Sweepstake

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Tickets being chosen in the Irish Hospitals Sweepstake, 1946 Irish Hospitals Sweepstake - Nurses holding up the picked tickets 1946.jpg
Tickets being chosen in the Irish Hospitals Sweepstake, 1946

In the United States, a sweepstake is a type of contest where a prize or prizes may be awarded to a winner or winners. [1] Sweepstakes began as a form of lottery that were tied to products sold. [2] In response, the FCC and FTC refined U.S. broadcasting laws (creating the anti-lottery laws). [3] Under these laws sweepstakes became strictly "No purchase necessary to enter or win" and "A purchase will not increase your chances of winning", especially since many sweepstakes companies skirted the law by stating only "no purchase necessary to enter", [4] removing the consideration (one of the three legally required elements of gambling) [5] to stop abuse of sweepstakes. [5] Today, sweepstakes in the United States are used as marketing promotions to reward existing consumers and to draw attention to a product. [2] By definition, the winner is determined by pure random chance rather than skill. [6]

Contents

Marketing

Sweepstakes with large grand prizes tend to attract more entries regardless of the odds of winning. Therefore, the value of smaller prizes usually totals much less than that of the top prize. Firms that rely on sweepstakes for attracting customers, such as Publishers Clearing House and Reader's Digest, have also found that the more involved the entry process, the more entrants.[ citation needed ] Businesses often obtain marketing information about their customers from sweepstakes entries.

Regulation

A Calcutta Derby sweepstake ticket Calcutta Derby Sweepstake Ticket 1934.jpg
A Calcutta Derby sweepstake ticket

Because of their potential for abuse, sweepstakes are heavily regulated in many countries. The US, Canada, and individual US states all have laws covering sweepstakes, so there are special rules depending on where the entrant lives. The U.S. Federal Trade Commission exercises some authority over sweepstakes promotion and sweepstakes scams in the United States. Notably, sweepstakes in Canada, Australia, and several European countries require entrants to answer a skill testing question such as solving an elementary-school-level mathematical puzzle, or answering a simple general knowledge question, making it (in theory, at least) a contest of skill in order to overcome requirements that would classify sweepstakes as a form of gambling under their country's legal definition. There are similar laws in Brazil.

Australia

In Australia, a sweepstake is known as a competition, however the technical name for a consumer competition is a trade promotion lottery. [7]

A trade promotion lottery is a free entry lottery conducted to promote goods or services supplied by a business. Unlike in the U.S., entrants may be required to purchase a product in order to enter a trade promotion in Australia.

Companies or promoters may require a trade promotion lottery permit if the winner(s) are to be chosen via an element of chance, i.e. a competition draw.

No permits are required for competitions that do not involve an element of chance in determining the winner or winners. Common examples include competitions where entrants are required to submit a photo or an answer to a question in 25 words or less.

Many compers (those who enjoy entering competitions) attend annual national conventions. In 2012 over 100 people from the online competitions website lottos.com.au met on the Gold Coast, Queensland to discuss competitions. [8]

The United Kingdom

Sweepstakes with an entry fee are considered in the UK to be lotteries under the Gambling Act 2005.

Most sweepstakes in the UK are small-scale. They are classed as work lotteries, residents' lotteries, or private society lotteries, and do not require a licence, provided that all the money staked is paid out as prize money. [9]

The popularity of the term "sweepstakes" may derive from the Irish Sweepstakes, which were very popular from the 1930s to the 1980s.

There is a tradition of office sweepstakes (known as office pools in the U.S.), which are usually based on major sporting events such as the Grand National and the World Cup. Entrants pay an equal stake for each horse/team they draw out of the hat before the event. The winner then takes the pot. For horse racing events, the pot may be split between the horses that win, place, and show.

What an American would call a "sweepstakes" — a random prize draw promoting a commercial product — is likely to be labelled as a "prize draw" or "competition" in the UK. [10]

In the UK, prize competitions and prize draws are free of statutory control under the Gambling Act 2005, [11] but should follow the CAP Code.

