The Legal Implications Of Running A Promotion – Anthony Verna

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TIME STAMPS

  • What are the difference in internet and advertising law 10 years ago and now? [10:33]
  • Why we all should have terms and conditions in our ads and promotions [19:04]
  • What is the difference between facebook law and state/country law when it comes to promotions? [24:37]
  • Whose responsibility is it to ensure that the prize gets to the recipient? [30:20]
  • Hear the other useful tips from Anthony related to this topic [35:10]
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TRANSCRIPTION

Welcome back to this week's episode of The bringing business to retail podcast. Running your own business is fraught with danger. We all know that and sometimes we don't have access to instant legal advice. So I'm here to help you. And I've brought Anthony Verna on the show. He's a lawyer and he's going to help us really navigate what it takes. What you need to be doing and how to make sure that you stay within the law when it to running a promotion. Anthony is the managing partner of   a boutique law practice focusing on intellectual property, trademark and copyright registrations protection, domain name law, advertising and promotions law which is what we're talking about today. He represents a huge range of businesses right from businesses like yours up to senior executives and multinationals. So welcome to the show Anthony.

Anthony:  Salena thank you so much. And you know I know it's a mouthful but I could hear you say that all day.

Salena: Well you've been doing this for a while haven't you.

Anthony: Yes I've been practicing law now for 15 years and all of it's been intellectual property and advertising laws. So yeah yeah 15 years is quite a long time now that  I think about it.

Salena: And what changes have you seen. Because I was doing a podcast yesterday and we were talking about how different the world is now. Just from 10 years ago ten years ago we didn't have data on phones. Now we can literally say hey Google turned the oven on. So what changes have you seen in the whole legal landscape with the Internet and cross border promotions and all these sorts of things. How has that affected what you doing business?

Anthony: Well I would say that you know with cross-border promotions I'd say not much.  Because I think a lot of companies want to maybe keep the branding even between jurisdictions. But because sweepstakes and promotions rules are very very jurisdictionally specific and many cultures in many countries and jurisdictions really are different cultures that they want to make; they really do want to keep the cultures country specific. But what we do see of course is using social media, I think mostly we also see a lot of misuse of social media. I'm sure Selena not just you but a lot of the listeners can remember the times when it says just share this picture click like for an entry to the sweepstakes and I don't know any jurisdiction in which that's an actual legal entry. So I do see a lot more of that going around than you ever used to just because of the ease of being able to put something up on the Internet and the mass communications going out quickly. So I do see a lot of that. But also you do see a lot of companies really trying hard to keep their branding, whether it's of their other promotions or their products as even as they can throughout the world. And that's, I mean that that can be a real problem because again every country every jurisdiction has its own culture and so people may come to the same end result in the same; in just a different way. So that's something that a lot of companies really are trying hard to do today. So they're doing a lot more legwork and the beginning to make sure that they can do that. But that's also true for sweepstakes as well. They want to at least keep some kind of semblance of a similar promotion even though it's different in different jurisdictions. But they want to at least keep that semblance in that branding the same.

Salena: Ok just so that we are all on the same page through these conversation you use the web promotion and use the word sweepstakes. Can you give us a little bit of a definition of what the different types, maybe the top three or four types of promotions that you see being run and what they entail?

Anthony: Sure. Any ability that a business has to get customers through the door to get names on an online form. Any way of doing that is a promotion. So whether we're talking coupons, whether we're talking discounts, whether we're talking you know 10 coffees and your 11th is free, 10 dinners and your 11th is free. Anything that gives the customers some kind of benefit is a promotion. So those promotions can be you know discounts, some kind of loyalty program. And of course the sweepstakes or other contests that we're talking about, that's how I would define a promotion. And then there are different types of promotions. So that's why I was using promotion or sweepstakes. I'd say that the traditional kind of sweepstakes is still really strong especially in retail.  And when I say it's a traditional kind of sweepstakes; if you're in retail and you put a box out and you say we're going to give a grand prize winner a thousand dollars. All you have to do is fill out the form that is still the strongest type sweepstakes that can be had. And the reason for that is Selena. If you're a retail store owner you're going to get people to come into your store because you're going to say here's how you enter. And not only will somebody enter your store. People will also give you their names, their addresses, their e-mail addresses, their phone numbers.

