Last Thursday, the Federal Trade Commission (the “FTC” or “Commission”) sued several individuals and businesses in a Los Angeles federal court for engaging in allegedly deceptive sweepstakes sponsorship and marketing practices, reinforcing the importance of consulting an experienced sweepstakes lawyer when formulating and/or sponsoring a promotional contest or sweepstakes.

How can a sweepstakes lawyer help keep promotions legally compliant?

Sweepstakes Promotions Gone Wrong

According to the FTC’s complaint, California resident Terry Somenzi, his Wyoming corporation and several of their Florida-based contractors (the “Defendants”) designed, printed and mailed to consumers hundreds of thousands of sweepstakes notifications.

The Defendants’ direct mailers supposedly notified consumers that they had won substantial cash prizes of nearly $1 million or more and instructed the named recipients to mail the Defendants a $25 “processing fee” in enclosed envelopes pre-addressed to post office boxes located in the Netherlands. However, many of the notifications reportedly contained boilerplate language stating that the Defendants provided a reporting service, and that the consumer had not actually won a prize.

The Commission alleges that none of the consumers who mailed in fees to collect their cash prizes ever received the promised prize money. Further, the Defendants purportedly used bar codes on consumers’ response forms to compile lead lists of consumer contact information, which were then allegedly sold to other direct mail marketers.

FTC’s Sweepstakes Lawsuit

On September 21, 2016, the Commission commenced legal action against the Defendants in the U.S. District Court for the Central District of California (Case No. 2:16-cv-07101), alleging that the above-described sweepstakes sponsorship and marketing practices amounted to misrepresentations or deceptive omissions of fact in violation of the FTC Act.

In connection with the lawsuit, the FTC is seeking restitution and consumer refunds for all monies paid, disgorgement of ill-gotten gains and a permanent injunction against both the companies and their individual owners.

How a Sweepstakes Lawyer Can Help

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