United States

U.S. Federal Trade Commission seal Seal of the United States Federal Trade Commission.svg
U.S. Federal Trade Commission seal
A 1987 Pepsi can advertising the Cubs Home Run Sweepstakes. Weathered Pepsi can 1987-2020.jpg
A 1987 Pepsi can advertising the Cubs Home Run Sweepstakes.

In the United States, sweepstake sponsors are very careful to disassociate themselves from any suggestion that players must pay to enter, or pay to win, since this would constitute gambling. Sweepstakes typically involve enticements to enter a consumer promotion with prizes that range from substantial wins such as cars or large sums of money to smaller prizes that are currently popular with consumers. There should be no monetary cost to the entrant (although some sweepstakes require entrants to subscribe to a promotional mailing list, potentially exposing the entrant to an increase in junk mail, spam email, or telemarketing calls) and sweepstakes winners should also not be required to pay any kind of fee to receive their prizes. [12]

As an example of a state policy on sweepstakes promotions, Tennessee residents are prohibited by a policy of the Tennessee Alcoholic Beverage Commission (and not a state law) from entering sweepstakes online sponsored by manufacturers of wines and liquors; however, Tennessee residents may enter many of these same sweepstakes promotions by entries delivered by the US Postal Service. Another example is that Tennessee state law prohibits sweepstakes agencies and sponsors from requiring sweepstakes prize winners to submit to "in perpetuity" publicity releases.

Most corporate-sponsored sweepstakes promoted in the United States limit entry to US citizens, although some allow entry by legal residents of both the United States and Canada.

Among the most popularly known sweepstakes in the United States were the American Family Publishers Sweepstakes (now defunct), Publishers Clearing House sweepstakes, and Reader's Digest Sweepstakes, each of which strongly persuaded entrants to purchase magazine subscriptions by placing stickers on contest entry cardstock while promising multimillion-dollar (annuity) winners who will be "announced on TV". The American Family Publishers sweepstakes used paid advertisements during NBC's The Tonight Show to announce its grand prize winners (for many years, its celebrity spokesman was Ed McMahon). All three companies eventually paid fines and penalties to a variety of states who initiated legal actions against them. Of those three companies, only Publishers Clearing House continues to use sweepstakes as a promotional device and as recently as 2010 paid $3.5 million to settle charges that it had violated the terms of a 2001 multi-state agreement for which it was fined $34 million. [13] [14]

Sweepstakes are frequently used by fast-food restaurants to boost business. One of the most popular has been the McDonald's Monopoly "instant-win" game-piece promotion (To satisfy the "no purchase necessary" requirement, free game pieces are made available on request through the US mail). Soft drink companies also sponsor many sweepstakes, such as the Pepsi Billion Dollar Sweepstakes game and the Pepsi Stuff loyalty rewards program that allowed Pepsi drinkers to accumulate points from packages and cups and redeem them for merchandise. Pepsi Stuff was Pepsi's largest and most successful long-term promotion ever and it ran for many years in the US and in many countries around the world. Other sponsors may require the submission of a UPC of a company product (with provision for receiving a "free" UPC) for entry into the sweepstakes drawing.

Sweepstakes parlors, which began to appear in the US around 2005, are establishments that offer chances to win cash prizes as a promotion for a product, usually either a telephone card or Internet access. Sweepstakes casinos use a similar model, offering promotional real money winning opportunities by playing casino-style games online.

Sweepstakes must be carefully planned to comply with local laws and curtail forms of entrant fraud and abuse. Before home computers were popular, a common method of entry was a mailed, plain 3" × 5" index card with the entrant's name and address. Massive computer-printed entries resulted in a new requirement that entries must be "hand-printed".[ citation needed ] Laser printers that can mimic ink pen writing are also a problem for sponsors. In most sweepstakes, entrants and their relatives must not be related to the sponsor or promoter.

