Let’s Review Some Tricky Commercial Co-Venture Issues

From a quick Google search I see articles citing “at least 22” states have commercial co-venture laws; “over 30 states have laws governing commercial co-ventures”; “currently 27 states define ‘commercial co-venturer’ in their solicitation laws”; “about 20 states” have commercial co-venture laws.  You get the point.  This can be a tricky area of the law.  For the record, 23 states have specific statutes pertaining to commercial co-ventures/venturers and additionally, the Illinois “charitable trust” statutes would apply to commercial co-venturers.

Many of these commercial co-venture statutes are uniform in their definitions and applicability.  However, there are always grey areas where the practical doesn’t always fit with the statutory.  I’d like to review a few of these areas with questions frequently posed:

If we only ask consumers to “like” our Facebook page to trigger a donation to charity is that a commercial co-venture?

Perhaps in some states.  The vast majority of state statutes expressly require a purchase to trigger a donation.  But a few states (AL, MA and MS) have statutes drafted which could encompass non-purchase solicitations.  By their terms, these states’ laws would apply whenever a company “conducts, promotes, underwrites, or sponsors a sale, performance or event of any kind which is advertised and which will benefit to any extent a charity.”  See AL Code § 13A-9-70(A); Mass. L. ch. 68, § 18; Miss. Admin. Code 1-15-1.01. (more…)

One Whale of a Story $2MM Fishing Contest Prize in Dispute After Failed Polygraph Test

Fishermen(persons?) say that the strongest currents yield the biggest catch.  Or at least I think they say that; I really don’t fish.  But there’s a storm a brewing in Maryland federal court over a disputed $2.8 million first prize in the “world’s largest billfish tournament,” known as the White Marlin Open in Ocean City, Maryland. White Marlin Open, Inc. v. Heasley, No. 1:16-cv-03015 (D. Md.)

Entering anglers had to pay a $1,000 fee to register their boat and winners received a prize based upon the type/size of fish caught and the total entry fees.   Phillip G. Heasley allegedly caught the only qualifying white marlin which would purportedly qualify him for a $2.8 million prize.  Pursuant to the contest rules, the Sponsor could require him to take a polygraph test.  He did.  He was found to have used “countermeasures” to manipulate the examination process.  Ooh, the plot thickens. The boat’s captain and crew were also given polygraph tests which purportedly helped sink Heasley.  Apparently, the claim is that Heasley’s catch report had a catch time of 8:15 a.m. that was written over with a time of 9:05 a.m..  The Official Rules state that anglers cannot fish until after 8:30 a.m.  Waiting to snare the big prize were the other winners.

The Sponsor, after conferring with the three independent judges, determined Heasely was disqualified.  The Sponsor then filed an Interpleader action in Maryland state court (which was later removed to federal court) seeking to deposit the prize money in escrow and let Heasely and the other winners fight it out.  But the Sponsor didn’t stop there.  The Official Rules provided that the Sponsor “shall be entitled to reimbursement for 5 times its costs and fees, including attorneys’ fees, which result from the determination and resolution of the validity of unjustified protests.”  The Sponsor then sought 5x its attorneys’ fees in the lawsuit. (more…)

“You Are [NOT] a Winner” Consent Order Entered Against Printer/Mailer of Deceptive Prize Notifications

On February 9, 2017, a consent order was entered in favor of the FTC against the general manager of a company engaged to procure printing and mailing of deceptive prize notifications.  The individual got laminated for $800,000 (subject to reduction).

The lesson: anyone involved with deceptive prize/sweepstakes/contests mailings could get in serious trouble.

According to the Complaint, the sponsor, using the aforementioned company, mailed hundreds of thousands of personalized cash prize notifications announcing that the recipients had won a cash prize of $943,543.54.  (NB: maybe a million dollars outright seemed too suspicious?)

Of course, the offer was made to sound juicy: “YOU HAVE WON A CASH PRIZE! … Your name was identified among a tiny percentage of ALL eligible individuals.  The fact that you have won a cash prize must be thrilling and somewhat overwhelming.”

