Marketing and promotional experts already know that with rare exceptions (e.g., the government), lotteries are illegal. An illegal lottery is a game or contest in which the outcome is determined by chance, the entry requires some form of consideration, and the winner is awarded a prize. Over the years, these three elements have been the subject of scrutiny, regulatory opinion and judicial decision. Although interpretive rules are not cast in concrete, a prize can be nominal in value; consideration can take the form of visiting a store or filling out a lengthy customer survey; and, if chance plays a material factor in determining the outcome, no amount of skill in any of the other elements of the promotion will save the day.
Marketing and promotional experts use “no purchase necessary” or “free alternate means of entry” as tools to avoid consideration—in general, promotions with a freely available alternate means to enter may be based on chance and may have a prize. Some promotions involve skill—eliminating chance. Shooting a hole in one at golf or solving a mathematical puzzle are examples of skill-based contests. Of course, the skill must be bona fide—guessing the number of beans in a jar is not a real skill, no matter how good one becomes at guessing.
Against this backdrop, advertisers, eager to get their message in front of consumers, are finding life increasingly difficult. Have you noticed increased advertising in movie theatres, outdoor signage or on uniforms of your favorite sports figures? Distribution technology and storage and recording media have given us the ability to fast-forward or avoid viewing messages that previously required you to physically leave the room or change the channel! Hmmm…so people are spending more time on the Internet—browsing, surfing—how about advertising there?
Well things seemed to be looking up for advertisers—cookies, pop-up ads, banners, above and below the fold advertising, mass commercial e-mail. Seemed like technology was coming to the rescue. But, enter their legal and technical counterparts—cookie disablers, pop-up blockers, spy-ware and ad-ware detection programs, SPAM and other filters, coupled with legislation and regulation over intrusive technologies or programs that invade privacy or transmit information without consent. Getting the message across is still getting tougher.
One approach is the increased use of “product placement”—insertion of branded products into actual programming “content.” Branded products become part of the action—someone is drinking a beverage, driving a car, using a computer—all branded. One of the most interesting developments in the world of product placement is taking place in interactive gaming. Interactive games require players to sit, often for hours, staring at a screen, paying close attention to the game. Background, backdrop, even music, contribute to making games realistic and become music to the ears of advertisers targeting a captive audience.
Can interactive, Internet-based games require a participant to pay to enter and participate—online “pay-to-play” games—and provide the winner cash or prizes? Here’s how such a game is typically structured: the participant downloads licensed programming for installation on his or her computer—the platform from which instructions and controls are transmitted. When combined with instructions and controls from team members or opposing players, the programming allows the game to be played. To enhance the gaming experience (and also to bolster the argument these are predominantly skill-based, not based on chance) many gaming platforms have sophisticated mechanisms to rate players and provide “matches” of comparable skill. Assuming games are skill-based, many (but not all) jurisdictions permit the payment of cash to play and the award of a prize. In some jurisdictions (but not all), the prize can even be derived from the number of players and the amounts paid by the participants. Check with Rimon before making any assumptions.
Regulation of Internet contests in the United States falls into four broad legal categories: (a) regulation of sweepstakes, contests and prizes; (b) regulation of unfair and deceptive trade practices; (c) regulation of gambling; and (d) consumer protection. We will turn to a more comprehensive legal review in next month’s issue, but we will tell you that if your game attracts children, you had better ensure there are mechanisms enabling you to comply with special regulations that apply. These are not limited to issues involving the age of majority and the ability of participants to legally enter into binding contracts (e.g., Alabama and Nebraska = 19; Mississippi and Puerto Rico = 21). Compliance with the Children’s Online Privacy Protection Act (“COPPA,” not to be confused with COPA or Copacabana—anyone still reading?), considerations of parental consent, propriety of content and a host of other regulations and legal considerations, come to mind.
Stay tuned for next month’s issue to find out more about these legal issues.