Rules <-- Legal Stuff

by Administrator
37 replies
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There are legal requirements you must comply with before starting a contest.

To help you stay out of legal trouble, what follows are guidelines copied from my membership site. Please read and apply them.

Keep in mind the Warrior Forum is not running the contests, but is merely a communication / advertising platform. Legal compliance is strictly your responsibility. Do not ask an admin, or a mod if what you are doing is legal.

How to Comply with Contest, Lottery, and Sweepstakes Laws

Contests are all over the Internet, and have recently been highlighted as a means of attracting super-affiliates who will send numerous customers to your business.

Ensuring legal compliance is important, especially given the worldwide nature of the Internet. Failure to comply with legal requirements can result in not only expensive civil litigation, but there is also the potential for criminal proceedings.

Three key definitions and concepts must be understood so that your business practices are legal:

1. Prizes.
2. Chance.
3. Consideration.

Lottery: All 3 elements (prize, chance, and consideration) must exist for a lottery. Generally, private lotteries are illegal in the United States. You will typically only see lotteries run by the states.

You do not want to do anything that has a prize, chance, and a payment involved.

A critical element to understand is 'consideration.' This is usually the payment of money. If you pay money for a chance to win a prize, the money you pay is called consideration.

Consideration does not have to involve money. Providing a service can be consideration. Providing detailed personal information can be consideration. Having to purchase a product is consideration.

Tip: Requiring that affiliates or JV partners purchase your product before becoming part of your program is consideration.

Providing an email address to enter is not consideration. Before the Internet people had to provide their physical address or some other way they could be contacted if the won. Obviously! The Internet is no different. Arguably, an email address is less intrusive than a physical address as email addresses can be temporary.

Note: it is one thing to request an email to communicate about the contest. It could be another to request an email as something of value to be used for other purposes, such as being sold to other marketers.

What is 'consideration' can vary from state to state but if you understand the underlying concept - it is something of value - you will probably be fine.

The goal is to avoid being classified as running a lottery. Lotteries are illegal.

Contest: Where there is a prize and consideration, but no chance, you have a contest.

For example - if you pay ten dollars to provide an essay, and the best essay wins a hundred dollar prize, this is a contest. There is no chance because skill is involved in writing the best essay.

Tip: Giving prizes to affiliates who bring in the most sales is a legal contest because the prize is based on the affiliates' skill and not chance. However, giving all affiliates who generate a minimum number of sales a chance to win a prize could be considered a lottery.

Sweepstakes: Where there is a prize and chance, but no consideration, there is a sweepstakes.

Most everyone has heard of the Publisher's Clearinghouse Sweepstakes. A chance to win a million dollars. Simply complete a form and you are entered. While it was hoped people would subscribe to offered magazines, no purchase was required to enter. That is the key for a sweepstakes - no purchase can be required.

Tricky Legal Compliance: You need to comply with US federal law, and the laws of each state if nationwide participation is allowed. If anyone can enter worldwide, be aware that what is legal in the US may not be legal in other countries.

Every state, and every country from whom residents can enter creates the possibility of government authorities from that state or country filing a lawsuit in their jurisdiction.

Tip: That is why you see 'Void Where Prohibited' as a term. Use it.

Tip: Many companies limit eligibility to residents of the United States. That is why you see terms such as 'Open to US Residents Only.'

Miscellaneous Issues:

Leave yourself an out for technical or security problems. If you get hacked, have a virus, etc, it could affect the validity of the contest. If it happens make sure you have the right to cancel the event. If consideration has been paid for an entry it will need to be returned.

Restrict eligibility to those 18 years old or older. All types of complications can arise if minors can enter your contest.

Avoid any appearance of a conflict of interest. Exclude from eligibility anyone associated with your company and any sponsors.

For a sweepstakes, state the odds of winning if there are a set number of entries. If the number of entries is open-ended state that the odds of winning will depend on the number of valid entries that are received.

Also for a sweepstakes, state up front, in large print, "NO PURCHASE NECESSARY TO ENTER." Be clear from the outset that your event does not meet the definition of a lottery.

Include Void Where Prohibited language.

Basic California Law:

While these rules are based upon California law, compliance with these provisions will in many situations be sufficient to comply with the laws of other states:

California Contest Rules:

No contest may be held if winning a prize is conditioned on a minimum number of entries being received.

Clearly and conspicuously disclose the deadline for entering.

Disclose the date on or before which the contest will terminate and upon which all prizes will be awarded.

Clearly and conspicuously disclose all rules, , terms, and conditions of the contest.

Disclose the exact nature and approximate value of the prizes being offered.

Award and distribute all prizes of the value and type represented - even if you didn't get as many entries as hoped for.

Obtain the express written consent of individuals before their names are used for a promotional purpose.

Refund all consideration to someone if they ask for it, in writing, within one year of payment, if they were unable to participate in any part of the contest for a reason that is not their fault. For example, Bill pays $100 to enter a contest but before being able to compete he is hospitalized for cancer and cannot participate. If Bill asks for his entry fee back, give it to him.

