ADventures in Law

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As a whirlwind 2024 draws to a close, we here at BakerHostetler are reflecting on the promotions trends we’ve seen this year and what we predict you will see more of in 2025. Below, we pinpoint those trends and share some best practices to keep in-house counsel ahead of the game.

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Sweepstakes and Contest Fundamentals

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First, let’s cover the basics. Mastering the fundamentals of sweepstakes and contests is essential to help analyze each promotion that lands on your desk – no matter how complex they may seem. Federal and state lottery laws prohibit any promotion that contains all three of the following elements:

Prize: Any item of tangible value

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Chance: Random selection and absence of skill

Consideration: Purchase, payment, and substantial time and effort

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State laws have some nuances, but generally to avoid a promotion being deemed an illegal lottery or gambling, sponsors need to subtract one of these elements. Nobody wants to subtract the prize, because that’s no fun. So most promotions subtract the element of consideration, e.g., payment. That’s why we’re all so familiar with the NO PURCHASE NECESSARY disclaimers. A non-purchase method of entry, known as a free Alternate Method of Entry (AMOE), must have “equal dignity” in relation to any purchase method of entry to avoid the promotion being deemed an illegal lottery. Mail-in postcards are one popular AMOE.

Contests, on the other hand, eliminate the element of chance by requiring that winners are evaluated by judges using objective criteria based on a bona fide skill competition. Therefore, contests requiring an entry fee may be legal, but most sponsors planning a giveaway don’t require a purchase because regulators will closely scrutinize any pay-to-compete consumer promotion without a free AMOE.&nbsp;

Our crystal ball (informed by working with our fantastic clients across myriad industries) tells us you’ll see these promotions trends in the year ahead.

Gamification: While people may be interacting with each other less in the real world, interactive and immersive online entry methods like scavenger hunts, playing games and completing tasks are trending. We like to score quick wins! Sponsors are capitalizing on this trend to boost promotion participation and meet their customers where they’re at: playing games online. Sponsors should consider the following when adopting gamification methods:

With this give-and-take, sponsors need to be aware of increased information sharing and privacy safeguards. Think about what you’re asking participants to do and share and whether it’s brand appropriate, and ensure all information is managed according to your privacy policy and consumer expectations.

Sponsors should also look at how their products and services are displayed in a game environment and analyze any claims – express or implied – with the same rigor they would in a traditional advertising setting. For example, does your game imply that chugging your product can make you run 2X faster?

Incentivized Entries: Promotions are a proven way of getting consumers’ attention, and offering incentives such as loyalty points, free trials or account openings builds relationships with consumers.

These methods can raise consideration issues like text message fees or service fees for account opening, so sponsors should look at the user flow carefully to determine if the entry method could be deemed a purchase entry method and then decide if a free AMOE is required.

If a sponsor is offering a free trial or account opening, it’s very important to disclose all material terms clearly and conspicuously and to obtain the proper consents, especially to any type of auto-renewal subscription.

On-Pack Promotions and QR Codes: We love nostalgia, and it looks like we’re not alone. Traditional on-pack promotions and the use of QR codes are making a comeback. Sponsors should:

Make sure there is no implied purchase requirement (e.g., the only way to logically participate is to buy the item), and material terms should be outside the package in a place that allows for clear and conspicuous disclosure and information about the free AMOE.

Include clear, strong liability disclaimers in anticipation of some technical errors that could arise when scanning to enter. It’s also wise to offer a URL website method of entry as a backup if a scan-to-enter method is available.

Carefully vet the QR code providers. Your agencies may suggest a vendor, and that vendor needs to meet your onboarding protocols to ensure privacy policy compliance and mitigate potential security risks.

User-Generated Content (UGC): UGC promotions are another blast from the past. We all remember that coloring contest at our local grocery store, right? While popular, UGC promotions present unique challenges, particularly with advances in technology – and we don’t mean the newest YInMn Blue crayon color. Sponsors should:

Set crystal clear expectations about the originality of submissions and address the use of Artificial Intelligence (AI). Also, if a promotion bans AI-generated content, make sure you can police that and enforce the rules.

Carefully think through how to managepublic voting in order to maintain the integrity of the promotion.

Influencers: We do our best work when we work as a team, and that seems to be true for brands and influencers too. Engaging influencers to launch promotions can be highly effective and a great way to get targeted audiences to engage. Sponsors should:

Require and monitor compliance with platform rules. Influencers need to follow the platform rules related to sponsored content and promoting sweepstakes and contests.

Mind the <a href="https://www.ecfr.gov/current/title-16/chapter-I/subchapter-B/part-255">FTC Endorsement Guides</a>. Influencers’ fans need to understand they’re working with the sponsor. Share with influencers the FTC Endorsement Guides that outline best practices for disclosing their material connection to a sponsor clearly and conspicuously.

Preview and approve content when possible. Given additional scrutiny of promotions, sponsors may want to preapprove influencer posts to ensure appropriate messaging and the inclusion of abbreviated rules and links to official rules in all posts. It’s a good idea to provide precleared music and a set toolbox of claims and imagery for the influencers to use as well.

Gaming, Gambling and Sports Betting: States continue to legalize sports betting, but more novel forms of gaming are on the rise too. Operators should:

Understand your product. Just because it doesn’t look like traditional gambling doesn’t mean a regulator or court won’t treat it as such. Recently, a tile-matching game offering free coins was sued under gambling laws.

Stay informed. Regulators and the plaintiffs<a>’ </a>bar continue to be active in this area, and new products can lead to new approaches from regulators. For example, several states took action this year against “pick ’em” style games, alleging they constituted gambling, despite their operation for years as a fantasy product.

Loyalty Programs: Loyalty programs are evolving with more complexity and gamification. Key things to think about:

Consideration issues. It’s popular to include sweepstakes entries as a benefit for loyalty program members, but requiring points to enter creates consideration problems. An AMOE may be necessary. And it should always be clear that entrants only have a chance to win a sweepstakes prize – it isn’t a provided benefit.

Privacy compliance. Some state privacy laws require disclosures for loyalty programs. Ensure compliance with privacy laws, and provide clear disclosures about data collection and usage.

Be ready to grow. Companies and programs evolve. Be sure to reserve the right to change loyalty program terms, and do so in a way that doesn’t unfairly harm consumers.

Cause-Related Marketing: Around the holidays, more and more clients have questions about how they can advertise charitable giving. Key considerations include:

State registrations. Are you encouraging consumers to take a certain action, particularly buying a product or service, and promising to make a donation when they do? If so, you’re likely acting as a commercial co-venturer and must register and bond in certain states.

Plan ahead. Even states that don’t require registration generally require that there be a contract with the charity. And registration, particularly the first time around, can take time.

What trends are you seeing?As promotions continue to evolve, staying ahead of the trends is key. Whether you’re navigating gamification, influencer collaborations, or cause-related marketing, understanding the legal landscape is crucial for success.

Promotions Trends to Look for in 2025