In August 2013, Mr. David Frankel initiated a lawsuit against the Federal Trade Commission (the “FTC” or “Commission”) for snubbing his submission to an FTC-sponsored contest concerning robocall-blocking technology. On July 31, 2015, the U.S. Court of Federal Claims unsealed its opinion and order, granting the Commission’s motion for summary judgment against Mr. Frankel and dismissing the case. The court’s opinion focuses on the terms and conditions contained in the FTC’s contest rules.

How important are contest and sweepstakes rules when sponsors are faced with potential liability?

FTC Contest for Robocall-Blocking Technology

In 2012, the Commission launched its FTC Robocall Challenge, which offered a $50,000 prize for the best new robocall-blocking technology proposed by a contestant. The FTC received approximately 800 timely entries, about 260 of which proceeded to the expert judging phase (including Frankel’s, which was named “It’s My Number”).

The judges ultimately determined that solutions which “filtered out” illegal robocalls with robocall-blocking technology best addressed the contest criteria. Frankel’s submission was rejected because it employed call-tracing technology instead of filtering. At the contest’s conclusion in April 2013, two contestants tied for first place and split the prize.

Lawsuit Against FTC Questions Contest Rules

In August of 2013, Mr. Frankel filed a pro se lawsuit against the United States in federal claims court, alleging that the FTC materially breached the contest rules by never giving his submission of robocall-blocking technology a fair chance of winning. In response, the government argued that Mr. Frankel had agreed to be bound by the FTC Robocall Challenge contest rules as a condition of entry. Of significance, the Robocall Challenge rules contained a provision stating that decisions of the contest judges would be final and binding.

Relying on federal caselaw, the court held that, “[w]here contest terms state that decisions by the judges are final and binding, courts should not interfere with the decision of the judges unless there is evidence of fraud, intentional or gross mistake, irregularity, or lack of good faith.” Because Mr. Frankel had not presented evidence of fraud or bad faith on the part of the FTC, the court determined that he had failed to meet his burden of proof and granted the Commission’s motion for summary judgment.

Sponsors: Take Contest and Sweepstakes Rules Seriously

As this case demonstrates, well-drafted rules can play a pivotal role in protecting contest and sweepstakes sponsors from substantial liability.