The question of whether a text-message charge in connection with a sweepstakes entry is an illegal payment for a chance to win was presented back in 2007 in several lawsuits that were brought on behalf of television viewers who entered sweepstakes as part of a game-show promotion by sending a text message from their mobile phones and were charged a 99-cent premium charge. On Dec. 11, 2007, the well-known New York-based plaintiff’s firm Milberg Weiss filed a class-action suit against NBC and others regarding an SMS-text game related to the TV show America’s Got Talent, Glass v. NBC Universal Inc., et al., Case No. CV07-0844-JFW (C.D. Cal.), which was consolidated with a number of similar cases involving other television programs, including American Idol, Deal or No Deal, 1 vs. 100, and The Apprentice (hereafter the “Couch cases”). For a more in-depth discussion of this history of the Couch cases, see: “Mobile Sweeps Promos Left In Limbo By Federal Courts – mitigating risks is crucial for marketers” (“Mobile Sweeps Article”).

In the settlement approved by the court on September 19, 2011, studio heavyweights including NBC Universal and Fox Broadcasting Co. agreed to settle the Couch cases with defendants agreeing to: (i) refund the premium text message fees of $.99 paid by the millions of people who entered the “American Idol Challenge” and “Deal or No Deal Lucky Case Game” and did not win a prize; (ii) pay the plaintiff’s attorneys’ fees of more than $5.2 million; and (iii) enjoin the defendants from: “creating, sponsoring or operating any contest or sweepstakes, for which entrants are offered the possibility of winning a prize, where people who enter via premium text message do not receive something of comparable value to the premium text message charge in addition to entry.” That thing of equivalent value might be a ringtone, wall paper or other digital items sold otherwise for 99 cents or more, a technique many text-to-win promoters have been using widely for some time. See Mobile Sweeps Article.

The result of the settlement is that mobile sweeps operators still cannot be certain that providing a free alternative method of entry is enough to satisfy the requirements for a legal sweepstakes, especially if they charge a premium fee for text message entries – a position disputed by plaintiffs in these cases. It also does not provide certainty that giving the premium text entrants a digital item will preclude liability. However, since the court approved the settlement, the later interpretation finds some support in so far as a court should not be approving prospective promotion terms that are clearly illegal. Nonetheless, approval of the settlement certainly does not create binding precedent on the issue.

There are ways to minimize the risk of premium text promotions. Chief among these is to provide real products or services, otherwise available for sale at the same approximate verifiable fair market value, to entrants who enter a sweeps by text, in addition to providing an online or mail-in alternative method of entry for those that do not elect to buy that product via premium text charge. For instance, if ringtones or wallpapers are provided in exchange for the premium text charge, these digital products should otherwise be widely available and marketed for purchase for at least as much as the premium text charge.