CA Laws Regulating Contests
By Christen Lee, Esq.
I. State statutes governing contests in general
State laws regulating contests are found in Bus. & Prof. Code § 17539 et seq. Section 17539.3 grants an exemption to some tax-exempt nonprofits. However, it is recommended that a nonprofit use these rules as a guideline when designing and publicizing a contest to help avoid violating false advertising and unfair trade practices laws.
The following summary is adapted from the CA Department of Consumer Affairs: Rules for Operation of Contests and Sweepstakes, available at: http://www.dca.ca.gov/publications/legal_guides/u-3.shtml
Generally, rules governing contests are found in CA. Bus. & Prof. Code 17539-17539.3, 17539.35.
A “contest” is any game, puzzle, scheme, or plan which offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill and/or chance, and which is conditioned on some payment of value.
The law requires every person who conducts a contest to disclose on each entry blank the submission deadline.
All contest and promotional puzzles and games must clearly and conspicuously include the following:
• Contest description, number of anticipated contestants, and the nature and value of the prizes.
• All the rules, regulations, terms and conditions of the contest.
• The maximum number of puzzles or games which may be necessary to complete the contest and determine winners.
• The maximum amount of money, including postage and handling fees, which a participant may be asked to pay to win each of the prizes offered.
• The date(s) upon which the contest will terminate, and upon which all prizes will be awarded.
• Whether future contests or tie-breakers, if any, will be significantly more difficult than the initial contest, and the method of determining prize-winners if a tie remains after completion of the last tie-breaker.
Misrepresenting in any manner the odds of winning any prize is prohibited. All prizes of the value and type represented must be awarded and distributed. The opportunity to win a prize cannot be conditioned on a minimum number of entries or contest participants.
Also, the contest sponsor must retain for at least two years following the completion of a contest the following information:
(1) Copies of all contest solicitations and puzzles.
(2) All puzzles and correspondence sent by a contestant or copies or records disclosing details thereof and records of replies thereto.
(3) Adequate records which disclose the names and addresses of all contestants, the approximate date each contestant was sent each puzzle or game, the number of prizes awarded, the method of selecting winners, the names and addresses of the winners, and facts upon which all representations or disclosures made in connection with the contest are based and from which the validity of the representations or disclosures can be determined.
II. Deceptive Mail Prevention and Enforcement Act (39 U.S.C. 3001 et seq)
• Federal statute that regulates advertisements sent through U.S., including contest materials.
• Requires the contest sponsors to disclose in a clear and conspicuous way:
• the terms, rules and conditions of the contest.
• how many rounds of the contest you must achieve to win the grand prize.
• the time frame for the winner to be determined.
• the name of the contest’s sponsor.
• an address where you can reach the sponsor to request that your name be removed from the mailing list.
• Mailings for skill contests or promotions must:
1. State all terms and conditions, including rules and entry procedures in language that is easy to find, read and understand and;
2. Provide a name and the business address where the sponsor can be contacted.
• Skill contest mailings must disclose:
3. The number of rounds or levels of the contest and the cost to enter each level;
4. Whether subsequent rounds will be more difficult to solve;
5. The maximum cost to enter all rounds;
6. The estimated number or percentage of entrants who may win, or have won the sponsor’s last three contests;
7. Qualifications of the judges if the contest is not judged by the sponsor;
8. The method used in judging and;
9. The date prizes will be awarded, how many, the nature and estimated value of each prize, and the payment schedule.
• Ads for sweepstakes, skill contests, and facsimile checks that appear in magazines, newspapers and other periodicals can be mailed as long as the advertisements are not personalized and do not offer a way to make a payment or order a product or service.
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