Of course, they targeted the elderly.  Of course, they asked for a “fee” of $25 to collect the prize.  Of course, people complied.  And of course, they didn’t get the cash prize.

Why go after the printer/mailer?  The sponsor gave him the electronic templates of the prize notifications, the outer envelopes and the return envelopes, and instructed him on the quantities to print, who to mail them too, and when to mail them.  (He may have done some editing too.)  He then arranged for the notices to be printed and mailed out.  According to the FTC this was enough to be in on the scheme. (more…)

Should Influencers Influence Cause Marketing?

To use or not to use a popular marketing tool?  That is the question.  Shakespeare, himself, opted for a popular marketing tool when he cast the famous tragedian, Richard Burbage, for the part of Hamlet.  This was probably a good idea, since according to Wikipedia, the play “has been performed many times since the beginning of the 17th century.”

Engage for Good recently posted “Statistics Every Cause Marketer Should Know.”  The numbers confirm that cause marketing is big, popular, and works.

What studies also show is that cause marketing works when it is genuine and credible.  There is a trust established between the consumer and the brand.  An implicit (or explicit) promise from the brand that its intent is to “do good.”  But the question for brands now more than ever is how to get the word out, and specifically, would a social media influencer’s influence influence the millennials who you want to influence?

Nearly 40% of Twitter users say they’ve made a purchase as a direct result of a Tweet from an influencer.”  70% of YouTube subscribers trust influencers’ opinions over celebrities.  And according to one study, on average, businesses generate $6.50 for every $1 spent on influencer marketing! (more…)

Will The Consumer Review Fairness Act of 2016 Affect Contests and Sweepstakes? (Hint: Yes)

On December 14, 2016, the Consumer Review Fairness Act of 2016 was passed to try to put an end to companies taking down nasty reviews about their products.

Congress’s way of telling companies: if you ask for it, you’re gonna get it.

The new law – effective March 14, 2017 – generally prohibits companies from imposing upon users a restriction for posting negative written, oral or pictorial reviews or similar performance assessments about the company’s goods or services.  The new law also prohibits mandating people to transfer their rights to their reviews or feedback to the company (a nonexclusive license is ok).

Could this new law have a dramatic and lasting impact on contests and sweepstakes as we know it?  I don’t think we’re quite at Chicken Little stage, but the reach of this new law could have a serious effect on contests and sweepstakes that seek reviews or feedback on a sponsor’s product.  That’s because the new law applies when the restrictions are contained in “form contracts,” defined as contracts with standardized terms that the other person doesn’t have any meaningful opportunity to negotiation.  Sounds like Official Rules.

“Tell us in 3 words or less how much fun you had on your last Sponsor To The Stars vacation” or “Post your favorite Sponsor Sandwich for a chance to win even more Sponsor sandwiches.” or “Tweet the 50 things you love about Sponsor Soap to #SponsorSoapSweeps.”  All potentially affected. (more…)

2016: The Year in Review

In case you missed it, here are some notable items from 2016 concerning sweepstakes, contests, and related promotional matters:

Influencers, Native Advertising, and Endorsements

2016 kicked off with reaction to the FTC’s new Native Advertising Rules which seek more transparency in sponsored stories/advertising.

In March, in its first enforcement action, the FTC cracked down on Lord & Taylor for paying “influencers” to attract social media attention to its Paisley Asymmetrical Dress.  The FTC issued a number of directives, including making the influencers aware of their participation, and making disclosure of the relationship unavoidable.

In May, the National Advertising Division (NAD), a self-regulatory industry, issued a decision concerning native advertising appearing in People.com under the “Stuff We Love” section.  The NAD determined that disclosure of the sponsorship must be made before you get to the stuff page.

In July, the FTC charged Warner Bros. with making inadequate disclosures in videos of influencers playing a new video game.  The FTC didn’t like that the sponsorship disclosure was in a collapsed box below the video and needed to be in a place where consumers will find it.

In October, in an effort to comply with the FTC Rule, YouTube introduced a new feature allowing visible text on a video for the first few seconds with the label stating “Includes paid promotion”

The take:  Consumers and the FTC don’t particularly like “influencers” or hidden ads, so be conspicuous. (more…)