Losing focus
Cheapest is not always best
Remember to coordinate
Anticipating change
Tackling cheaters and beaters
Changes after the fact
Acting on problems immediately
Avoiding arrogance
Directing blame at retail
Premature mea culpa
Vulnerability to legal indemnities
Overestimating insurance
Remember the lawyers


Promotion is a key part of business. This update considers the most common mistakes that occur regarding promotion design, execution, fulfilment and contracts – and suggests ways to avoid them.

Losing focus

Too often, brand names and trademarks are misused in the quest for creativity. In the end, it is all in the name - the promoter's brand and trademark. With the name and reputation of the promoter at stake, proper appreciation of the promoter's trademarks is essential. To the suppliers, it is mostly about money; to the promoter, the key element is the franchise that it has with the consumer. Without the brand, there is no promotion. Above all else, protect the brand, use it correctly and have the promoter's trademark counsel review all materials.

Cheapest is not always best

When it comes to hiring vendors, making a deal with the cheapest bidder is a costly approach, particularly with printers. Ensure there are written procedures and guidelines for the selection of vendors. Do not always award jobs to the lowest bidder. Reputation and experience are the key elements to look for when selecting vendors, particularly printers, since they are a key player in a successful promotional execution. Whenever possible, go with vendors with which you have a track record. Due diligence investigation of all suppliers is mandatory and references should be checked. If the supplier is new, get examples of prior jobs. Visit the plant to see whether the equipment is sufficient, and enquire about the supplier's other commitments and timetables to be certain that the project is properly scheduled. Establish timetables and take action if they are not met – and establish contingency plans in case something goes awry. Get copies of certificates of insurance and, if necessary, become an additional insured. Have a representative present during the job or have access at any time during the contract period.

Remember to coordinate

The failure to coordinate advertising copy with promotional materials, especially official game rules, can create inconsistencies and cause legal exposure. Have proper procedures for checks and balances. A lack of coordination among the various parties participating in the development and execution of a promotion is a primary cause of disaster. A promotion may be perfectly structured and produced, but if the advertising does not match or coordinate with the promotional materials, the risk of a problem rises significantly. Advertising, promotional materials – including official rules – and packaging should always be consistent. One person should be designated to coordinate all of the elements and players, and there should be legal sign-offs at every juncture.

Anticipating change

Do not assume that what is okay at the planning stage will be fine by the time the promotion breaks. Circumstances can change within a short period of time and may wreak havoc. So, anticipate changes and build in ample lead time. Check periodically with legal counsel and send them the various elements as they are developed, rather than waiting until the last moment; do not release a promotion without a last-phase sign-off by counsel. If there have been changes in personnel during programme development, be sure to brief new team members thoroughly and revisit timetables as necessary.

Tackling cheaters and beaters

Failing to consider how games players might try to cheat or beat the system may result in fraud. Perhaps the biggest fear and most devastating error in any promotion is poor design that results in fraud. Fraud can severely damage a programme and jeopardise the integrity of everyone involved. While it cannot be avoided – given the propensity of some consumers to cheat – when the ability to cheat is the result of a poorly designed promotion, the negative impact on the brand is multiplied. However ordinary they may appear, play out every concept internally. Anticipate how a consumer might try to cheat or beat the game, and provide contingencies in your official rules. Never assume every contingency has been covered; play the game again and again.

Changes after the fact

Once published and distributed, it is very difficult to change a promotion. Anticipate contingencies and the possibility of changes that may be needed when developing official rules, but tread lightly. If carefully worded, the official rules may allow a mid-course change. However, consider whether you are trying to overcome problems due to a lack of participation or game design versus circumstances totally beyond control; the former may be more difficult to justify.

Acting on problems immediately

Even a minor glitch in a promotion can turn into a nightmare if not treated seriously. The laws governing promotions are a virtual minefield. In addition to the federal laws, a myriad of laws in all 50 states govern promotional activity. For example, some states have specific laws governing in-pack promotions; some have laws governing specific types of representation in a promotion; and others have special laws governing direct mail promotions. In addition to the sheer volume of laws, the risks are enhanced by the fact that laws governing promotions are penal in nature. Therefore, the ramifications of making a mistake can be quite severe. As soon as a problem is identified, communicate it to legal for input.

Avoiding arrogance

Big brands and major players should not treat an investigative enquiry lightly just because of their status. The largest recoveries and most damaging outcomes have been against the biggest advertisers. Regulators do not make investigative inquires cavalierly – they mean business. Any inquiry should be responded to immediately, preferably through a face-to-face meeting.

Directing blame at retail

Depending on retailer support for point of sale and local fulfilment can be costly. In practice, a promoter has little control over what retailers do in the marketplace. Nonetheless, it is liable for any mistakes that retailers make. At the same time, it is virtually impossible to hold retailers responsible while maintaining relations with them. Therefore, whenever possible, packaging and other promotional and advertising support should anticipate retailer non-fulfilment.

Premature mea culpa

Rushing to the media in the event of a disaster is foolish. Unfortunately, some promotional campaigns are best remembered for their disastrous outcome rather than their creativity or marketing success. When a promotion goes awry, its sponsor should communicate with consumers directly, confess the mistake and offer a solution. But remember, no matter how acute the problem, there is always time to think thoroughly and carefully. A premature public reaction may actually increase liability rather than limiting it – so think first, react later.

Vulnerability to legal indemnities

Indemnities from otherwise asset-poor suppliers can create a false sense of security. An indemnity provides only a legal cause of action against the supplier; it does not immunise the promoter from consumer or regulatory liability. If the supplier has little or no assets, an indemnity is worthless. Be realistic: accept the fact that not all suppliers can pay the freight in the event of a problem.

Overestimating insurance

While insurance can protect a promoter from some financial exposure, generally it does not cover fines (against public policy) or protect it from the ongoing burden of a consent decree or order. So, understand the legal risks and review all promotional materials carefully. Do not think that the insurance policy will save the day if something goes wrong.

Remember the lawyers

A company cannot afford to take the risk of eliminating the need for specialised counsel to review each phase of its programme. Promotions, sweepstakes, games and contests are highly specialised marketing vehicles. It is generally recommended that the legal advice of specialised counsel be obtained for all promotional programmes. Ensure that whoever is conducting the legal review of the promotion has the requisite expertise in the area. Have an internal system in place to ensure that the promotion complies with the laws of all 50 states, as well as federal law. Involve the lawyers early in the programme planning. The discomfort that they may cause is minimal compared to the pain that can be brought on by an attorney general or plaintiff's lawyer.

For further information on this topic please contact Douglas J Wood at Reed Smith LLP by telephone (+1 212 521 5400), fax (+1 212 521 5450) or email (dwood@reedsmith.com).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.