Loyola University Chicago School of Law, JD 2021
Sunny Co Clothing posted a photo of a woman wearing a red swimsuit with a caption reading “EVERYONE that reposts and tags us in this picture within the next 24 HOURS will receive a FREE Pamela Sunny Suit” – along with other applicable rules. Instagram went crazy with thousands of reposts. The following day, Sunny Co Clothing posted a second photo stating that they had the right to cap the promotion if they so choose. Many people, myself included, questioned how this retraction was possible. Could it be as simple as reposting an Instagram photo and tagging the company to receive a $64.99 swimsuit for free? The answer is yes, but with a caveat. One must follow the federal sweepstakes laws, applicable sweepstakes laws of the participants’ home states, and the governing rules of all the social medial platforms where the post appears. Easy, right?
What exactly is a “sweepstakes”?
Historically, sweepstakes were a large part of in-store promotions. Today, however, the ability to disseminate information to the masses immediately forces many companies to focus on social media. Before getting to governing laws, it is important to understand the different types of sweepstakes. A lottery requires three elements: a prize, consideration, and chance. Consideration is usually defined as a payment or purchase that is required for a participant to enter the lottery. Under most state laws, it is illegal for citizens to host private lotteries. A contest requires effort, skill, or merit from participants to win. The winner is determined by certain criteria therefore eliminating the element of chance. Sweepstakes are similar to lotteries, but they do not require consideration from participants. Participants enter the sweepstakes and a winner is chosen at random. In a sweepstakes, the entrance process must not require much work from the entrant. If too much work is required to enter, it may be misconstrued as consideration, ultimately turning the sweepstakes into an illegal lottery. A sweepstakes must also clearly state that “no purchase is necessary” and that “a purchase will not improve one’s chances of winning.” This language requires that every entrant has an equal opportunity to win the sweepstakes.
How are sweepstakes regulated?
To be considered legal, sweepstakes are subject to mandatory federal guidelines. If the value of the sweepstakes prize is equal to or greater than $600.00 a 1099 tax form must be reported with the winners information. Facebook, Twitter, Snapchat, Pinterest, and YouTube all have their own rules and regulations for using their sites to promote sweepstakes. While all the sites have different rules, there are many similarities. All platforms require that the company provides their participants with the official rules and eligibility requirements. Furthermore, none of the sites allow the companies to imply that the platform endorses the sweepstakes. Last, the companies must comply with the state laws applicable to each participants’ respective states.
For example, Instagram asks that companies not encourage users to inaccurately tag themselves in content that the user is not featured in. Instagram also requires that the sweepstakes includes a complete release of Instagram by each entrant and acknowledgement that the sweepstakes is not sponsored, endorsed, or associated with Instagram. Instagram will not assist the company with their sweepstake and the administration of the sweepstake is taken at the risk of the company.
Failure to follow these rules and regulations could lead to participants and the company losing their profiles on Instagram. Most people utilizing social media for their sweepstakes are not lawyers and therefore they might not think of the compliance regulations. Also there is a strong likelihood that they will be posting their sweepstakes on multiple sites which complicates it even further. They are not immune from the regulations and must become knowledgeable for their sweepstakes to be legitimate.
As social media continues to grow, so will sweepstakes promoted on these platforms. One study conducted found that advertising through social media has an 100% higher lead-to-close rate than traditional marketing, such as mail or printed advertisements. Social media is a strong avenue for companies to display and advertise their products and sweepstakes are a great way for smaller companies to get their name out to the public. It is very important to understand the sweepstakes rules and compliance implications specific to each social media site before creating your own.