• Collect entries by having users post on the Page or comment/like a Page post
• Collect entries by having users message the Page
• Utilize likes as a voting mechanism

As before, however, companies cannot administer promotions on personal Timelines. And companies must include Facebook in their release language and acknowledge that the promotion is in no way sponsored, endorsed or administered by, or associated with, Facebook.

There may be cases in which using an app makes more sense, but at least companies now have more options.

The entrant first asked the FTC for his entry’s grade, but the Commission declined to provide it. Then, he filed a FOIA request for the scores of all entries. The FTC provided score sheets for the seven finalists, but the entrant wasn't among the finalists. Then, the entrant tried to get more information from one of the judges. When that didn’t work, he filed a complaint with the U.S. Government Accountability Office. And now, he’s considering a lawsuit.

Contests can be a great way for companies to get creative ideas. But entrants get protective of their entries, and frequently complain (and sometimes threaten legal action) if they lose. Indeed, my dog recently won Best in Show in Kelley Drye DC's first Take Your Dog to Work Day. Rest assured that, if she hadn't, I would have sued the office managing partner.

Before you run a contest, take some time to think about how things can go wrong, and make sure you have provisions in the rules to protect your company. But even that may not stop complaints from disgruntled entrants. In those cases, your legal, marketing, and PR teams should work together to find the best way to make the problem go away as quietly as possible.

Effective April 26, 2013, nothing in the Vermont statute “shall be construed to prohibit a person from requiring or paying any kind of entry fee, service charge, purchase, or similar consideration in order to enter, or continue to remain eligible for, a game of skill or other promotion that is not based on chance.”

The line between chance and skill isn’t always clear, but if companies can get on the right side of that line, they’ll soon have more options for running promotions in Vermont.

The FTC recently investigated a promotion conducted by Nordstrom to promote the opening of a new store. Nordstrom provided social influencers with gifts and failed to tell the influencers that when they wrote about the event, they should disclose they had received gifts. After reviewing the promotion, however, the FTC decided not to pursue the case for a few reasons. First, the FTC noted that several influencers who posted content did disclose that they had received the gifts. And, second, Nordstrom revised its social media policy to address the FTC’s concerns.

This case serves as a reminder that companies who engage in social media should have a policy that provides endorsers with guidelines about what they can, can’t, and must do. It’s not just enough to have the policy in place, however. Companies must also monitor to ensure endorsers comply with the policy, and take action against those who don’t.

Pinterest also reminds companies that they are responsible for ensuring their promotions comply with applicable laws. As we've noted before, not only do companies have to worry about promotions laws, they also need to think about the fairly unique intellectual property issues that can arise on that platform.

On November 16th, Kelley Drye held a webinar which discussed the new rules of the road for mobile communications, marketing, and sweepstakes, and offered suggestions for reaching consumers while mitigating the legal risks.

Click here to download the slides from the webinar and click here to watch the recording.

The FCC requires broadcast licensees to disclose the material terms of their promotions -- including when and how winners will be selected -- and to conduct their promotions substantially as advertised. The agency wasn’t persuaded by the station’s argument that the discrepancies were due to inadvertent errors, holding that inadequate oversight of staff does not excuse a failure to run the promotion as advertised. The agency also rejected the station’s argument that the errors did not put any consumers at a disadvantage. Instead, the FCC noted that there was a potential for harm, and that a showing of actual harm is not necessary in determining whether a violation occurred. Accordingly, the FCC proposed a fine of $10,000.

This case demonstrates that companies can be held responsible for discrepancies between how they advertise a promotion and how the promotion is actually run. If you are running a promotion, make sure that your rules and marketing materials are in sync with how you actually run the promotion.

Among other things, the Prizes and Gifts Act requires sweepstakes sponsors to make a list of up to nine disclosures in any "written promotional prize offer," a term that is not defined. The plaintiffs argue that the small Game Stamps consumers collect as part of the Game constitute written promotional prize offers, and that McDonald's failure to make all of the relevant disclosures on the Game Stamps constitutes a violation of the Act. As a result, the plaintiffs claim that they suffered a loss and are entitled to damages.