Salena:: And that means that as a retail owner you can now keep promoting to that customer or potential customer. So that traditional type of sweepstakes where you just give away some kind of money or some kind of prize is still really strong. You see some companies getting a little more creative.

Anthony: I have I have one client that you know the best that I could say is that they're in the in the beauty industry. And and part of their particular promotions do involve some kind of creativity. So they try to ask for user input on say hot beauty bloggers and maybe it's the beauty bloggers that will win a prize. So there are some different considerations there. But what's nice about a situation like that is the store owner can again, get customers interacting with them on social media. And that's very important as well in today's world.

Salena: Okay, so one of the questions I have about the first though that the traditional sweepstake, put your...07:47 in here and you can win a prize. You said and then the the retail store owner and can market to those people. But can we?

Anthony: Well again I'm licensed New York and New Jersey. And so I don't know for anybody listening in Australia, I don't know the answer. But yes. Yes you can. Now you'll have to of course state this in the rules of the promotion and again whatever type of promotion this is you're going to have to have rules for it.  And those rules are basically the contract between you the retail owner.  It's going to also be between you and the entrant because that entrant may or may not be a customer. And by the way it's also going to be between you and the jurisdiction in which you reside.  Because in the United States we have 50 states we have 50 states and the District of Columbia and Puerto Rico and other territories. And so that means we've got you know what 54 different ways of looking at sweepstakes. For example in Pennsylvania there are no sweepstakes statutes it's just all judge ruled. Judge made rules. So anyway yes you can market to them but how you're going to do that has to be in the rules for the sweepstakes. But I mean yeah, there's nothing wrong with sending a flier to somebody in the mail. And if somebody gives you their address for the right have a chance of a thousand dollars or whatever it may be.

Boom there you go. Absolutely acceptable.

Salena: So do you see a lot of times when independent businesses are running these sorts of competitions that kind of glossed over the part where they have to make terms and conditions?

Anthony: All the time.

Salena: OK I'm just thinking the same thing because as you said that, I know that you have to have terms and conditions. But I was just thinking so many of the promotions that we see, especially on social media, they never say click here to see the terms and conditions, which I'm sure in some way. Well actually no I'm not sure at all. That's why we're having this conversation. So can you then just give us a quick overview of the sorts of things we should be covering in our terms and conditions.

Anthony: Sure. So first off if you're running some kind of contest or sweepstakes as the promotion.  You really need to make sure 1.  that you name it. And a lot of people are surprised about that. But you want to name it because it's special to you right now. And and also you need to remember things like who's eligible. So everybody has to either be eligible or not eligible. And you have to basically state that this is an agreement to the official rules.  The sweepstakes or contest has to have a period. So it's opened at a certain date. It closes by a certain day. You have to state how you enter the particular sweepstakes. It could be visiting you know visiting a location and when you visit the location you have to fill out a form and one form per visit or one form per day per household whatever it might be. And then you also in how to enter. You also have to stay here at least in the United States, you have to state what we call an alternative means of entry. And what that means is that, if say it's too difficult for somebody to say drive a car to your location you still have to provide a mail in kind of entry.

Salena: No!!

Anthony: Yes, yes

Salena: No

Anthony:  Yes yes. Yes yes you do. Yes. Alternative means of entry has to be done so that the... really the philosophy behind it is that, those who wish not to enter or wish not to make a purchase can just even avoid your particular location.