Many state lotteries also run second-chance sweepstakes in conjunction with the retail sale of state lottery scratch cards in an effort to increase consumer demand for scratch cards and help control the litter caused by the improper disposal of non-winning lottery tickets. [15] Since lottery tickets are considered to be bearer instruments under the Uniform Commercial Code, these lottery scratch card promotions can be entered with non-winning tickets that are picked up as litter.

Related Research Articles

The Robinson–Patman Act (RPA) of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.

<span class="mw-page-title-main">Competition</span> Rivalry where multiple parties strive for a goal which cannot be shared

Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss. Competition can arise between entities such as organisms, individuals, economic and social groups, etc. The rivalry can be over attainment of any exclusive goal, including recognition.

<span class="mw-page-title-main">Federal Trade Commission</span> United States government agency

The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction over federal civil antitrust law enforcement with the Department of Justice Antitrust Division. The agency is headquartered in the Federal Trade Commission Building in Washington, DC.

<span class="mw-page-title-main">Lottery</span> Gambling that involves the drawing of numbers at random for a prize

A lottery is a form of gambling that involves the drawing of numbers at random for a prize. Some governments outlaw lotteries, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments. The most common regulations are prohibition of sale to minors and licensing of ticket vendors. Although lotteries were common in the United States and some other countries during the 19th century, by the beginning of the 20th century, most forms of gambling, including lotteries and sweepstakes, were illegal in the U.S. and most of Europe as well as many other countries. This remained so until well after World War II. In the 1960s, casinos and lotteries began to re-appear throughout the world as a means for governments to raise revenue without raising taxes.

<span class="mw-page-title-main">Skill testing question</span> Legal requirement attached to many contests in Canada converting games of chance to games of skill

Skill testing questions are a legal requirement attached to many contests in Canada.

In the United Kingdom, the football pools, often referred to as "the pools", is a betting pool based on predicting the outcome of association football matches taking place in the coming week. The pools are typically cheap to enter, and may encourage gamblers to enter several bets.

<span class="mw-page-title-main">Irish Hospitals' Sweepstake</span> Irish lottery for financing hospitals

The Irish Hospitals' Sweepstake was a lottery established in the Irish Free State in 1930 as the Irish Free State Hospitals' Sweepstake to finance hospitals. It is generally referred to as the Irish Sweepstake or Irish Sweepstakes, frequently abbreviated to Irish Sweep or Irish Sweeps. The Public Charitable Hospitals Act, 1930 was the act that established the lottery; as this act expired in 1934, in accordance with its terms, the Public Hospitals Acts were the legislative basis for the scheme thereafter.

Publishers Clearing House (PCH) is an American company founded in 1953 by Harold Mertz. It was originally founded as an alternative to door-to-door magazine subscription sales by offering bulk mail direct marketing of merchandise and periodicals. They are most widely known for their sweepstakes and prize-based games which were introduced in 1967. From August 2020 to March 2024, they owned the Wide Open Media publications Wide Open Spaces, Wide Open Country, and FanBuzz.

<span class="mw-page-title-main">Online gambling</span> Gambling done through the internet

Online gambling is any kind of gambling conducted on the internet. This includes virtual poker, casinos, and sports betting. The first online gambling venue opened to the general public was ticketing for the Liechtenstein International Lottery in October 1994. Today, the market is worth around $40 billion globally each year, according to various estimates.

American Family Publishers was an American company that sold magazine subscriptions. Founded in 1977, American Family Publishers (AFP) was one of America's leading marketers of magazine subscriptions. AFP was jointly owned by TAF Holdings, Inc. and a group of private investors. It is best known for running sweepstakes in which a large amount of money was offered as the grand prize. The winner was chosen at random, by a professional auditing company, from among all who responded to the sweepstakes, regardless of whether a magazine subscription was purchased or not.

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<span class="mw-page-title-main">National Lottery (United Kingdom)</span> The National lottery in the United Kingdom

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A sweepstakes parlor is an establishment that gives away chances to win prizes with the purchase of a product or service, typically internet access or telephone cards. They began to appear in the Southern United States some time around 2005, and quickly proliferated. Purchased entries are redeemed using computers at the establishment, which contain specialized software that presents whether a participant has won a prize. Results are often presented using mechanisms that resemble casino games, such as slots, and the facility itself may contain casino motifs in their overall decor.