Although McDonald's did not include the disclosures on the Game Stamps, Game materials referred consumers to the Game's Official Rules for details, and the Official Rules included the required disclosures. This suit challenges a practice that is common in the industry, so companies that offer these types of instant win games should pay attention as they case develops.

Participants in the fantasy football and baseball leagues were required to pay entry fees for a chance to win prizes. At the end of the 2010 season, the company notified winners and told them how much they had won. During the investigation, however, the AG discovered that the company failed to pay out at least $151,261 of the promised prizes. The suit alleges, in part, that the company used the fantasy baseball entry fees to pay the fantasy football winners and the football entry fees to pay the baseball winners. Because the amount of money available would depend on the number of participants, the company could not guarantee the prizes.

The AG is asking the court to issue injunctions prohibiting further violations of the law, to require the defendants to provide full restitution to victims and pay all court and investigative costs, and to require the defendant to pay the state a civil penalty and an amount equal to 10 percent of total restitution ordered.

The Google+ Pages Contest and Promotion Policies states, in part: “You may not run contests, sweepstakes, offers, coupons or other such promotions (“Promotion”) directly on your Google+ Page. You may display a link on your Google+ Page to a separate site where your Promotion is hosted so long as you (and not Google) are solely responsible for your Promotion and for compliance with all applicable federal, state and local laws, rules and regulations . . . .”

Google reserves the right to block or remove pages that violate the Policies, so companies should be careful to ensure they comply.

Although the defendants deny that the sweepstakes were unlawful, they agreed to settle the cases. As part of the settlement, the defendants agreed to refund all premium text messages fees paid by members of the class, to pay more than $5 million in fees and costs, and to consent to a five-year injunction barring them from offering any sweepstakes in which people who enter by paying premium text message charges do not receive something of comparable value to charges in addition to the entry.

Because the case settled, we don’t have a definitive court ruling that examines whether or not the sweepstakes were lawful. Nevertheless, the lawsuit and settlement highlight that there are a number of risks associated with text-to-win sweepstakes. To reduce the risks of challenge, companies that offer text-to-win sweepstakes with premium fees should consult with their legal teams early in the planning process. At a minimum, each sweepstakes should include a free method of entry and consumers who pay premium fees should get something of value for those fees.

Last month, the Indiana Supreme Court unanimously ruled in favor of the NCAA. At the outset, the Court determined that under Indiana law, a lottery is “a scheme for the distribution of prizes by lot or chance among those who provided or promised to provide consideration.” Under this definition, a promotion must include each of the following three elements for it to constitute a lottery: (1) a prize; (2) chance; and (3) consideration. In the decision, the Court focused only on the prize element.

The Court determined that a prize is something of more value than the amount invested. In this case, consumers invested the price of the tickets plus a handling fee, and would receive in exchange either the tickets minus the handling fee or the price of the tickets minus the handling fee. Thus, because those consumers who receive tickets would not get anything of greater value than those who receive refunds, the tickets were not prizes. Because there was no prize, there was also no lottery.

The decision is good news for the NCAA and other companies that run similar promotions. Nevertheless, companies should be careful any time they offer a promotion that requires people to pay money for an uncertain benefit. Indeed, the Court also noted that the decision “would not prevent a prosecutor or plaintiff from attacking a similarly structured scheme that is merely a ruse for a traditional lottery.”

• Promotions on Facebook must be administered within Apps on Facebook.com, either on a Canvas Page or an app on a Page Tab. You cannot use Facebook features or functionality as an entry mechanism. For example, you cannot give people entries simply by liking a page.
• You must make certain disclosures. For example, you must disclose that the promotion is not sponsored by Facebook, that entrants are not providing information to Facebook, and that entrants release Facebook of liability. You cannot use Facebook’s name or trademarks other than to make those disclosures.
• You cannot condition entry upon a person taking any action using Facebook features or functionality, other than liking a Page, checking in to a Place, or connecting to your app. For example, you cannot condition entry upon a person uploading a photo on a Wall.
• You cannot notify winners through Facebook, such as through Facebook messages, chat, or posts on profiles or Pages.

