Online Contests – the legalese

Posted on | October 4, 2006 | No Comments

Contests can be a great way to generate interest in your site or product. They create buzz and get folks talking. A good contest can take a site or product from obscurity to fame in only a few weeks. But is it legal? Well, every state and country has it’s own rules on what’s legal in their own jurisdictions. In a very brief, non-fully-inclusive nutshell, here’s the safe route to going live with an online contest: ~ Keep the prize purse below $5,000 USD ~ Limit the entires to only residents of the US or Canada ~ Expressly exclude residents of the Province of Quebec in Canada If your prize purse exceeds $5,000, you’ll have to register the contest with Florida, New York and Rhode Island, or exclude their residents. Florida and New York states require a bond, as well. It’ll be equal to the amount of the prize purse. You pay a percentage of the bond value to a bond issuing company – it’s like insurance, basically. You do not pay the full value equal to your prize purse. This protection is held to ensure the citizens of these states are protected should you decide to cut & run before paying out the prizes. Florida requires a minimum of 7 business days notice before a contest begins, New York looks for 30 days notice. The difference being that Florida will definitely fine you for breaking the rule, whereas New York, though it reserves the right to, tends not to fine folks for breaking their 30 day rule. Fines typically are about $1,000 USD. Each state application must be accompanied by the state’s administration fee as well. And, as if all that weren’t enough red tape to jump over, you must submit a copy of your contest guidelines for approval – and they’d better pass muster, or the whole thing gets kicked and your money is NOT refunded. Truly, your best bet for contests running larger prize purses is to partner with a company like http://www.scapromotions.com/ who can manage it all for a fee. It’s easily worth their time and your money. …and if you’re wondering why 99% of all contests exclude citizens of Quebec, well, that province requires all the details a couple months in advance of your contest start date. They also reserve the right to have the final say on how and what type of prizes can be awarded to their province’s residents. That’s way too much for most companies, so they exclude residents of Quebec. If a resident of Quebec is travelling outside their province, though, and they win a prize in a contest, they can keep it and take it home. So, contests can be useful tools for gaining exposure, but they require a serious review from a business perspective to make sure you are not leaving yourself exposed.