<span class="mw-page-title-main">Prize-linked savings account</span> Type of savings account

A prize-linked savings account (PLSA) or lottery-linked deposit account is a savings account in which some of the interest payment on bank deposits or marketing dollars are distributed as prizes based on chance. They are attractive to consumers as they function both as a sweepstakes or game of chance and as savings vehicle. PLSAs are similar to lottery bonds, except they are offered by banks, credit unions, prepaid card companies, and financial technology companies, and they can be held for a period of time determined by the consumer. Sometimes the returns are in-kind prizes rather than cash.

Gambling has been present in the Philippines since at least the sixteenth century. Various legal and illegal forms of gambling are found almost all over the archipelago. The government manages gambling through the Philippine Amusement and Gaming Corporation (PAGCOR) a state-owned enterprise which both operates a number of individual casinos and in turn acts as a regulator to privately owned casino operators. Since 2016 PAGCOR has also granted operating licenses and overseen the regulation of growing online gambling sector serving offshore markets. Casino gambling and integrated resorts have become a key component of the Philippines appeal as a tourist destination with more than twenty casinos found in Metro Manila alone.

Omaze is a for-profit fundraising company that partners with charities in fundraising events. Omaze's events feature prizes, such as material goods, property, or celebrity experiences, usually with one grand prize and several lesser prizes. In order to enter the draw for the prizes, financial contributions were encouraged, with 15% to 60% of the money going to the partner charity.

<span class="mw-page-title-main">Betting and Lotteries Act 1934</span> United Kingdom legislation

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<span class="mw-page-title-main">Loot box</span> Purchasable video game item containing random rewards

In video game terminology, a loot box is a consumable virtual item which can be redeemed to receive a randomised selection of further virtual items, or loot, ranging from simple customization options for a player's avatar or character to game-changing equipment such as weapons and armor. A loot box is typically a form of monetisation, with players either buying the boxes directly or receiving the boxes during play and later buying "keys" with which to redeem them. These systems may also be known as gacha, which is popular in Japan, and may be integrated into gacha games.

References

  1. "Sweepstakes – Definition and More from the Free Merriam-Webster Dictionary" . Retrieved 20 September 2014.
  2. 1 2 "Understanding sweepstakes" . Retrieved 17 July 2024.
  3. "Advertising FAQ's: A Guide for Small Business". Federal Trade Commission. Retrieved 28 January 2014.
  4. "no purchase necessary laws". Federal Trade Commission. Retrieved 28 January 2014.
  5. "Is Your Contest Illegal? 33 Important Legal Considerations for Contests and Sweepstakes" . Retrieved 23 December 2014.
  6. "OLGR > Promotions and competitions > Trade promotion lotteries". liquorandgaming.justice.nsw.gov.au. Retrieved 2016-12-27.
  7. "Comp Queens". Aca.ninemsn.com.au. 2012-09-21. Retrieved 2012-12-16.
  8. "I would like to organise a sweepstake (for example, on the European Championship or Olympic Games), are there any rules?". Gambling Commission. Retrieved 2012-12-16.
  9. "Sales promotions: Prize draws". CAP. Retrieved 2015-03-19.
  10. "Free draws and prize competitions". Gambling Commission. Retrieved 2015-03-19.
  11. "Sweepstakes Scam Cheated Unsuspecting Consumers, FTC Says". Ftc.gov. 2006-10-19. Retrieved 2015-08-30.
  12. "Attorney General Announces Multistate $3.5 Million Settlement with Publishers Clearing House to Settle Contempt Charges" (Press release). Colorado Attorney General's Office.
  13. Pankratz, Howard (September 10, 2010). "Publishers Clearing House to pay for violation". The Denver Post. Retrieved October 24, 2013.
  14. Tennessee Lottery. Play It Again Program - FAQ. Archived September 28, 2007, at the Wayback Machine