This week, 14 Attorneys General have sued Tik Tok challenging its practices. If you are a sponsor who currently has a sweepstakes or contest running on Tik Tok, or if you’re considering one, you may be asking yourself what can I do to protect myself if time runs out on Tik Tok.
I have no idea whether the allegations against Tik Tok are true, false, or somewhere in between. What I do know is that when your sweepstakes or contest platform gets sued by 14 State AGs, you gotta look out for number 1. The new suits seek damages, disgorgement of profits and injunctive relief, and accuse the company of fraudulent and deceptive practices because of the dangerous effects of its platform on children. And Federal lawmakers are already trying for Tik Tok’s forced sale. So, careful consideration should be taken for promotions running on or to be run on this targeted platform.
Can I terminate our existing sweepstakes or contest running on Tik Tok?
Usually a lawsuit (even a lawsuit by the government) against the platform running your promotion won’t be sufficient grounds to terminate your promotion. As you know, states generally don’t allow a sponsor to terminate a promotion for any old reason, and the State of Florida specifically prohibits changing or modifying Official Rules once a sponsor has registered a game of chance with prizes over $5,000.
Since, as we all know, your Official Rules form a binding contract with entrants, you could look to specific “termination” clauses in your Official Rules, which may provide some options.
Official Rules often have a force majeure clause which provides for the right to terminate in the event of catastrophes, acts of god, and the like. But unless the lawsuits or other actions against your platform actually makes it impossible to run the promotion on that platform, it’s not likely you can hang your hat on this clause. To allow a sponsor to terminate a promotion based upon a force majeure event, courts typically require that the particular type of event be described in the rules, be unforeseeable and beyond the control of the sponsor, and that continued performance must be impossible or at least impractical.
If the government actually shuts down Tik Tok, including by a preliminary or permanent injunction, it’s more likely a sponsor’s performance of its obligations under the Official Rules can be excused based on force majeure and a Sponsor should then follow the provisions in the Official Rules as to what to do in such an event.
Even without a specific force majeure clause in the Official Rules, there is the common law contractual right to excuse performance of a contract based upon impossibility. But courts are more stringent when applying this common law principle, typically requiring that performance must be objectively impossible and that the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract (here, the Official Rules).
What can I do if I’m considering running a sweepstakes or contest on Tik Tik?
Now that it could be argued that you are on notice that your promotion could possibly be affected by an adverse event involving Tik Tok, you may have more difficulty relying on the common law doctrine of impossibility or frustration of contract, and you probably want to be more specific in your Official Rules.
To provide the best availability of options, it’s a good idea to draft a force majeure-type clause in your Official Rules specifically tailored to the Tik Tok situation given its current state of legal affairs. For instance, the Official Rules can expressly provide that the sponsor can modify, suspend or terminate the promotion in the event the promotion cannot be executed as planned, including because of any unavailability of, or disruption of the business operations of, Tik Tok (or other social media platform), and that in such event, the sponsor will select winners from entries received which are unaffected by the problem. I can’t guarantee that any specific language or clause will do the trick, but given how courts look at terminating contracts, I believe spending the time to provide more specificity in these circumstances is time well spent.
