on social media often run afoul of both the law
and consumer confidence when public voting determines the winner. Most states require contest entries to be judged by qualified judges, and the general public may not
satisfy the requirement.
Public voting, therefore, often means the
winner is chosen by popularity (which is
not the skill being tested; in fact, it’s not
a skill at all). Winning by popularity also
encourages “vote farming.” Vote farming is defined as soliciting, or farming
for, votes using social media, e-mail, and
other means, without regard to the judging
criteria. Indeed, if the prize is significant
enough, some entrants will hire third-party
search engine optimization companies to
solicit even more votes.
Many companies have felt both the legal
and perhaps worse, the social wrath of vote
farming. The perception by legitimate entrants that they never got a fair shot to win
can lead to resentment of the brand, which
can go viral and reduce the credibility of a
company quicker and with more devastating
consequences than an attorney general’s investigation. Recently, the Coca-Cola Company stripped an adjudicated winner of his
prize when it discovered that he had been
vote-farming. The winner (an attorney) did
not dispute he had engaged in the practice,
but argued that the rules of the promotion
were ambiguous and therefore allowed the
practice. While the company risked being
sued by the winner, it chose to take that
chance in favor of its fan base.
Companies who want to involve public
voting in a skill contest have a number of
options to avoid potential liability. At the
outset, all promotions rules should have a
clause prohibiting unfair play and specifically, vote farming. Public voting can be used,
but only for a “people’s choice” award that
gives the winner bragging – not significant
financial – rights. Another solution that can
help to reduce liability is to sandwich a public voting round between a sponsor’s initial
screening round and a final round, also conducted by the sponsor (and, thereby, qualified judges). In this way, the public round
does not determine the either the finalists, or
the final winner.
Such adaptations greatly reduce the likelihood of an illegal lottery or a PR problem,
and they also can serve to give the sponsor
a better outcome, because it has a say in the
winner. The makers of Mountain Dew found
out the hard way what total consumer choice
means. The company was determined to give
their loyal fans full control over the name
of the company’s new soda flavor. Without
corporate intervention, the edgy consumers chose “Hitler Did Nothing Wrong” and
“Diabeetus” as the winning brand names.
Had the sponsor limited the public voting
to names the company considered reasonable by conducting an initial screening process and/or determining the final winner, it
would have gotten more useful submissions.
Smartphones and the Telephone
Consumer Privacy Act Trigger
Smartphones opened the door to text messaging promotions, and marketing teams
went crazy for them. Text promotions al-
Published in Business Law Today, September 2015. © 2015 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any
portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
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low companies to instantly offer a promotion, pop-up style, and directly connect
with their consumer base to deliver promotions, coupons, and other marketing material. Marketers took advantage of a legal
ambiguity that allowed sponsors to reach
out later via text to entrants for marketing
purposes. On October 16, 2013, the ambiguity was clarified and the loophole closed.
The FCC clarified that auto text message
communications are not like e-mail communications. Auto-text messages (those generated by a machine, like a “call to action” to
enter a promotion or to receive a coupon)
fall under the Telephone Consumer Privacy
Act (TCPA). Under the TCPA, companies
must have prior written consent from a consumer in order to send a commercial text.
The FCC also made clear that mobile numbers collected prior to the clarification were
not grandfathered. The week before the effective date of the clarification, consumers
received a flurry of text opt-in requests.
Those companies that did not know about
the change and who failed to text such requests in time were forced to clear their collection of mobile numbers completely and
use another format (like e-mail) to contact
consumers for the opt-in. This single change
has not only brought about significant federal enforcement and class action activity in
the past year-and-a-half, but also changed
the face of promotions on smartphones.
To be clear, the FCC does not consider a
consumer to have opted-in to receiving text
messages if a company merely changes its
privacy policy and then requires a consumer to accept the change, or if it merely adds
texting language to its sweepstakes rules
and requires the consumer to accept the
terms. Specifically, the FCC requires the
opt-in to be specific to receiving text messages, and will not allow companies to use
text in order to get that permission.
As a result of the foregoing, some companies have resorted to using push notifications within an app to administer promotions. Push notification do not at this time
qualify as text messages. Companies who
want to continue to use text technology for
promotions should as a threshold matter
allow entry online and use the online me-
dium to get consent to text at a later date.
The FCC recently settled a TCPA violation
case for a record-setting $75 million, and
the reports of increasing policing in this
area continue to grow.
Hashtagging is the New Astroturfing
The social media promotions craze is not
likely to slow down soon, largely because
millennial consumers prefer social media brand recommendation of friends over
standard corporate advertising, and utilizing consumer recommendation is far less
expensive than corporate media campaigns.
Indeed, the value of a consumer recommendation is so great, most companies have
influencers hawking their brands on social
media.
An influencer is a regular consumer sponsored in some way by a company (paid in
merchandise, product discounts, VIP treatment, or otherwise) to tout the virtues of a
product or brand. But if a consumer is getting paid to spread the gospel, is the message genuine, and does a fellow consumer
have a right to know? What if a company
is more concerned with positive online reviews than genuine ones, and is willing to
pay for them? The concept of creating a
disingenuous positive review is called “astroturfing.” State and federal bodies believe
it’s the newest form of false advertising,
and believe the practice damages legitimate
businesses and dupes consumers.
