Marketing Law Overview - American Marketing Association

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Marketing Law Overview

By Maxine Lans Retsky
Maxine Lans Retsky is a partner in the Chicago office of Piper Marbury Rudnick & Wolfe, where she heads the advertising, marketing and trade practices group. Ms. Retsky's law practice includes marketing, including promotions, sweepstakes and advertising.

	1. Promotion Law

The legal field of advertising and marketing is constantly changing. The laws governing promotions, trademarks, copyrights and advertising are updated frequently to adapt to new technology and consumer needs. Therefore, it is important to keep current regarding your legal responsibilities as a marketer and conduct campaigns and promotions that comply with the law.

This article is a brief introduction to four areas of marketing law: promotions, trademarks, copyrights and advertising.

Promotion Law

Sweepstakes, games of chance and skill contests (collectively referred to as promotions) are governed by a variety of federal, state and local laws and regulations.

If not conducted properly, these games can be deemed illegal lotteries.

An illegal lottery consists of three elements:

Prize,
Chance,
Consideration.

In order to make a promotion legal, one of the three elements must be eliminated. To state it another way, when consideration (which means an expenditure of effort or anything of value, not just money) is given for the chance (usually in the form of a random drawing) to receive a prize, an illegal lottery exists.

So, how can you conduct a sweepstakes, game of chance or skill contest without violating lottery laws? First, it is important to identify the type of promotion you are conducting.

If it is a sweepstakes, winners are selected in a random drawing from all eligible entries received.
If it is a game of chance, winning wining game pieces are mixed into a universe of losing game pieces and then randomly distributed (i.e. matching games, scratch and win, collect and win).
If it is a skill contest the winners are selected on the basis of bona fide skill (i.e. the element of chance may not affect either the selection of the winner or the amount of the prize the winner will receive). A skill contest might be an essay, drawing, photography or cooking contest.

If you decide to conduct a sweepstakes or a game of chance, you must provide the opportunity to participate without any consideration being given. Keep in mind that consideration may be found not only if a purchase or monetary payment is required, but also if “a substantial expenditure of effort” is required (such as completing a complicated task or, in certain states, making a visit to a store or attending a sales presentation.)

Although it is legal to have one of your methods of entering or playing include consideration, the laws require that the sponsor also offer a free method of entry. That way the nonpurchasing participants have an equal chance to enter and win. Most often this is accomplished by allowing participants to write to a P.O. box to enter a sweepstakes or to obtain a free game piece.

If you opt to conduct a skill contest, you must eliminate the element of chance. Select winners based on skill using established criteria that is consistently applied by qualified expert judges. Requiring consideration from participants in a skill contest, whether it is “effort” or a purchase, is permissible, except in a few states.

Skill contests are somewhat tricky, and what may appear on its surface to be a game of skill may actually be a game of chance.

For example, if a contest uses a series of true/false questions, a participant could arguably become the winner by guessing rather than by exercising skill. Also, if a game uses skill to narrow the field of participants, but the winner is ultimately determined by a random drawing, it is really a game of chance. Even if a number of participants achieved the same score and a random drawing was conducted to determine the winner, it would be an illegal lottery.

Promotion Law Practice Tip:

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Table of Contents

1.	Promotion Law
2.	Trademark Law
3.	Copyright Law
4.	Advertising Law