At the conclusion of the contest send to all entrants upon their request the names of all winners and the prize or prizes won by each.

If your contest involves solving a puzzle, there are many other rules that will apply.

Keep for at least two years after all prizes are awarded all of the following:

(1) Copies of all contest advertising and solicitations.

(2) All correspondence sent by a contestant and any responses.

(3) Adequate records which disclose:

A. The names and addresses of all contestants,
B. The approximate date each contestant was sent eachcontest,
C. The number of prizes awarded,
D. The method of selecting winners,
E. The names and addresses of the winners, and
F. The facts upon which all representations or disclosures made in connection with the contest are based and from which the validity of the representations or disclosures can be determined.

California Sweepstakes Rules:

Do not imply that a person has won a prize unless that is true. This takes into account contextual factors such as:
location, and
presentation of the representation and any qualifying language, that a person is a winner

There must be a clear and conspicuous statement of the no-purchase-or-payment-necessary message

The no-purchase-or-payment-necessary message included in the official rules shall be set out in a separate paragraph and be printed in capital letters in contrasting typeface not smaller than the largest typeface used in the text of the official rules.

Sweepstakes entries not accompanied by an order for products or services shall not be subjected to any disadvantage in the winner selection process.

Advertising materials shall not represent that an entry in the promotional sweepstakes accompanied by an order for products or services will be eligible to receive additional prizes or be more likely to win.

Advertising materials shall not represent that a person has been specially selected in connection with a sweepstakes unless it is true.

The official rules for a sweepstakes shall disclose information about the date or dates the final winner or winners will be determined.
  • Profile picture of the author DrMeg
    Thanks so much for this information, I am about to run a contest to launch my new blog, I think I better postpone until I cover all these bases!
    Meg McCormick
    The BackLink Lady

    Come read what I'm writing about at HubPages
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  • Profile picture of the author sonjay
    Thanks for taking the time to share this information to the Warrior Forum.

    I just remembered something when I read the portion about minors (those under 18)... I believe something similar applies to the whole forum as well? I think I've read somewhere in the forum that they are below 18 years of age...
    500+ Leads | Quality Traffic
    choose target location
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  • Profile picture of the author vip-ip
    Quick question:

    If we post a challenge before we get 200 posts (because the forum still lets you do that) and it gets denied during moderation for that reason (post count), then once we do have 200 posts, do they automatically pop up for re-consideration? Or do we have to re-submit the thread?

    Best Regards,
    vip-ip ...
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  • Profile picture of the author scortillion
    I’ve submitted a challenge for review but never hear anything; no accept or denied. How do we know what’s wrong with a challenge if no one takes the time to tell us what the problem was?
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  • Profile picture of the author michellesnow2
    That was extremely useful information that most people actually have no idea about. Thanks so much. That will help me with my upcoming contest.
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  • Profile picture of the author Mobi Websites
    Good Read considering im launching a new site soon, and I was planning on using contest to promote it.

    Join the mobile revolution! Create your mobi website today, discount for all warriors, goMobi! Free trial.

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  • Profile picture of the author Yogini
    "Tip: Giving prizes to affiliates who bring in the most sales is a legal contest because the prize is based on the affiliates' skill and not chance. However, giving all affiliates who generate a minimum number of sales a chance to win a prize could be considered a lottery. "

    This is a very useful post and I had a question above the above section. I see a number of "contests" that seem to be based on points but also say that the winners can be random as well. I think there is a plug-in that even states this. It sounds like from the above quote that if one wins a contest it needs to be based on skill. However, there can be multiple prizes such as the best answer, the funniest answer, the most outrageous answer etc. Just checking if this is right.

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  • Profile picture of the author whoser
    Thanks for all
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  • Profile picture of the author jumbo2011
    Wow, this is good information. I really like it. Thanks for Sharing!
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    • Profile picture of the author Okoji
      Hi friends,

      I would not like to make a mistake here.

      If the contest is to ask members to create a logo for a site and 2 members who have the best logo get a free banner placement on a site.

      Can this be considered legal and okey?

      Please get back to me.

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  • Profile picture of the author JohnMessmer
    I did not see rules for 'Challenges' posted here. What are the rules for 'Challenges' and can someone provide examples of acceptable challenges?
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    • Profile picture of the author Kay King
      I did not see rules for 'Challenges' posted here. What are the rules for 'Challenges' and can someone provide examples of acceptable challenges?
      How can you NOT see the rules when you are posting in one of the four sticky threads in this section - and it's labeled "rules"? Forest/trees or deliberately obtuse? Read the other three stickies and you'll know more about this forum section.

