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Are Your Company’s Social Media #Sweepstakes FTC Compliant?

Social media contests and sweepstakes have gone viral. They have not only caught the attention of consumers nationwide, they have caught the attention of the Federal Trade Commission.

Social media contents and sweepstakes have been instrumental in helping brands reach and engage consumers. And the giveaways are great. Consider, for example, HGTV’s yearly Dream Home Giveaway, Smart Home Sweepstakes and Urban Oasis Sweepstakes, which each offer the opportunity to win an exquisite home. Or, Esurance’s award of $1.5 million to one lucky Twitter user who tweeted #EsuranceSave30 after the Super Bowl.

While the FTC has always regulated contests and sweepstakes to help protect consumers from deceptive advertising and trade practices, with the recent explosion of social media contests and sweepstakes, the FTC has weighed in with new guidance designed for the Internet age. In a document titled The FTC’s Endorsement Guides: What People Are Asking, the FTC has instructed that companies must make it clear that users’ posts about their company or products, made in response to contests and sweepstakes, are incentivized.

According to the FTC, a contest promoted by XYZ company, which requires participants to send a Tweet with the hashtag #XYZ_Rocks, is insufficient to notify viewers that the post was incentivized. Instead, the company should require participants to send a Tweet with the hashtag #XYZ_Rocks_Sweepstakes or #XYZ_Rocks_Contest. The FTC further noted that adding the word “sweeps” to the hashtag, in lieu of “sweepstakes” is not sufficient because most people would not understand what that means. In doing so, the FTC appears unsympathetic to Twitter’s inherent 140 character limitation.

In addition to complying with the FTC’s guidelines, a company whose social media contest reaches social media users in Rhode Island must comply with Rhode Island law. Rhode Island law requires businesses to register any contest through which “a retail establishment offers the opportunity to receive gifts, prizes or gratuities, as determined by chance, in order to promote its retail business” when the value of the prizes offered exceeds $500. R.I. Gen. Laws 11-50-1. The cost to register a contest in Rhode Island is $150. The failure to comply with Rhode Island’s registration requirement is a misdemeanor. Florida and New York also require registration of certain types of sweepstakes, including certain types of social media contests.

Before your company launches its next social media #Sweepstakes, make sure your campaign is FTC compliant and is properly registered in accordance with state law.

About The Author

Nicole J. Benjamin

I am a shareholder and business litigator at AP&S. I help businesses and their legal departments achieve their objectives by reducing their liabilities, advising them on complex legal matters and defending unavoidable litigation in federal and state court. I am also a member of the firm’s Appellate practice group and counsel the firm’s clients on appellate matters in the Rhode Island Supreme Court and the United States Court of Appeals for the First Circuit.

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