State of California California Department of Consumer Affairs

CONTESTS/SWEEPSTAKES/GIFTS/PRIZES

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CONTESTS/SWEEPSTAKES/GIFTS/PRIZES

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Sweepstakes:

  • A sweepstakes is a game of chance requiring no purchase or any other payment in order to participate in the game.
  • The fact that you do not have to pay anything to be eligible for the prize is what makes a sweepstakes legal. If you send in an entry on a plain sheet of paper, it must be given the same chance of winning as an entry that includes a "proof of purchase".
  • Many people mistakenly believe that purchasing the product and checking the "Yes" box on the entry envelope will increase their odds of winning the prize. However, to be legal, each entry must be given the same chance of winning the prize, whether or not the entrant makes a purchase or checks the "yes" box.


Contests: B & P Code 17539.1-3

  • A contest involves skills or a combination of chance or skill in order to win the prize, and may be conditioned wholly or partly on a payment of some value. For example, guessing the number of jelly beans in a jar is generally not considered to be a contest, although some people go as far as to figure out mathematical formulas for the area of each jelly bean.
  • A person who operates a contest may not represent, either directly or indirectly, that another person has won any prize or item of value without disclosing its exact nature and approximate value. Similarly, a person may not make representations to someone else that he or she has won any prize or item of value in a contest, unless there has been a real contest in which at least a majority of the participants have failed to win.
  • Every person who conducts a contest must disclose on each entry blank the deadline for submission of that entry.
  • Use of the word "lucky" to describe an entry form or symbol, or any other implication that advantage is conferred on the participant in preference to other participants, is prohibited.
  • The use of simulated checks, currency or items of value, is prohibited unless they bear the words "SPECIMEN-NONNEGOTIABLE" clearly and conspicuously.


All contest and promotional puzzles and games must clearly and conspicuously disclose each of the following:

  • All the rules, regulations, terms, and conditions of the contest
  • The maximum number of puzzles or games that 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) the contest will end, and the date(s) when 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
  • The exact nature and approximate value of the prizes must be disclosed clearly and conspicuously when they are offered
  • If a tie-breaker for extra cash or any other type of prize may be entered by paying money, it must be clearly disclosed to the participant that the payment is optional, and that he or she does not have to make the payment to play for these prizes. Participants must be given, clearly and conspicuously, the opportunity to indicate that they wish to enter this phase of the contest for free.


Why Companies Sponsor Contests and Sweepstakes:

  • The purpose of contests and sweepstakes is to increase sales or consumer awareness about a particular product or service the company is selling, and not to give you something for nothing. The prizes are merely incentives for consumers to buy the sponsoring company's products or services.
  • Magazine publishing companies have greatly increased magazine sales by using sweepstakes and contests. Charitable organizations, fast food restaurants, and timeshare resorts now also use sweepstakes and contests as promotion methods.


Lotteries: Penal Code 319

  • A lottery is a plan or scheme for disposing of a prize (money or something of value) predominantly by chance to people who have paid something of value for the opportunity of getting the prize.
  • Except for the state-run lottery and certain charitable bingo games and raffles, lotteries are illegal in California.


A lottery is composed of three elements:

  1. a prize (for example, money, an automobile, a vacation, or the right to play a free game),
  2. payment of consideration to be eligible to win a prize (for example, $2.25 in exchange for a game card, or the purchase of a product sold by the sponsoring company), and
  3. distribution of the prize by chance. If one of these three elements is missing, then the scheme is not a lottery.


Your Chances of Winning:

  • Usually the odds of winning a sweepstakes, contest, or lottery are quite low: for example, more than 400 million to 1 against winning a grand prize of $500,000. To determine your odds of winning, read the fine print on the ticket or the promotional materials.
  • The law prohibits the company from misrepresenting the odds of receiving any item offered.


Before You Enter...

  • Carefully read the entry blank and all the promotional material. Sometimes, the entry blank is designed so that when you fill out the entry, you are also ordering products. Remember: you don't have to order anything in order to enter a sweepstakes and have a chance to win a prize.
  • Consider the tax implications if you win a prize. Prizes, including cash, are considered taxable income. Companies are required to report to the Internal Revenue Service (IRS) any prize with a fair market value of more than $600.
  • Read the entry rules carefully. You may be disqualified if you don't follow them exactly.
  • Be cautious of the wording of sweepstakes letter, which often give you the impression that you've already won something, and that you only have to send in a "donation" to collect.
  • Remember: You don't have to buy or pay anything to enter a sweepstakes.
  • Sweepstakes often identify "pre-selected winner(s)". Solicitation materials containing sweepstakes entry material cannot represent that the recipient is a winner or has already won a prize unless the recipient has in fact won a prize.


Where to Go For Help:


  • The local district attorney's office.


  • Write a letter of complaint to:

Department of Justice
Office of the Attorney General
Public Inquiry Unit
PO Box 944255
Sacramento, CA 94244-2550
(800) 952-5225 (CA Callers)
(916) 322-3360 (Out of State)
(916) 323-5341 Fax
(800) 952-5548 (TDD in CA)
(916) 327-5564 (TDD Out of State)


If you have a problem with a contest or sweepstakes and the entry form and promotional materials were sent to you in the mail, contact the U.S. Postal Service (look in the white pages of your phone book under U.S. Government). The U.S. Postal Inspector may also take action against foreign lotteries soliciting people within the United States.


If you feel the advertisement for the contest or sweepstakes was misleading, or the method of promotion was deceptive, contact the California Attorney General's Office, or the:


Federal Trade Commission (FTC)
901 Market Street, Suite 570
San Francisco, CA 94103-1798
(877) 382-4357
www.ftc.gov

Federal Trade Commission (FTC)
10877 Wilshire Boulevard, Suite 700
Los Angeles, CA 90024
(310) 824-4300
(877) 382-4357


The FTC does not resolve individual problems, but it can determine if a particular practice generally injures the public. Your letter of complaint can help convince the commission to investigate a company or business practice.



Publications available:
Be Smart Buy Smart - What Consumers Should Know About Prizes and Gifts
Be Smart Buy Smart - What Consumer Should Know About Sweepstakes, Contests and Lotteries
<p>Consumer Resource & Referral Guide Consumer Resource & Referral Guide
Directory of State Agencies Directory of State Agencies
Directory of Federal Agencies Directory of Federal Agencies
Return to DCA Home Page Return to DCA Home Page

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