In 2014, the New York Attorney General orchestrated a sting operation against
a search engine optimization company for
creating fake positive online reviews in exchange for money. Most social media sites
now have updated their terms of service
regarding the practice of astroturfing (be it
from consumers or employees). For some
years, the FTC has been grappling with the
online endorsement craze and created the
“Dot Com Disclosures” guidelines to help
companies avoid an FTC inquiry for false
advertising. In 2013, the FTC applied its
disclosure standards to hashtag promotions.
The FTC determined that a Cole Haan
contest on Pinterest was problematic because it required consumers to create a
Pinterest board using the hashtag “#wan-
deringsole” (the company’s tagline) but
with no indicia that it was a contest. The
FTC found that without any indication that
the board was made for a contest, consumers would believe their friends were freely
endorsing Cole Haan without incentive for
doing so, which was not the case. The FTC
determined hashtag promotions should include words that made clear the post was
made pursuant to a contest or sweepstakes.
In 2015, the FTC further clarified its position, stating that adding the tags “#sweeps”
or “#spon” were insufficient to remedy
the problem, since consumers were not
familiar with those terms. Companies that
want to run hashtag promotions must now
make certain the term “#contest,” “#ad,” or
“#sweepstakes” is included in the public
facing promotion entry.
Always attempting to be one step ahead
of the rules, some companies have opted for
entrants simply to repost (re-gram, re-Tweet)
a company statement, hoping to avoid the
notice requirement. While the FTC has not
yet ruled specifically on whether such reposting content without a proper disclaimer
or notice is acceptable, the digital writing
is on the wall: if a consumer would not immediately recognize a social media action as
having been taken as a result of a sponsor’s
incentive, notice must be given.
This new guideline may be a blessing in
disguise to marketers, notwithstanding their
initial negative reaction to the mandate.
Identifying Pinterest boards, Facebook, and
Twitter feeds, Snapchat photos, and Instagram shots with promotions tags is likely
to prompt more curiosity from viewers, and
ultimately additional entries, all of which
leads to a deeper relationship with the brand.
Social Media Platforms Don’t Always
Play Along
Social media platforms have also gotten
into the promotions game, providing their
own guidelines for how promotions may be
administered on their sites. Some companies, like Twitter, take a laissez-faire route,
simply requiring companies to properly
disclose terms and conditions. Others, like
Facebook, have very specific requirements
that change frequently.
Published in Business Law Today, September 2015. © 2015 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any
portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
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Examples of such platform policy requirements abound. Facebook’s guidelines
have changed several times over the past 12
months, and its current guidelines no longer
allow promotion sponsors to require entrants to post commentary on their or their
friends’ walls in order to receive an entry
or to receive extra entries (requiring posting
on the sponsor’s wall is still fine). Facebook
continues to allow “like-gating” as a condition of receiving a sweepstakes or contest
entry, but does not allow like-gating for app
page incentives. Facebook also requires that
any company creating promotions on its
platform specifically and clearly disclaims
Facebook’s involvement. YouTube limits eligibility for entering a promotion on its site
to entrants 18 and older, despite the fact that
YouTube account holders can be as young as
13. Some platforms, like Snapchat, charge
for certain promotion types. The list of rules
grows as social platforms grow, and while
these platforms do not
As always, the FTC and AGs are watching trends on smartphones and social media. In a recent update to its “Dot Com Disclosures,” the FTC specifically called out
the practice by many companies on Twitter
of inviting consumers with one Tweet to
enter a promotion and using another Tweet
to direct them to the rules. Pointing out that
a consumer’s Twitter feed may not have the
two messages side-by-side, the FTC wrote
the practice violates its mandate that ap-
propriate disclosures must be “as close as
possible” to the call to action. To remedy
this, some companies (like Macy’s) have
a Twitter feed dedicated to promotions in
which the consumer can always click on
rules. The FTC has also made clear that
the smaller screen size of smartphones and
tablets does not excuse the requirement to
disclose terms and conditions. If the size of
the screen or social platform limitations do
not allow a sponsor to fully disclose relevant terms to a consumer, then the platform
is not appropriate for the promotion.
tential social and legal landmines in a way
that confers real value to the client.
The sky is not falling, but it will continue
to cloud up from time to time. Each new
technology brings with it new ways to connect with consumers and no shortage of
marketing schemes to maximize a brand’s
social significance. “No purchase necessary” is still the cornerstone of the sweepstakes world, and promotions will continue
to push the envelope. The trick is to keep
calm and ask your teenager what he or she
is doing, before your client calls.
Don’t Counsel if You Won’t Play
Tsan Abrahamson practices at Cobalt
Law, LLP, in Berkeley, California.
The digital era brings with it one more
development: the risk-taking marketer.
Notwithstanding the potential hot water
companies can get into for violating these
consumer protection guidelines, many companies prefer to continue outdated (and
potentially risky) practices because they
believe the potential viral benefits of a promotion outweigh the possible liability. Lawyers should be grateful for these risk-takers,
because they often refine the law for other
more risk-averse clients, but they can be
hard to advise. For the practitioner, it may
mean working with clients to reduce – even
if we cannot eliminate – potential liability,
and that means practitioners must fully understand the proposed social platform. Getting one’s hands dirty at a practical level is
the only way to guide clients through the po-
ADDITIONAL RESOURCES
For other materials related to this
topic, please refer to the following.
Business Law Today
The Promotion that Went South
A look at the hazards of product sweepstakes and contests
Volume 15, Number 6,
July/August 2006
By Tsan Abrahamson
Published in Business Law Today, September 2015. © 2015 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any
portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
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