Creative Business Law Blog | Inspiration Spaceship | Congratulations, you have just won a permanent ban from the prize promotion business.
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Congratulations, you have just won a permanent ban from the prize promotion business.

Sweepstakes scammers effectively received such a message recently, delivered by the Federal Trade Commission in connection with a record $30 million forfeiture. The case, which was brought in Missouri in 2018, represents the largest forfeiture the FTC has ever obtained in a case against a sweepstakes scam. Among the proceeds that will be used to refund money to victims are two luxury vacation homes, a yacht, a Bentley automobile, and over $21 million in cash.

The FTC complaint charged the sending of deceptive personalized mailers to consumers, many of them senior citizens. Some of the mailers claimed that recipients had won or were likely to win a substantial cash prize. Others invited the playing of “games of skill” without disclosing total fees needed to play or that the final round required solving a mathematical puzzle well beyond the abilities of non-genius-level mathematicians, if even one with such ability could have solved it.

Many seniors paid the fees, and some even paid more than once, before realizing that it was all a scam. Even if not conducted by criminals, however, contests, sweepstakes, and similar consumer promotions are traps for the unwary agency trying to assist its client in developing a creative incentive. Both federal and state laws regulate advertising and rules surrounding promotions. Oregon prohibits among other unfair trade practices soliciting participation in a contest or sweepstakes by using the mail to falsely represent that a person has won a particular prize or is a finalist for a prize when over 25% of those receiving the solicitation have the same chance of winning.

Under Oregon law, numerous specific disclosures are also mandatory. For example, ORS 646A.803 provides that it is an unlawful practice to solicit participation in a contest without “clearly and conspicuously” disclosing the maximum total cost required to play through the final rounds. Further, if the contest involves multiple rounds of increasing difficulty, the advertiser must disclose an illustrative example of the last determinative round or state that subsequent rounds will be even more difficult. Additional requirements apply to creative choices for disclosures, including font, color contrast, and placement.

Since the Justice Department this week announced “the largest coordinated sweep of elder fraud cases in history,” the FTC will likely increase its focus on communications aimed at elderly consumers. Boutique agencies serving this important but particularly vulnerable market should take care to include clear and conspicuous language disclosing all material terms and any required purchases in promotions directed at seniors. If you have questions about contests, sweepstakes, or other advertising and promotions, please feel free to contact Inspiration Spaceship.

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