Salena: So you provide a mail in a way for them to alternatively enter the sweepstakes. Now by the way you can make that alternative means a little difficult like it can be on a three inch by five inch postcard. You have to print your name and no handwritten entries accepted things like that.  So you can make it a little difficult on the alternate means. But you do have to provide an alternate means because dropping something in the mail and you know with a little bit of postage, not all that difficult to do. Whereas actually going to a store for some people might be difficult. You have to discuss the odds. And here in the United States half the states want your odds to be stated as one in a certain number event of numbers. And the other half of the states are perfectly acceptable if you're, perfectly happy if you say the odds of winning depend on the number of eligible entries received. And so by the way everybody has a set of rules is invalid and half of the United States just by that particular problem alone. You also have to discuss things like winner selector, winner selection and notification. So that would certainly be something to think about. You have to discuss how the winner will be publicly acknowledged because there are some states in the United States like Tennessee that require that you state that somebody has won your sweepstakes.

Anthony: And yes there are lots of people out there who are going to call your corporate headquarters or wherever your main location is and say who won the sweepstakes because they're really curious. And so you have to you know make sure that that's a part of your rules. Some other things that you should think about are some of your limitations of liability as obviously you as a retail owner are not going to be responsible for alternative entries that are lost by the Postal Service. If you are running this online obviously you're not going to be responsible for any kind of electricity problems or internet problems or things like that. If there's a dispute you have to state the dispute. If this is being tied into something online you should tie this into your company's privacy policy because it is about how you do business. So there are you know those are some of the things that I would say that you really do need to think about hard when you know when you're drafting rules for sweepstakes or other promotions.

Salena: So then my next question is, we all see the promotions on social media. Like us and follow us to get an entry into Weena such and such free.  How are people getting away with it and why is the the social media platform; Facebook is probably the biggest one because they own just about everything. Why do they not crack down on it?

Anthony: Well 1 it's it's really not Facebook's realm to crack down on a contest or promotion that's not being run correctly. Right. They're not the government entity. 2. I'd argue that a lot of these; a lot of companies that are running improper promotions are being cracked down. I would just say that it's maybe we're not aware of it. It's not something that really makes the news but there are fines out there for it. There are fines for deceptive misleading advertisements. So it happens. I would say that also that a lot of companies do get away with it because it's not the top number one priority of state consumer advocacy. So when a state is looking at what is going on you know in his jurisdiction, you know this probably not high on the list of fines but I've certainly seen companies get fined for it.

Salena: Interesting.

Anthony: One of the biggest times that I see a company going fine for it isn't really the shared picture or like this on Facebook even though that does violate the rules in every single US state.  One of the biggest ones I've seen is is a Rhode Island rule which is that if you're sweepstakes is going to be valid in Rhode Island then you as a retailer actually have to register the sweepstakes in Rhode Island.  Now it's not such a big deal.

Anthony: You fill out a form you pay 50 bucks and whether you know if it's one of my clients I fill out that form and then I bill them for it. It's really not a lot of money to get it registered in Rhode Island. However it's Rhode Island. So the other thing that I could just do is say void in Rhode Island and now you don't have to worry about registering and people are like yeah, Rhode Island's smallest state in the union. I could skip that.

Salena: We're talking a lot about the USA and if the majority of the listeners of this podcast are in the US but if you are in Australia, I'm going to be linking in the show notes to a podcast that Anthony did with an Australian barrister on this topic as well. Have a listen to this and grab a whole bunch of information from Anthony. But head on over to the show notes and if you're in Australia listen to the Podcast Anthony did with the Australian barrister just to top up your knowledge a little bit more.  So don't be freaking out if you're in another country because the information that Anthony is giving away is, whilst the rules and regulations may change a little bit. Take what he's saying things like make sure you have terms and conditions. The big takeaways that he's giving is take those and then do some more investigation on your own terms. But I have to say I haven't run a competition for quite some time and it can be quite difficult to draft those terms and conditions. I think I probably left out some of those things because often promotions done on the spur of the moment like maybe a supplier will give you something you weren't expecting it.  So they say hey we'll give you an extra one to give away. So you just pop it up on your social media or on your website be in the draw to win a free makeup brush because someone's given it to you.  Can genuinely reuse your conditions once you've drafted them?

