When companies sponsor an instant win game, sweepstakes or contest that is not designed or executed properly, they run the risk of skirting gambling and lottery laws, engaging in deceptive advertising practices, as well as committing mail fraud. For example, on September 22 the FTC sued California resident Terry Somenzi for allegedly engaging in deceptive media promotion when advertising his company’s instant win contests. The materials that were mailed to contestants reportedly told them that they had won cash prizes of $1 million or more, and that to collect the money they had to mail in a $25 “processing fee”
In actuality, the fine print contained information stating that the company was providing a “reporting service” and that this mailer did not guarantee that the participants had actually won the $1 million. The Commission is claiming that this type of promotion and marketing are both misrepresentative and deceptive. Had Mr. Somenzi employed an experienced marketing professional, these legal risks could certainly have been eliminated.
In national news, Attorney General Loretta Lynch has announced a crackdown on companies that support global mail fraud, landing them on the same list as murderers and drug cartels. Companies such as PacNet, a Canada-based payment processor, are being investigated for partnering with mail scams that prey mostly on the elderly population. These scams promise money or rewards in exchange for a small one-time fee, paid by check. These companies collect those check and go to PacNet, which helps them to legally cash them.
This situation sounds a bit too similar to Mr. Somenzi’s ongoing case in California. No company wants to be mistaken for one of these mail scam companies, especially now that the U.S. government is becoming more involved. At MRI, we have executed virtually every type of promotion and have extensive experience with the importance of clear and well-written rules for sweepstakes and contests. We are experts in social media and interactive promotions and can help optimize marketing strategies without having to resort to questionable and quite possibly illegal approaches.