International prize promotions are an opportune platform in our recovery
As the world battles the COVID-19 pandemic, utilizing new marketing and promotional tools is essential throughout the sports industry. Revenue from major sporting events and fixtures has evaporated because of lockdowns operating in numerous countries around the world. As they plan their recovery and look to ways to reopen and rebuild, the running of an international online prize promotion may be a useful additional tool for clubs, leagues, federations, regulatory bodies and associations, to engage with their consumers, gather valuable data and promote their brands.
Nothing gets customers talking more about a product or sporting event than free tickets, unique opportunities or discounted merchandise. In these days of the “new normal,” given the obvious benefits of the internet, brands, influencers and their advisers may do well to consider operating prize draws (or sweepstakes) and competitions through social media platforms or via email campaigns. However, that is not to say operating a prize promotion does not come without risk, including legal risk. In the past, stakeholders in the sports industry have not always considered the legal ramifications of running a prize draw, sweepstake or prize competition.
Prize promotions run on social media are, by their very nature, accessible globally. This can be a blessing and a curse when it comes to the all-important Terms and Conditions (T&Cs) of a promotion. The T&Cs need to specify who can enter and promoters should consider technologies to restrict its reach. Failure to geo-block or at least sufficiently target, risks exposing the promoter to liability under the more restrictive laws controlling prize promotions in many jurisdictions. Not an easy feat, for sports brands, which often have large global followings interested in winning the attractive prizes on offer.
To operate a successful global campaign, organizers typically look to work with the law of a single territory. For good flexibility and international credibility, English law is often the preferred choice.
Any international prize promotion must comply with local gambling laws, and UK gambling laws offer a fairly liberal approach to an area that has traditionally been restricted to state operated lotteries (if permitted at all). It is because of the more permissive approach of English law, and the more liberal regulatory regime, that many sports businesses operating international prize competitions seek to do so under English law. In the UK, the key legislation does not regulate genuine prize competitions and permits prize draws, so long as they are free to enter. Listening to the marketing industry’s desire to link prize promotions to the purchase of products and services, the UK has for well-over a decade permitted promotions to be operated on that basis, subject to some easy to comply with controls.
Jurisdictions such as certain U.S. states and Australia, for example, see a more restrictive approach. In the U.S., the New York attorney general has stepped in on several occasions to halt sweepstakes that failed to comply with relevant laws. The rules in territories such as Italy and the Philippines are more restrictive still. For example, in 2017, the Italian Competition Authority levied a heavy €3.1 million fine on a major international consumer goods company for running an illegal prize promotion. Certain countries prohibit the operation of sweepstakes where there is a payment to enter (e.g., the Republic of Ireland and Northern Ireland), while genuine prize competitions are usually less problematic.
On the other hand, many brands with international reach have successfully operated prize promotions under English law. Recent examples include the BBC for Sport Relief and numerous other campaigns, and Manchester United’s weekly promotions.
Sports brands should not forget that promotion T&Cs must also comply with local consumer law. Again, English law offers a relatively business-friendly approach. Even though there is increasing harmonization within the EU, the approach of the UK courts and regulators has been, on the whole, less restrictive. Following Brexit, the UK’s approach is unlikely to be no less business-oriented.
Operating an international prize promotion through social media is an exciting and attractive marketing technique, particularly in the age of the coronavirus. Running promotions under English law offers flexibility and clear advantages over the laws in many other jurisdictions. However, the drafting of promotion T&Cs should always be checked with legal advisers to ensure that both the mechanism chosen is lawful and all other terms are valid and enforceable (especially on key issues like limits on liability and jurisdiction). This will prevent any potential criminal liability, regulator intervention and embarrassing media attention.
Carlton Daniel is a partner and Ailin O’Flaherty an associate in the Intellectual Property, & Technology Practice, Squire Patton Boggs.