10 Things You May Not Have Known About Promotion Marketing
The following advisory was authored by Verrill Dana Partner Robert Laplaca, Chair of the Firm's Promotion Law practice.
- Practically every type of promotional activity is regulated in some way:
- Sweepstakes and contests;
- User generated content on websites and social media;
- Coupons, gift cards and money-back guarantees;
- Charitable solicitations;
- Celebrity endorsements or other testimonials;
- Marketing to children; and
- Even trying to give something away for “free”
- You need official rules for every sweepstakes and contest you conduct. They form a binding contract with the entrants that will help protect you in the event of a dispute.
EXAMPLE: When Kraft mistakenly produced too many winning game pieces for its “Ready to Roll” sweepstakes, they were protected by having a clause in the rules stating they were not liable for printing or production errors.
- You cannot require a purchase to enter a sweepstakes, but you can give an entry with a purchase so long as the consumer gets something of value with his purchase (other than an entry) and there is an alternative free method of entry available.
EXAMPLE: Class actions were brought against the shows American Idol, Deal or No Deal and The Apprentice for charging a $0.99 fee for text message entries.
- You cannot award certain prizes. Winners are taxed on the value of the prize and you need to provide an IRS Form 1099 to winners of prizes over $600.
EXAMPLES: Apple prohibits awarding iPads and iPods as prizes. NASCAR prohibits awarding tickets to its racing events without its permission. EXAMPLE: It was a publicity debacle when a family with a paralyzed son won “free” home improvements but couldn’t pay the tax bill on the prize.
- You may be responsible for user-generated content.
EXAMPLE: Subway sued Quiznos after Quiznos conducted a contest asking contestants to submit a video depicting Quiznos subs superior to Subway’s claiming Quiznos encouraged contestants to make false claims against or otherwise disparage the Subway brand.
- Your coupon offer may be too good.
EXAMPLE: After Oprah promoted a KFC internet coupon deal on her show, the high (and unexpected) volume of respondents caused KFC to refuse to accept coupons and resulted in a class action that settled for $1.5 million.
- Charitable sales campaigns require registration or bonding in a number of states.
EXAMPLE: If you want to give a portion of the purchase price to charity, many states have laws governing the contract with the charity, the advertising disclosures, and reporting and recordkeeping.
- #ad or #spon may need to be included when a celebrity tweets about your product.
EXAMPLE: The FTC has guidelines for when paid celebrities tout your product in cyberspace.
- Avoid online promotions open to children under 13 if you can.
EXAMPLE: The Children’s Online Privacy Protection Act contains a number of strict guidelines for online promotions open to children under 13, including obtaining information, obtaining parental consent and sending notifications.
- “Free” must mean free.
EXAMPLE: The FTC has strict regulations on use of the word “free” in advertising. For instance, any conditions must be clearly and conspicuously disclosed (an “*” may not do), and there are limits on the timing and amount of these offers.
This is just a sampling of the things that must be kept in mind when running a sales promotion. If you would like to discuss these or other promotion marketing matters, please contact Rob Laplaca at [email protected].
Topics: General Business Issue