Online Only Amoe Challenged in New York
By: RICHARD J. WEGENER
Recent New York Enforcement Actions Against Retail Sweepstakes With Online Entry Alternative Cause for Concern
There are many federal, state and local laws and regulations governing sweepstakes and contests, two very popular promotional techniques.
As a general rule, a sweepstakes or contest becomes a “lottery” and, thus, illegal under federal and state laws, if all of the following three elements are present: prize, consideration and chance.
Prize is always present in such promotions.
Chance means that the winner is selected at random (e.g., a drawing, a pre-selected number, a rub-off card randomly distributed, etc.).
Actually, consideration does not need to be eliminated entirely – it can remain as long as it is not mandatory. Virtually all U.S. jurisdictions will permit a chance promotion where some participants “pay to play,” such as earning entries for purchases, provided a free alternate method of entry (AMOE) extends an equal chance to win to non-purchasers, as well.
But what form should the free method of entry take? Two recent enforcement actions by the New York Attorney General help define that answer for national sweepstakes promotions.
Online Only AMOE Challenged in New York
Last month's enforcement action by the State of New York against drugstore giant CVS Corporation is a "real time" lesson on how to structure entry alternatives for certain national promotions.
CVS conducted a sweepstakes offering a trip to Hawaii as the grand prize. Consumers who purchased designated products using their CVS ExtraCare Card were automatically entered in the sweepstakes. However, consumers who did not make a purchase were unable to obtain an entry form for the sweepstakes, but could enter online.
Pursuant to the settlement, CVS must make entry forms readily available at participating CVS retail locations, regardless of whether the consumer has made a purchase.
The settlement with CVS follows a similar May 2004 accord with The Great Atlantic & Pacific Tea Company, Inc., which also agreed to settle allegations that it failed to provide sweepstakes entry procedures for customers who did not purchase items from its stores.
Properly structuring a free alternative method of entry is always a key sweepstakes design issue. In recent years, marketers have relied upon an online entry option to satisfy this requirement. These two recent New York enforcement actions clearly lay down the gauntlet to national marketers – automatic reliance on an online alternative method of entry risks a challenge by New York enforcers.