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Georgia Supreme Court Delivers Victory to Sweepstakes Sponsors
April 28, 2008
Attention Now Moves to California Verdicts
By Alex Palmer
Last week the Georgia Supreme Court ruled that a text-to-win sweepstakes offered in conjunction with NBC's Deal or No Deal television show did not violate state gambling laws. This comes as good news to sweepstakes sponsors interested in offering similar consumer promotions in the future. However, additional lawsuits against similar text-to-win contests are still pending in California.
The Deal or No Deal contest offered a cash prize to randomly selected entrants who sent a text message to the show's number. The controversy was due to the $0.99 fee participants paid to text in, with the plaintiffs arguing that such an entry fee breached the legal requirements of a sweepstakes. It was contended that this sweepstakes violated Georgia's gambling laws, which prohibit sponsors from requiring consumers to make a purchase or pay money to enter a sweepstakes.
The court determined this contest did not violate the gambling laws because, unlike in gambling, the contest sponsors offered a free alternate method of entry in addition to the way that includes a payment. Entrants to the Deal or No Deal contest could enter the sweepstakes through the shows Web site without paying the $0.99 premium charge.
"This is a big victory for anyone who wants to do a mobile promotion," says Gonzalo Mon, an attorney at Kelley Drye Warren LLP's advertising and promotions law practice.
This lawsuit, as well as the ones brought to Californias courts, is the first to put such scrutiny on mobile sweepstakes. With these consumer promotions becoming more popular with sponsors, not only on Deal or No Deal, but other television shows including American Idol, The Apprentice, and 1 vs. 100, the courts' verdicts are of no small interest to sponsors.
Besides the alternative, free entry option, the contest was defended on its differences from gambling. According to the sweepstakes sponsors, the premium fee, unlike a gambling wager, was deemed already paid by the participants, not some kind of bet the entrant could win back. Also, the rules required the sponsors to award a winner the full amount of the prize no matter what.
"The difference here is the sponsors running this are going to pay out a prize," explains Mon. "So this isn't like a typical gambling thing where if they win they don't pay out the prize and if they lose they do pay out the prize."
The lawsuits pending in California, allege that the text-to-win contests are in violation of the state's lottery laws, as opposed to gambling laws. Since state governments are the only organizations allowed to run lotteries, these sweepstakes would be considered in violations of lottery laws if they offer the chance at a cash prize for the purchase of entry.
The plaintiff's arguments in these cases differ slightly than in the Georgia cases, focusing on the fact that these promotions do not give consumers anything in return for their entry fee (in contrast to promotions that are included along with a product). So these cases will look at whether the free online method of entry is sufficient and whether the paid method of entry has to be tied to some benefit or product that the consumer receives.
Sweepstakes laws vary from state to state, and the plaintiffs may be bringing these cases to California to test its strength, says Mon. "I think the plaintiffs are sort of testing this there and if they win you might see similar cases in other states."
Georgia Supreme Court Delivers Victory to Sweepstakes Sponsors
April 28, 2008
Attention Now Moves to California Verdicts
By Alex Palmer
Last week the Georgia Supreme Court ruled that a text-to-win sweepstakes offered in conjunction with NBC's Deal or No Deal television show did not violate state gambling laws. This comes as good news to sweepstakes sponsors interested in offering similar consumer promotions in the future. However, additional lawsuits against similar text-to-win contests are still pending in California.
The Deal or No Deal contest offered a cash prize to randomly selected entrants who sent a text message to the show's number. The controversy was due to the $0.99 fee participants paid to text in, with the plaintiffs arguing that such an entry fee breached the legal requirements of a sweepstakes. It was contended that this sweepstakes violated Georgia's gambling laws, which prohibit sponsors from requiring consumers to make a purchase or pay money to enter a sweepstakes.
The court determined this contest did not violate the gambling laws because, unlike in gambling, the contest sponsors offered a free alternate method of entry in addition to the way that includes a payment. Entrants to the Deal or No Deal contest could enter the sweepstakes through the shows Web site without paying the $0.99 premium charge.
"This is a big victory for anyone who wants to do a mobile promotion," says Gonzalo Mon, an attorney at Kelley Drye Warren LLP's advertising and promotions law practice.
This lawsuit, as well as the ones brought to Californias courts, is the first to put such scrutiny on mobile sweepstakes. With these consumer promotions becoming more popular with sponsors, not only on Deal or No Deal, but other television shows including American Idol, The Apprentice, and 1 vs. 100, the courts' verdicts are of no small interest to sponsors.
Besides the alternative, free entry option, the contest was defended on its differences from gambling. According to the sweepstakes sponsors, the premium fee, unlike a gambling wager, was deemed already paid by the participants, not some kind of bet the entrant could win back. Also, the rules required the sponsors to award a winner the full amount of the prize no matter what.
"The difference here is the sponsors running this are going to pay out a prize," explains Mon. "So this isn't like a typical gambling thing where if they win they don't pay out the prize and if they lose they do pay out the prize."
The lawsuits pending in California, allege that the text-to-win contests are in violation of the state's lottery laws, as opposed to gambling laws. Since state governments are the only organizations allowed to run lotteries, these sweepstakes would be considered in violations of lottery laws if they offer the chance at a cash prize for the purchase of entry.
The plaintiff's arguments in these cases differ slightly than in the Georgia cases, focusing on the fact that these promotions do not give consumers anything in return for their entry fee (in contrast to promotions that are included along with a product). So these cases will look at whether the free online method of entry is sufficient and whether the paid method of entry has to be tied to some benefit or product that the consumer receives.
Sweepstakes laws vary from state to state, and the plaintiffs may be bringing these cases to California to test its strength, says Mon. "I think the plaintiffs are sort of testing this there and if they win you might see similar cases in other states."