Anthony:  I would say yes depending upon what the promotion is.  I've certainly have done that for clients where basically all we do is change 2016 to 2017 and make sure the dates are all lined up correctly at that point and we're rerunning the exact same promotion. There are some times when parts of maybe a promotion have not worked correctly so you change them up. Some of that is some of that's a legal decision some of that's a business decision.

Salena: Right. Now I have another question having been the recipient of a prize once doesn't happen very often but once I did.  It never turned up.

 

Anthony: You realize that there are people who just like enter everything that they do that they can find and you wind up like living on what they're able to to win because they enter everything.

Salena: I know but what is with that?  Like I just can't see the point. I also can't see the point. This happens a lot at trade phase and this is just very pertinent because I was at a conference yesterday and of course you put your card into win this and you get scammed to win that and I just can't see the point in entering if you don't want the prize.  It just seems like such a waste to be bombarded with advertising material. Yes I understand you can opt out but why waste everybody's time. That is a conversation for another podcast.

Salena: However my conversation was a few years ago I did win something. I think it was just a book or something like that and it didn't turn up. So whose responsibility is it to ensure that the prize gets to the recipient?

Anthony: Oh it's the company that's running the promotion is absolutely. Now by the way there certainly can be conditions on collecting that particular prize. So again this is where the rules of the road come into play. If somebody has to be present at the store to go to get it you'd better say that. If somebody has to only use the prize in a certain radius and I certainly had this where I certainly had this particular issue one time with the client.  Because the client had a cool branding marketing deal for a little bit with a movie theater company.  And they basically said well, yes we've got theaters here here here and here. So you know anybody like you know if you're right like in Nebraska and you were winning this you could use it you could get it. But boy you're driving along way for the ability to cash in on it. So you can put these limitations in the United States at least you can put these limitations in your rules. And that's perfectly acceptable.

Salena: That is I think a lot of people don't ever think of that. And they are here in Australia we just had a law change which was with the use of gift cards. So if someone purchases a gift card it now has to be valid for three years.

Anthony: You guys are totally late. Here and this actually started with New Jersey, because New Jersey bumped it up to like six or seven. Yes so and then the Federal Trade Commission bumped it up a few years as well.

Anthony: So you guys are three years. Wow. That's like; that is the least restrictive Australian law I've ever heard of compared to an American law.

Salena: It used to only be 12 months but it's carry on your balance sheet. That's a pain in the butt.

Anthony: Yes breakages is a big problem when you have to carry it that long. Yes.

Salena: So at the moment that's only in certain states of Australia. I'm sure it will change in different states but this is exempt if it's a customer loyalty card. So if it is as a result of a promotion or it's you know I spend $100 and you get $20 gift card. Those you can set. You can make it two weeks if you want to. So I think one of the things just to be really aware of, you were saying with the radius that you can potentially use it is also the timeframe.

And that just amazes me that someone can have a gift card for 10 years like really. It's just life. I can understand 12 months sort of moving off the subject a little bit. I can understand 12 months if it's some where you don't go very often. I can't think of anything off the top of my head. But if it's somewhere like a spa maybe. And but surely in three years you've got to be able to get there. In10 years the value of that gift card is worth nothing. Let's just quickly talk about this. Just because the 10 years it's got me flabbergasted.

Anthony: I don't think it's 10. I have to double check back numbers.

Salena: Let's say it's seven, that's still very very very long time. If that gift card in New Jersey, say I've purchased a gift card not for dollar value but for a product or service. And I think a spa like a haircut. So one haircut and I've paid my hundred dollars for that for my friend to go and get a haircut.  If she doesn't redeem it for five years and that haircut is now worth three hundred dollars.  Is it still valid for the one haircut or is it still valid for the $70 or $100?

