You’ve probably entered hundreds of giveaways yourself on the internet. Maybe you’ve even hosted one for your photography clients? Either way I’m sure you’ve seen them going around social media and if you’re reading this it’s probably because you’re considering hosting one yourself. Before you jump in and host one there are lots of laws to consider and I’m here to give you a few tips to get you started.
First let’s talk about various types of contests you might encounter here in the US. There are sweepstakes (giveaways) where a prize is given to a randomly generated winner. There are contests where winning is dependent upon criteria or skills. Finally there are lotteries, where you can buy a chance to win. These are the three big ways you can offer a type of contest. Most photographers and contests in our industry are giveaways so we’re going to focus a little bit on what you need to include to give away a prize to a randomly generated winner!
- Comply with Federal and State Law – First, all giveaways need to comply with both federal and state laws. You may have to limit who can enter your giveaway based on laws in various countries as well as the states here in the US. Some countries actually restrict sweepstakes so you may not be able to offer the giveaway to all of your followers. Most importantly, here in the US you need to look up your federal and state laws before hosting a giveaway. Giveaways in the new world of the internet are even more difficult because the laws were created on an older sweepstakes style system and our new system doesn’t always account for how the internet plays a role. That means some of the laws may be hard to decipher and fully understand, so do your research and call your state and federal departments that govern giveaways.
- Outline the Rules and Regulations of the Contest – You will always need to outline on your giveaway what the official rules are and how things work to be considered compliant. Below is a list of basic things you may need to comply, but the laws may vary depending on where you’re at and who you’re allowing to enter.
- Age – Usually 18 and older
- Country and States – Make sure if there are any states that cannot participate you list them. It’s also a good idea to state that your giveaway may be void where it is prohibited by law.
- How to enter
- Who can enter
- Identify the prize and list the total value
- State no purchase necessary – in order to qualify as a sweepstakes (giveaway) you need to make it clear people don’t need to purchase anything to enter
- Explain how you will re-award the prize or deal with unclaimed prizes
- Dates and duration of giveaway
- Odds of winning and how the winner is chosen
- Liability release
- How you will handle any problems that may arise during the giveaway – These could be technical like your website being unavailable etc.
- Value of Your Giveaway – The total value is important here in the US. The value will dictate what types of laws you may need to follow. If the total value of your prize is $600 or more you will be required to collect the Social Security Number of your winner(s) and issue a 1099 at the end of the year. This means your winner will have to claim the value of the winnings on their taxes as income received. If you have multiple winners any of them who receives more than $600 in prizes will need a 1099. It’s important to disclose this information on your giveaway so your winners know what is expected. Also, some state and federal laws may have very specific rules for any giveaway over $5000 specifically.
- Considerations – Operating a giveaway means you’re running a sweepstakes. In a sweepstakes everything around winning is based purely on luck or random chance. A consideration is usually something a participant has to do in order to be considered for winning, such as purchasing a product or a ticket. Sweepstakes are what they are because they don’t require any considerations to win, that’s why it’s so important for you to put “no purchase necessary” on your giveaway. However, the complex part of considerations are that a certain action required to enter a giveaway may result in financial gain for the giveaway host, and therefore void your giveaway. Anything that could benefit the company could potentially be a consideration and mean your giveaway is illegal. It’s difficult to specifically say what is and is not a consideration. I’ve read sources that say asking people to like your page, sign up for a newsletter, or share the giveaway are considerations because they bring the company benefit by showcasing the company to potentially new people. Each state and the federal government has its own laws on how these things work. Unfortunately it’s really difficult to give a concrete answer on if doing any of these things will void your giveaway since the laws are still vague. Some people argue that simply needing a computer or internet access to enter a giveaway could be a consideration. Since these laws surrounding consideration are deep and complex I recommend contacting a lawyer who has worked on sweepstakes or similar contests to ensure you are complying with the law before offering a contest.
- Social Media Platforms – If you are going to promote your giveaway on any social media you will also need to ensure you comply with their rules and regulations regarding giveaways.
Now that you’ve read up you’re probably incredibly scared to dive into offering a giveaway or contest to your clients. If you’re looking to do any type of contest, giveaway or lottery as a marketing tool please make sure you contact a lawyer to ensure you are doing it correctly. Unfortunately many of us have made mistakes that don’t follow US law regarding giveaways in the past and now we have an opportunity to do them correctly. Please know this blog post is intended as informational content only based on my own personal research and is not legal advice. If you’re looking for more information on the official side of doing business check out our Get Legit blog archives or sign up to take the Taxes and Official Ickiness Bootcamp that starts next week and runs continually all year long!