Follow the Rules for Social Media Contests to Avoid a #Headache

From small mom-and-pop shops to the world’s most well-known brands, organizations have jumped on the social media contest bandwagon. “Like” a Facebook brand page or Tweet a photo with a certain hashtag for a chance to win everything from a gift certificate to a new house to $1 million. Companies are using social media contests and sweepstakes as incentives to build a larger following, engage their audiences and cultivate brand loyalty.

But are these companies following the rules?

While there are plenty of benefits to running social media contests, organizations that don’t comply with Federal Trade Commission (FTC) regulations run the risk of lawsuits and penalties for compliance violations. The FTC, which works to protect consumers from deceptive practices by regulating contests and sweepstakes, recently released a new document titled “The FTC’s Endorsement Guides: What People Are Asking.”

One of the key issues is the clear disclosure that social media posts about a company or product made in response to a contest are incentivized. This falls under the umbrella of endorsements because a social media user is essentially promoting a company or product for the sole purpose of entering a contest. As a result, the company running the contest can capitalize on each participant’s reach on a particular social media platform, so other users of that platform should be notified accordingly.

For example, if a contest participant is required to post on social media with a hashtag to enter a contest, that hashtag must make this fact clear. Including “contest” or “sweepstakes” will do the trick, but a shortened version such as “sweeps” would be considered inadequate because many people wouldn’t understand what that means.

Organizations running social media contests or sweepstakes also need to comply with the laws of any state that a contest reaches. In Florida, a game promotion (contest, game of chance, sweepstakes or gift enterprise) that offers prizes in excess of $5,000 must be registered with the Florida Department of Agriculture and Consumer Services. Game promotions originating in other states but open to Florida residents or conducted in Florida must be registered as well.

Also, a surety bond or statement of trust is required from the contest operator unless they’ve been conducting game promotions in Florida for at least five years and haven’t been charged with wrongdoing. This is designed to provide contest participants with compensation if the operator is unable or unwilling to deliver any prizes or winnings as advertised in the contest. All contest rules must be published and conspicuously posted on all outlets in which the contest is promoted, including social media, and a list of all winners must be made available to anyone who requests it.

Penalties for violation of these contest and sweepstakes rules range from a civil penalty of up to $1,000 to an injunction to referral for criminal prosecution. Before you run your next social media contest, make sure you understand the rules, and consider having your strategy and disclosures reviewed by an attorney.