Don't lose out on an "everybody wins" sweepstakes

Telemarketing, Feb 1994 by Goldstein, Linda

Telemarketers are frequent users of prize and gift schemes as a means of inducing consumers to respond to their offers. One of the more popular types of prize promotion schemes employed by telemarketers is the "everybody wins" sweepstakes, in which every participant is guaranteed to receive a prize for responding. The "everybody wins" promotion is particularly appealing to marketers because of the excitement it generates in promising that everyone will win a prize of some value.

Typically, the "everybody wins" sweepstakes is structured so there are a small number of prizes of significant value, and a low-end prize of a more nominal value that is won by virtually all of the participants.

The "everybody wins" sweepstakes, like all sweepstakes promotions, must, in the first instance, comply with the federal and state lottery laws. In general; to be compliant with these laws, one of the following three elements must be eliminated: prize, chance or consideration. In the "everybody wins" sweepstakes, the element of prize is clearly present. The element of chance is also present, since, although there is no chance as to whether one will win a prize, there is an element of chance as to the precise prize the entrant will win. To avoid being construed as a lottery, therefore, there must be and alternative free method by which persons can participate. In other words, consumers cannot be required to purchase the marketer's products or services to claim the prize or award they have been guaranteed to win.

In addition to the general body of federal and state lottery laws, which are applicable to all sweepstakes and promotions, telemarketers contemplating the use of "everybody wins" sweepstakes should be aware of a growing sensitivity among the regulatory officials to this form of promotion.

Typically, when advertising an "everybody wins" sweepstakes, marketers use phrases such as "you are a winner," "congratulations," "you have been selected to receive," and similar types of representations.

Both the United States Postal Service and the United States Department of Justice have brought several cases in recent years against sweepstakes promotions utilizing the "everybody wins" format. While there were a multitude of issues involved in these cases, one of the concerns consistently raised by the government was that the use of language such as "you are a winner" or "you are guaranteed an award" leads to the consumer to believe he or she has a unique or rare status as a winner. The government has indicated that such language may not be appropriate when virtually all of the participants will be receiving the same item.

Of even greater influence, however, is the increasing number of state statutes that appear to be specifically targeted at these types of promotions. In fact, the proliferation of state prizes and gift statutes is one of the most significant developments in the promotions law area.

In November 1993, the state of Oklahoma announced that it has served civil investigative demands on more than 30 telemarketing companies as part of an industry-wide investigation of telemarketers soliciting customers in that state. One of the areas of inquiry cited by the Oklahoma Attorney General's office is whether these telemarketers are in compliance with Oklahoma's Prizes and Gifts Act. That Act generally provides that it is unlawful for any person to use the term "prize" or "gift" in any manner that would be untrue or misleading. The Act goes on to more specifically prohibit representing in any manner that an offeree of a prize or gift has been "specially selected" in any manner unless the representation is true.

In addition to Oklahoma, there are currently 13 other states that have some form of a so-called "special-selection" provision in their prize and gift statutes. These provisions basically take one of two forms. The more general statutes basically say you cannot represent that a person has been specially selected or chosen to receive a prize where virtually everyone receiving the solicitation will receive the same prize or opportunity. Some of the statutes are more specific and say you cannot represent that a person has won a prize if more than 10 percent of the names considered are selected as winners.

The following is a summary of the states having some form of a special-selection statute:

CALIFORNIA prohibits schemes offering a gift conditioned on the person purchasing or leasing the sponsor's goods or services, any representation that the person has been specially selected unless the representation is true and the person has purchased from the sponsor within the preceding six months or has an account with the sponsor.

FLORIDA declares it unfair or a deceptive act of practice to represent that the person is a "winner" or has been "selected" when the enterprise is a promotional scheme designed to make contact with prospective customers or in which all or a substantial number of those entering receive the same prize or opportunity.

LOUISIANA prohibits the use of any language that may lead people to believe they have been specially selected, such as "You have been selected to receive" or "You have been chosen."