      Don't mean to be rude - but you can see the sticky threads above most of the forum sections. Those are the rules for the section and the main forum rules also apply. How hard is that?
      Saving one dog will not change the world - but the world changes forever for that one dog
      I firmly believe that animals make people more human.
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  • Profile picture of the author YasirYar
    Great post. Legal stuff usually ends up being a pain in the butt so you should really watch your back and cover all your bases so you dont get caught off guard later on!

    >>>Get your websites ACTUALLY ranked by checking these out: Quantum SEO Labs, Home Page Link Building & SERP Ability. Want to get rid of negative listings? Check out Reputation Enhancer.

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  • Profile picture of the author troysmith1012
    Sharing such great info truly helps a lot! Clearer understanding about this legal stuff issue. Thanks!
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  • Profile picture of the author tamse
    hi, I'm new and I would like to ask if it's alright to start a thread where i could share the giveaways on my blog? thanks
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  • Hey I checked out this post and think it is great. I am evaluating whether creating a competition for warrior forum members is viable. I am proposing a competition for the warriors to use their skills to raise money for charity through Everyday Hero - Where Living is Giving. The winner will be the warrior who raises the most as measured by the fundraising website and charity earnings.

    As the charity is officially registered in Australia I need to know if this is possible first of all? Would I need to pass 200 posts to start it? Is there a way to promote the competition on the forum to maximize the exposure? What is the best lead time pre event to post the competition? What costs would I incur to get maximum benefit from the forum? The competition will go from 1st May through 31st August 2012
    First prize will be a 22 day tour in Peru, including climbing to Machu Picchu and walking inca trail, an economy return flight and be filmed as part of a documentary. A celebrity is yet to be announced. The trip itself will start in November 2012 with the campaign continuing until such date. I want serious warriors and marketing professionals to take part not just for the prize but for bragging rights!

    I need to know if the competition must be specifically setup for warrior members in regard to wording and scope or may include the public.

    Please contact me in regard to this concept and I will outline the idea further.
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  • Profile picture of the author dippo
    What country do these legal rules pertain to/based on?
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    • Profile picture of the author tpw
      Originally Posted by dippo View Post

      What country do these legal rules pertain to/based on?

      I will help you out here, because I took the time to read the entire post...

      Originally Posted by kindsvater View Post

      Basic California Law:

      While these rules are based upon California law, compliance with these provisions will in many situations be sufficient to comply with the laws of other states:

      California is in the United States, so when he says that these rules should be "sufficient to comply with the laws of other states", he was talking about other states in the United States.
      Bill Platt, Oklahoma USA,
      Publish Coloring Books for Profit (WSOTD 7-30-2015)
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      • Profile picture of the author ryan.arnfinson
        Outstanding information! Been looking to find this concise bit of help for now quite a while...

        Thanks a lot!

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  • Profile picture of the author Jeff333

    Thanks for this information about contest. In my country rules are far more complex...contest Is a gouvernment money making machine....

    Best Regrds
    Jeff Boivin
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  • Profile picture of the author crissie
    I think some people give very little thought to proposals/contests they suggest to others online. This thread is important. It helps us all get a little more serious about the way we approach others with our proposals, ideas.

    Any good salesman can make a killer proposal that attracts tons of clients and brings in an attractive sum of cash. But if its dishonest, the amount of trouble we'll face in the future will hardly make that outcome a profit.
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  • Profile picture of the author tonecarole
    Thanks a whole lot for this information, I am about to run some sort of contest for you to launch my own new weblog, I believe I better postpone till I cover these bases!
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  • Profile picture of the author Eggomate
    Prizes are very popular so a good design for a competition is going to be worth a lot of money, good luck with your's. I have some unique and very different prizes for you all. Original Digital Portraits
    You should be quick as soon as I get to ten on this test I will be reviewing the offer
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  • Profile picture of the author nunyad
    Seems to be a very specific set of rules. Thanks for this, I will need to implement a batch of this to a marketing project.

    Has anybody here tried any sweepstakes/contest type marketing stuff that caused issues? Always good to know what might arise from some experienced members.
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  • Profile picture of the author GBM
    Does poker fall under "chance", or "skill"? Because there is a bit of both involved.

    _/\_\o/_ JAWS

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  • Profile picture of the author footballfreak
    Thanks for great advice. I have been thinking about starting a contest and this is just the info I needed.
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  • Profile picture of the author malouisa
    Just found this as a new member. And thank you for creating this on allowing us to have our own contest. I will check everything here and soon i will create mine also.

    Are you still struggling with your income? Try to check this.

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  • Profile picture of the author Agamemnon
    Thank you for spelling out exactly what is what. I have been somewhat inactive since joining as I have spent way too much time in the hospital. I see that I have missed a treasure trove of knowledge which I will happily absorb and get up-to-date.
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  • Profile picture of the author Paula Guilfoyle
    Thanks for this info

    Paula: Make money teaching online classes and course

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  • Profile picture of the author Hoang Huan
    Sharing such great info truly helps a lot! Clearer understanding about this legal stuff issue. Thanks!
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