May 12, 2017

sweepstakes-marketingLast month, a federal district court in San Francisco dismissed the preemptive lawsuit of Contest Promotions, LLC (“Contest Promotions”), which had hoped to establish the legality of its sweepstakes marketing signs under applicable local law.

How can a sweepstakes lawyer help keep promotions legally compliant?

San Francisco Sign Regulation

Contest Promotions generates new customers for its business clients in New York City, Los Angeles, San Francisco, Chicago, Seattle and Houston by organizing promotional contests and sweepstakes that reward repeat store patrons.  To promote its sweepstakes and contests, Contest Promotions uses stand-alone signs located on its clients’ store premises depicting the prizes that entrants can win.

In 2007, the City and County of San Francisco (the “City”) determined that Contest Promotions’ sweepstakes marketing signs violated Article 6 of the San Francisco Planning Code because sweepstakes and contest prizes were not awarded on-site.  Article 6 allows the construction of new “business signs” (which advertise products or services that are available at the adjoining business), but bans the construction of general advertising signs.

Sweepstakes Marketing Lawsuits

In 2009, Contest Promotions sued the City, challenging the constitutionality of Article 6.  The parties settled their dispute in 2013.  Pursuant to that settlement agreement, the City recognized Contest Promotions’ signs as “business signs” under Article 6, while Contest Promotions agreed to apply for proper sign permits and otherwise comply with the San Francisco Planning Code.

In 2014, the City amended Article 6’s definition of “business sign” to include only those signs advertising the primary products or services sold on the premises where the subject signs are located.  Because its sweepstakes marketing signs promote giveaways (rather than its customers’ primary products and services), Contest Promotions once again sued the City in November 2016 in the U.S. District Court for the Northern District of California (Case No. 16-cv-6539), alleging that the amended definition is unconstitutional on First Amendment grounds.

On April 26, 2017, the Court dismissed Contest Promotions’ complaint against the City with prejudice, finding that the risk of Contest Promotions being penalized for its sweepstakes marketing signs was insufficient to justify invalidating the City regulation.  The Court noted that Contest Promotions could apply for a permit from the City and challenge the denial of such permit (if denied).  Contest Promotions has appealed a number of its adverse rulings to the Ninth Circuit Court of Appeals.

How a Sweepstakes Lawyer Can Help

When administered effectively, promotional contest and sweepstakes marketing has the potential to create a lot of buzz (and revenue) for the sponsor.  However, as the above-referenced case demonstrates, sweepstakes sponsors and their marketing partners may also encounter substantial legal hurdles relating to the advertising of promotions.

Many sweepstakes-related regulatory and legal risks can be minimized or eliminated entirely by working with experienced marketing counsel before launching a promotional contest.  Well-planned promotions can help protect contest and sweepstakes sponsors and their marketing partners from substantial liability.  Additionally, a sweepstakes lawyer can help promotion sponsors address a number of other legal concerns related to contest rules, advertising, consumer privacy, bonding requirements and other areas of compliance.

If you are interested in learning more about this topic, or need legal counsel in connection with your contest or sweepstakes-related venture, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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