Staying Legal With Facebook Give-Aways & Contests

I’m not a lawyer.

But, I do know that giving away prizes through Social Media channels is a great way to engage customers and get followers. However, you may want to proceed with caution and do some research before jumping in. There could be terrible consequences if it’s done incorrectly.

I’m going to link you to a great article that gives a more in-depth discussion on the topic but here are the highlights.

There are 3 types of give-aways:

1. Sweepstakes –Winners are chosen randomly. If you have official rules in place, this is usually pretty safe.
2. Contests – Winners have to do something to get chosen-submit the best photo, get the most votes, etc. – Fun and engaging but it gets a little hairier.
3. Lotteries - People pay money for a chance to win - Hire a lawyer for this one.

Three items are looked at when determining if a giveaway is illegal. If all three are present, it may be illegal.

Prize – Is there a prize being offered. (Usually always is!)
Chance –Is it just pure luck? If you make the participants do something requiring skill-you can eliminate this one. But here’s the Catch 22. If participants have to do something, you often eliminate the number that will participate.
Consideration – The entrant has to give something of value to participate, usually money. The tricky part is, what, other than money, is considered value? A stamp isn't. (If they have to mail in an entry.) But if you ask them to jump through a bunch of hoops, leave comments about the product on another’s page, blog about you, etc, that could be considered, Consideration. A participant’s time to some degree is considered valuable. Because Social Media advances so rapidly, laws governing it have not really kept up and there's a lot of gray areas.

If you're running a contest it important to have official rules that are easy to locate. These rules tell people how to participate, alternative ways to enter (by mail for example if they dont' have a computer or Internet access), no purchase necessary, start and end dates of the contest, the prize and it's value, etc.

And remember, Uncle Sam wants his cut too, so if the prize is over a certain value ($600) the winner needs to be issued a 1099 so they can report it on their taxes.

Those are the highlights. This article from the Social Media Examiner does a good job of spelling out more of the details.

I honestly hope this didn't scare you away from doing give aways. There are ways to do it correctly. You just have to follow the rules, like you do with any promotion.