The complete Guidelines are available here. Keep in mind that complying with the Guidelines does not guarantee that a promotion will be lawful. As Facebook points out, “promotions are subject to many regulations and if you are not certain that your promotion complies with applicable law, please consult with an expert.”

The company asked consumers to provide their numbers on sweepstakes entry forms so that the company could contact them if they won. According to the FTC, however, the company also contacted non-winners with sales calls. Although the Telemarketing Sales Rule generally allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an “established business relationship” with the consumer, the FTC has warned that companies may not rely on a sweepstakes entry form as the basis for that exception.

This case serves as a reminder that companies cannot misrepresent the reason for collecting phone numbers or assume that just because a consumer gives the company a phone number, the company can place a sales call to the consumer.

Yesterday, Facebook updated the Promotions Guidelines. The most significant change is that companies no longer need to obtain written permission before administering a promotion on the Facebook platform.

Companies still have to comply with a number require requirements, though. For example: (a) people can only enter on the canvas page of an application or the application box in a tab on a Facebook Page; (b) companies have to include specific disclosures on the entry form and in the official rules; (c) companies cannot condition entry on taking certain actions on Facebook; and (d) promotions cannot be open to people who are under 18 or to residents of certain countries. The complete Guidelines and a list of do’s and don’ts are available on the Facebook site.

The revised Guidelines -- particularly the absence of requirement that Facebook approve promotions -- will make it much easier for companies to run promotions on the platform.

As part of the settlements, the companies generally agreed to (a) ensure that outstanding complaints are resolved, (b) process rebates in the time advertised, and (c) initiate procedures that allow for the proper handling of rebate submissions. In addition, the companies will pay $200,000 in attorneys' fees and costs and donate $100,000 to the Florida Alliance of Boys and Girls Clubs.

Over the past few years, various states have passed new laws regulating rebates and, as a result, offers that were lawful a few years ago may now be unlawful. In addition, regulators have become more active in challenging companies who fail to follow these laws. Companies that issue rebates need to pay close attention to these developments to ensure that their practices comply with applicable laws.

According to the complaint, each person who applied for tickets could submit an application with up to ten entries and a non-refundable handling fee. People who didn’t win tickets would give up the handling fees they had paid. (A more complete description of the process appears in our previous post.) Under Indiana law, an unlawful lottery consists of three elements: (1) prize; (2) chance; and (3) consideration. The Seventh Circuit held that the promotion was a lottery because plaintiffs allegedly paid a fee (consideration) to enter a random drawing (chance) in hopes of obtaining the tickets (a prize).

Following that decision, the NCAA filed a petition for rehearing arguing that the case involved issues of “exceptional importance” and that the decision conflicts with an Indiana Court of Appeals decision. Upon consideration of the NCAA’s petition, the Court of Appeals vacated its previous opinion and certified three questions for determination by the Indiana Supreme Court. How the Indiana Supreme Court answers the questions will determine whether the NCAA violated lottery laws. It could also determine whether other types of promotions that include fees are lawful.

After reviewing recent consumer complaints and PCH mailings, the states determined that consumers could still be misled. According to the agreement, PCH will, among other things, have to: (a) pay $3.5 million to cover the cost of the states' investigation; (b) make significant changes to its mailings to avoid the implication that a purchase will increase chances of winning; and (c) increase consumer surveys to ensure that consumers understand that purchasing does not increase their chances of winning.

It is unlawful to require people to make a purchase to enter a sweepstakes. Moreover, laws in many states and on the federal level specifically require advertisers to clearly and conspicuously disclose that no purchase is necessary. Over the past few years, many companies have been challenged for advertising sweepstakes in a way that suggested a purchase was necessary or advantageous. Be careful to ensure that your ads do not create that impression.