Last month, the State of Indiana Attorney General’s Office (“Indiana AG”) filed a lawsuit in Indiana state court against defendant Hopkins and Raines Inc. (“H&R”). The prize promotion lawsuit alleged that H&R deceptively advertised prize promotions in violation of the Indiana Deceptive Consumer Sales Act (Indiana Code § 24-5-0.5-1 et seq.) and the Indiana Promotional Gifts and Contests Act (Ind. Code § 24-8-1 et seq.). The Indiana AG complaint seeks injunctive relief, restitution, costs, and civil penalties.

Indiana AG’s Prize Promotion Lawsuit Claims

How did H&R’s prize promotion campaign violate the law?

H&R is a Texas-based company that runs advertising and promotional campaigns for the automotive industry. In its prize promotion lawsuit, the Indiana AG alleged that H&R advertised 56 different prize promotions by mail on behalf of about a dozen motor vehicle dealerships. These promotional campaigns advertised auto dealership sales events to 2.14 million Indiana State residents. H&R earned over $500,000.00 from the subject prize promotion campaign.

The subject prize promotion mailings represented to recipients that if their game pieces had “winning” numbers or symbols, they could win prizes of significant value at participating dealership sales events, including: (1) $500 to $25,000 in cash; (2) $1,000 Walmart gift cards; (3) 70-inch HDTVs; (4) motor vehicles; and (5) vacation packages. The Indiana AG alleged that the “winning” numbers or symbols “were identical on every game piece sent by H&R, resulting in all recipients being informed that they were ‘winners.’” However, according to the Indiana AG, no recipient won the aforementioned prizes when they attempted to claim their prizes at the advertised dealership sales events.

In point of fact, the prizes that were actually won by recipients could be found in very small fine print on the prize mailings located separately from the game pieces and none of the prizes awarded was valued at more than $12.00. The prizes awarded included: $5.00 Walmart gift cards, scratch-off lottery tickets, Turkey rebate coupons, MP3 players, and smartwatches. For those recipients who were given a smartwatch, they were required to pay $19.95 in taxes. In addition, the Indiana AG alleged that two of the prizes—the MP3 player purchased by H&R for $2.25 each and the smartwatch purchased by H&R for $11.63 each—had retail values substantially below what H&R represented.

Specific Promotion Law Claims

The Indiana AG alleged that H&R’s prize promotion mailings were intended “to generate excitement and deceive recipients into believing they won a significant prize to drive attendance” at the dealership sales events in order to provide dealerships with the opportunity to sell recipients motor vehicles.

In addition, the Indiana AG alleged that H&R’s prize promotion mailings violated applicable state law by failing to include:

  • the name and address of the promoter;
  • a statement of the odds of winning each prize listed in the same size type and boldness as that of the advertised prize copy;
  • statement of the verifiable retail value of each prize in the same size type and boldness as that of the advertised prize copy; and
  • a disclosure that the recipient may be required to hear a sales presentation prior to claiming the prize.

Prize Promotions Law

The Indiana State laws at issue were enacted to, among other ends, protect the public from deceptive promotional advertising. Before launching a prize promotion, contest, or sweepstakes, companies should retain qualified legal counsel to help navigate the regulatory and legal issues that may arise during the course of the promotion.