As we have talked a lot about this month, social media platforms offer many opportunities to grow your business but also carry inherent risks.
It is important as a business owner that you are aware of those risks and take effective steps to mitigate those risks.
There is one opportunity we haven't talked about but has been increasing in popularity - social media contests. Join me as we navigate the legal issues of social media contests.
What is a social media contest?
A social media contest is legally known as a sweepstakes or giveaway. The definition of a sweepstakes or giveaway is that it is game of chance, where winners are chosen randomly. There is no purchase, payment or any other type of consideration for the contestant to enter. Sweepstakes are governed by both state and federal regulations. In addition, each social media platform has rules in its terms of use around what you can and can't do regarding contests on their platform.
How do I protect my business?
If you are looking to start a social media sweepstakes, you need to first develop a set of official rules that will govern how the entries interact with the sweepstakes and your business but also show you are complying with both state and federal laws. The rules must contain:
who is eligible to enter the sweepstakes,
what prize or prizes are being given away,
the dates of the sweepstakes,
clear language that there is no purchase or monetary compensation needed to enter,
the value of the prize(s),
a reference to an affidavit of eligibility and liability that the winner will need to sign,
language that lets the winner know that they is responsible for paying all taxes regarding the prize,
an assignment of rights for any photos submitted, if part of the sweepstakes entry, and
a release of liability clause and instances of disqualification to protect your business.
Additionally, the rules should contain any terms required by the specific social media platform you are promoting the sweepstakes on and any unique state law requirements.
Finally, in addition to the official rules, it is necessary to also include either your company’s privacy policy or at least a link to it. The privacy policy helps to govern the personal information that each entrant provides when entering your sweepstakes.
Why do I need to go to all of this trouble?
While it may seem like a lot of effort for such a limited event, without these rules, your sweepstakes could be in violation of Federal Trade Commission, Federal Communications Commission, state laws, or the social media platform's terms of use.
This opens your business up to monetary penalties and other consequences. The rules need to be clear as to various expectations because just having loosely defined rules can also result in a violation of federal regulations.
These sweepstakes rules not only need to be drafted but they need to be drafted clearly and in compliance with whatever state laws the sweepstakes is based in. In addition to a violation of the FTC or FCC regulations, the liability you are opening your company to if the rules are not drafted well should also be a concern.
The rules are your contract with the entrants and the winner, and they are in place to protect your business from any disputes with entrants and the eventual winner.
Is it worth it?
While this may seem like a daunting task to promote a social media sweepstakes, it is often worth the effort. This article from Outgrow states that "an average of over 34% of new customers are acquired through contests". Other benefits of social media contests include:
Growing your online community,
Improving engagement with your social media account,
Building awareness about business or a specific product or service,
Incentivizing people to follow your social media account, and
Adding subscribers to your email newsletter.
How do I make sure my rules keep me protected?
Working with an attorney to develop these rules can save you a lot of headaches, time, energy, and potential costly mistakes. If you ever thought about running a sweepstakes or giveaway on your business’ social media account, schedule a time to talk to us more about what rules you need in place.