Anthony: It's valid, for the U.S. it is valid for the dollar amount.  And by the way it's five years. Yes. Which you have to admit is still a longtime.

Salena: Still a long time. So in the U.S. It's a deal. But again I guess you write this in the terms and conditions don't  you.

Anthony: Always.

Salena: OK. All right. What else should we know? You have just been a wealth of information. I've got a whole page of notes here of things that people should be putting in their competitions and I know that you're going to give us, we're going to link up to an advertising overview that you've got as well. So I think that can be very ideal for people. But what are some other things that you see people, and you just shake your head.

Anthony: Well the other thing that, I mean, look it's perfectly acceptable to say that you have to on Twitter put a certain phrase, tag a certain Twitter account. And then of course if you're sophisticated enough you collect those you know you collect those tweets and you dump them into your database. And this way you match up the fact that somebody put an entry in on the form as well as made the tweet because this way the tweet is there. What I would say is is stuff like that to me seem, it's not overly complex. I mean have a bachelors in computer science and I'm a lawyer so I've seen much more complex stuff. But I think for the consumer aspect of this that's very complex to say fill out the form and then tweet this particular phrase as well. And so I think that's going a little out of fashion because I just think it's too many steps for that.

Salena: I just have to jump in here and say if you are running these kind of; I think that cold linked parties I don't buy into them but you know in order to win you have to go online. Because all these people are putting in prizes, you have to go in like business a Facebook page and Instagram page and tag a friend.  And you have to do these for every single business and there's 12 businesses. It's just like, the only people going to win them are those competition junkies. Because I don't necessarily want to follow all those people and you just maybe  do 36 things and I don't want to hassle with my friends by tagging them.

Anthony: Yes. But I actually am looking at a set of rules that I wrote for a client where they had to follow and tag a friend on Instagram at my client's Instagram account. So I have written those rules for sure.

Salena: But then that comes down to ethics doesn't it? It's like how many good quality entrants are you going to get when you're making people do all these things.  You literally are going to get the competition Junkies, but again that is a conversation for another day. That's a marketing conversation we're talking legal here.

Anthony: Yeah well I mean look in my practice you know in my IPN advertising practice business and legal go hand in hand. So if it doesn't make business sense I tell my clients why are you doing it. If it doesn't make business sense why are you doing it. And in a situation like this if they think they're going to get the people to do it that's fine.  But if there's a simpler way of doing it I always say what's the simpler way of doing it. You know a few years ago my former partner and I wrote the set of rules that personally, I didn't understand and completely objected to.  Because there was a drawing every day and every day everybody who has entered in this promotion. Well first off they had to do something. And that physical sum activity was then entered and then because they did that thing every day, they'd get like a red number and a blue number. And then of course like a lottery a red number would be chosen and a blue number would be chosen. But you would only win if you match the red and the blue. And then there's a weekly drawing of the red and the blue. And of course you only win if you match the red and the blue correctly and right.

Salena: They really didn't want to give away that prize.

Anthony: And that's exactly correct. Completely perfectly legal to set up a ruleset where you just don't want to give the prize away perfectly completely legal. But yeah I mean apparently, I don't know who would be participating in that.  But I guess they they said they had a lot of people participating in it.

Salena: Good luck today is what I say.

And they didn't give away the grand prize. I will tell you that much.

Salena: They did or they didn't?

Anthony: They didn't.

Salena: Of course they didn't. They made it too hard. At the end of the day if nobody wins and people find out nobody won, the consumer sentiment that goes with that wasn't worth the effort.

