The use of promotions and contests in connection with online and mobile marketing can be a dynamic and cost-effective way to increase conversions, build a database of engaged consumers and increase brand awareness. However, businesses must be aware of the fact that governmental entities, such as the Federal Trade Commission (“FTC”), are tasked with regulating, investigating and sanctioning non-compliant promotional marketing practices. In this article we address the legal issues surrounding the promotion-related online and mobile marketing space.
Online and Mobile Sweepstakes Marketing
The appeal of promotional contests, games and sweepstakes is obvious: consumers are attracted by the opportunity to win prizes. Despite the allure of the sweepstakes model, there are specific state and federal laws that apply to promotional games. Social media websites, such as Facebook®, Instagram® and Twitter®, also have their own promotional marketing rules. Caution: you could incur substantial liability if these laws and platform rules are not closely followed.
In assessing your liability risk, the baseline question to ask is whether your promotion is a game of chance or skill. Games of chance are considered illegal lotteries, unless there is a free means of entry, with no strings attached. Games of skill are an enticing alternative, but may run afoul of certain anti-gambling laws depending on prize structure and the degree of participation of the game’s promoter.
When running such contests, it is important that your promotional marketing approach comply with other applicable laws and guidelines. For example, you must at all times comply with intellectual property laws. This is especially true when you are offering a prize that carries a registered trademark, such as an iPhone®, or when you are marketing your contest on a social media platform, such as Facebook®, and wish to use the Facebook® name in your marketing material.
Blog and Social Media Promotional Marketing
Employing a different approach, many businesses have recognized the promotional advantages of incorporating their branded messages within various blogs and websites. Some have even created fake blog/social networking site pages masquerading as review sites, and posted fake articles that include paid testimonials.
While potentially lucrative, this conflation of marketing with blogs/social networking media carries significant legal risk. Because of the historical nature of the Internet as a place for the public to voice their opinions, there is an expectation that the blogger/site member in question is not a paid spokesperson. But when a blogger/site member is engaged in marketing products for a fee, or when that person is an employee of a company that is selling products on the blog, there is an inherent conflict of interest when these relationships are not properly disclosed. Under those circumstances, the blog/website posts can amount to a form of deceptive marketing.
In fact, the FTC recently updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising to address these issues. The essence of the guidelines is that promotional marketing material must prominently display a disclaimer that informs the reader of any financial interests that the bloggers or writers have in connection with the products featured/discussed in the media. Similarly, the author of a fake article must disclose: 1) that the article is not real, but rather, a marketing device; and 2) what the author stands to gain in connection with writing/posting same.
The guidelines also make clear that fake testimonials are strictly prohibited and, when using an authentic testimonial, the blogger or writer must not edit or change it from the original in any material way. Finally, where the provider of the testimonial stands to gain anything of value by providing the testimonial, this fact must be disclosed to the reader.
Daily Deal Website Marketing
The “daily deal” business model, which is most closely associated with industry leaders Groupon® and LivingSocial®, offers a unique means for businesses to promote their brand and attract customers through “daily deal” coupons, discounts and other perks. However, many businesses are unaware that state and federal laws may apply to these discount offers. Problems arise due to the fact that the discount offers expire after a period time. Because consumers must pay a fee for these “daily deals,” the offers may be considered gift certificates and, therefore, fall under the purview of the Credit Card Accountability, Responsibility and Disclosure Act (“CARD Act”).
The CARD Act, and its state law counterparts, require(s) that all gift certificates have an expiration date at least five years from the date of purchase. While Groupon®, LivingSocial® and their competitors maintain that the discount offers in question are coupons, and not gift certificates, attorneys general in multiple states have begun to scrutinize this business model to determine the nature of the offers. Additionally, multiple class action lawsuits have been filed alleging violation of the CARD Act and corresponding state law.
E-mail and Mobile Marketing
While games, contests and other promotional vehicles are valuable marketing tools, e-mail and mobile marketing should not be neglected as another way that businesses can monetize their client databases. Many companies do not take full advantage of these marketing options because they are unfamiliar with the laws that govern e-mail and mobile marketing. If a company does choose to engage in e-mail and/or text message marketing, or to engage the services of a third party to manage and market to its databases, the company should ensure that it and/or the third party marketer is complying with all applicable laws, as well as its privacy policies.
Please be aware of the fact that the FTC and the Federal Communications Commission (“FCC”) require that you obtain prior written consent from consumers before sending any auto-generated or pre-recorded text messages to cell phones. The consumer’s express consent to the receipt of text message marketing and e-mail marketing, should always be obtained from consumers at the time of sign-up.
Additionally, the federal CAN-SPAM Act of 2003 (“CAN-SPAM”) includes requirements that must be followed when marketing via e-mail. Under CAN-SPAM, use of false or misleading header and sender information is prohibited and the applicable e-mail subject line should accurately reflect the products/services that are being advertised in the subject e-mail. CAN-SPAM mandates that when sending a commercial e-mail message, businesses must clearly identify the e-mail as an advertisement, include a valid physical postal address for the sender, and provide consumers with a mechanism to opt out of the receipt of future e-mail.
Hiring a Promotional Marketing Attorney
While the use of promotions, gaming, consumer reviews and blog posts in connection with online and mobile marketing can garner great benefits for your business, you must also be cognizant of the associated pitfalls, which may put you at legal risk. As such, businesses should consult with knowledgeable attorneys before commencing any online or mobile marketing campaign.
If you require assistance in connection with your promotional marketing campaigns, 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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This blog post was originally published in 2013 and updated on July 9, 2021.
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