In contests, prizes are awarded to the best performers; be it a submission, such as an essay, recipe or painting or the results of trivia or other test. While this may be a simple enough proposition, issues abound for marketers interested in using skill-based promotions.
As with sweepstakes and instant win games, the skill-based promotion must first comply with federal and state lottery laws. As commonly defined, a lottery consists of prize(s), distributed by chance among those persons who furnish consideration. Here, though, the absence of chance becomes the focal point of the analysis. To be legally sound, the contestants' talents - not the vagaries of chance - must determine the prize winners.
The analysis then turns to the type of consideration required of the contestant. Must the contestant make a payment in order to participate? Is the payment in the form of a product purchase? For sure, a purchase requirement will not cause a skill-based promotion to run afoul of lottery laws. However, the answers to the above questions may still introduce additional legal hurdles. For instance, if a contestant must pay to compete, registration may be required in Arizona. In other states, such as Florida, the required purchase may be considered an illicit wager. And some states view the mandatory purchase itself as a violation of law.
Next, the official rules of the promotion must be crafted in accordance with consumer disclosure and other laws. Some states, like California, mandate that certain prescribed statements appear in the official rules as well as in related advertising copy. For skill-based promotions offered via direct mail, the federal Deceptive Mail Prevention and Enforcement Act as well as various state laws come into play. Skill-based promotions conducted on the Internet also present significant liability issues as well as logistical concerns.