Anthony: I would say yeah I would say if you're going to put together some kind of contest or sweepstakes, have half a prize that you can stomach giving away. And this way 1. you're going to have people enter. 2. You can make a big deal about it in all of your marketing channels when that happens when you give it away. And this way you'll get customers who, or at least winners who appreciate that. If people are going through this and it's a slog to go through, and nobody wins, from a business standpoint is that good for your brand? I don't really think so.  Yeah I mean so if you don't feel like giving away five thousand dollars, well then don't . Give away a smaller amount and that's OK. And by the way five thousand dollars is not a number that I pull out randomly. Five thousand dollars is a number that in New York and Florida requires bonding and insurance in case anything happens to the winners or to the contest. So you know if you want to give away a smaller amount and save yourself extra paperwork and extra costs, because it's like it gets so much more expensive at the five thousand dollar mark. So you know give away less money.

Salena: And that's really pertinent to those people we were just talking about earlier where you might have 12 companies putting together and the total prize pool is more than $5000. So that is a piece of gold right there. Thank you Anthony. Because a lot of people are probably thinking it's the individual but it's the whole total pool isn't it.

Anthony: It's the prize. So if you're giving away a $5000 prize then you have to do the New York and Florida bonding insurance.

Anthony: But if you're you know if your grand prize is under that then you don't.

Salena: I see a lot of those linked parties where the prize value is well over a thousand dollars. So that's very interesting to know, thank you. We could talk about this for ages but I think you've given us so much useful information that we don't want people's heads to explode. They can go off and look at your Website, grab your advertising overview. If you are listening in Australia click through and listen to Anthony's podcast with an Australian barrister. And where can they find you?

Anthony: Sure you can go to vernalaw.com. And if you just want to send me an email, Anthony@vernalaw.com works as well.

Salena: Great. And so if you are running these sorts of competitions on a regular basis or if you're trying to get trademarks. Anthony is your guy. So if you're looking for those things make sure you head over there and have a chat with him. Send him an email. I'm sure he'd be more than happy to give you some advice and give you some process on how you can get those things done.

Anthony:  Thank you very much.

Salena: Thank you for coming on the show.

Bio

Anthony M. Verna III, is the managing partner at Verna Law, P.C. With a strong focus on TrademarkCopyrightDomain Names, Entertainment, and Advertising law, Verna Law, P.C. strives to provide all Intellectual Property services a modern business of any size may need to market and promote itself better.
From the very early concept stage, Verna Law, P.C. can conduct a comprehensive, all-encompassing search and analysis on any proposed trademark to head off complications. Once the proposed concept enters the Alpha stage, Verna Law, P.C. can seamlessly switch to handling registration, protection, and if needed, defense of registered trademarks, copyrights, and domain names, as well as prosecution of entities violating said rights.
Verna Law, P.C. also provides intellectual property counseling and services tailored to fit into your business’ comprehensive growth strategy. This shows as many of Verna Law, P.C.’s clients are international: from China, the United Kingdom, Canada, and Germany, Verna Law’s reach is worldwide.  Additionally, Verna Law, P.C., can handle your business’ Entertainment and Advertising law needs by helping your business create advertising and promotions that keep competitors and regulators at bay.
Located in the shadow of New York City, Verna Law, P.C. has a global reach that will provide clients with the most vigorous Intellectual Property advocate available.
Anthony M. Verna III  is a member of the New York and New Jersey Bars, as well as the U.S. District Court Southern District of New York. He is a sought-after business speaker, including regular appearances at the World Board Gaming Championships, Business Marketing Association of New Jersey, and Columbian Lawyers Association.
A leader in his field, Anthony M. Verna III has lead multiple continuing education classes and professional development seminars including Practicing Before the Trademark Trial and Appeal Board at Lawline.com,  Intellectual Property Law for Small Law Firms at Rutgers Law School-Camden and  Advanced Trademark Trial & Appeal Board Techniques and Practicing before Trademark Trial & Appeal Board TTAB for Lawline.com as well as Copyright Basics: The Nuts & Bolts for the Jenkins Law Libary. His paper,  “www.WhatsInA.Name” was published in the Seton Hall Journal of Sports & Entertainment Law.

“Each week I interview industry and thought leaders for their take on business and life”

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