Be Smart Buy Smart: What Smart Shoppers Know About Sweepstakes, Contests, and Lotteries

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Sweepstakes, Contests and Lotteries

Consumer authorities are in agreement that deceptive practices relating to sweepstakes are common. Finding that earlier methods of disclosure were inadequate and created misunderstandings, the California Legislature has adopted laws that require full disclosure of contest rules, and that make it unlawful to identify people as "winners" when they haven't actually won.

Remember—even if the contest, sweepstakes, or lottery that you enter follows all of the legal requirements—chances are that you will not win anything.

Why Companies Sponsor Contests or Sweepstakes

The purpose of contests and sweepstakes is to increase sales or consumer awareness about a particular product or service the company is selling. The prizes are merely incentives for consumers to buy the sponsoring company's products or services.

Some magazine publishing companies have increased magazine sales by using sweepstakes and contests. Some charitable organizations, fast food restaurants, and timeshare resorts also use sweepstakes and contests as promotional devices.

Your Chances of Winning

Usually, the odds of winning a sweepstakes, contest, or legal 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 prize.

Sweepstakes Penal Code section 319; Business and Professions Code sections 17539.5, 17539.15, and 17539.55

A sweepstakes is a game of chance that requires no purchase or 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. So, if you send in an entry without a "proof of purchase," your entry 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 lawful, 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. In fact, California law requires that a sweepstakes solicitation include a prominent statement in the official rules stating that no purchase is necessary.

It is unlawful for a sweepstakes operator to solicit or sell an information access service (e.g., a "900" or "976" number) in any manner related to a sweepstakes. This would include inviting sweepstakes contestants to call an information-access number.

By law, sweepstakes entry materials cannot represent, taking into account the context in which the representation is made, that a person is a winner or has already won a prize, unless that person has, in fact, won a prize.

Contests Business and Professions Code sections 17539.1 through 17539.3

A contest requires talent and skill (rather than pure chance) in order to win the prize. However, chance may play a part. 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.

California law regulates the conduct of contests in which payment of money is required to become or remain a contestant. 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 contest operator may not represent that any particular person 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 prizewinners if a tie remains after completion of the last tie-breaker.

The exact nature and approximate value of prizes must be disclosed clearly and conspicuously when they are offered.

Misrepresenting in any manner the odds of winning any prize is prohibited.

All prizes of the value and type represented must be awarded and distributed.

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 told, clearly and conspicuously, the opportunity to choose to enter this phase of the contest for free (other than reasonable postage and handling fees).

Lotteries Penal Code sections 319 through 329

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, certain charitable bingo games, and raffles conducted by certain private non-profit organizations, lotteries are illegal in California.

A lottery is composed of three elements:

  • A prize (for example, money, an automobile, a vacation, or the right to play a free game)
  • Payment of consideration to be eligible to win a prize (for example, 25 cents in exchange for a bingo card, or the purchase of a product sold by the sponsoring company)
  • Distribution of the prize by chance

If one of these three elements is missing, then the scheme is not a lottery.

Before You Enter Business and Professions Code section 17539.15

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 a product or service. Remember, you do not have to order anything in order to enter a sweepstakes and have a chance to win a prize.

Read the entry rules carefully. You may be disqualified if you do not follow them exactly.

Be cautious of the wording of sweepstakes letters, which often give you the impression that you have already won something, and that you only have to send in a "donation" to collect. Remember, you do not have to buy or pay anything to enter a sweepstakes.

Do not put personal information such as your Social Security Number on an entry form. If the entry form requests your income, marital status, or other sensitive information, think carefully about whether you want to provide it. Remember that it may be shared with others or used for purposes that you would not approve of.

Sweepstakes often identify "pre-selected winner(s)." This usually means that each "winner" has been randomly selected by a computer and assigned a number, with one or more persons receiving designated prize(s). If the sweepstakes promotion states you are a "pre-selected winner," you may be eligible only if you respond to the sweepstakes, and you may not win the prize that you want.

Where to Go for Help

Your Local District Attorney. Look in the county government pages of your phone book under the name of your county.

The Attorney General. Write a letter of complaint to the California Department of Justice, Office of the Attorney General, Public Inquiry Unit, Post Office Box 944255, Sacramento, CA 94244-2550, or call 1-800-952-5225.

The U.S. Postal Service. If you have a problem with a contest or sweepstakes, and the entry form and promotional material was sent to you in the mail, contact the local postal inspector or postmaster. Incidents of suspected mail fraud can be reported to the Inspection Service by completing PS Form 8165, Mail Fraud Questionnaire. This form is available at your local post office or can be requested via e-mail (fraud@ uspis.gov). The U.S. Postal Inspector may also take action against foreign lotteries soliciting people within the United States.

The Federal Trade Commission. If you feel an advertisement for a contest or sweepstakes was misleading, or a method of promotion was deceptive, send a copy of your complaint letter to:

Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103-1798; or
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, CA 90024;
or call 1-877-FTC-HELP (1-877-382-4357).

It's a good idea to include a copy of the advertisement or deceptive promotional material. The FTC does not resolve individual problems, but will determine if a particular practice generally injures the public. Your letter of complaint may help convince the commission to investigate a company or business practice.

For Information on Other Consumer Topics

Visit the Department's website or call 1-800-952-5210.

California Department of Consumer Affairs
1625 North Market Blvd., Sacramento, CA 95834
1-800-952-5210 • TDD (916) 322-1700

The opinions expressed in this publication are those of the authors and should not be construed as representing the opinions or policy of any agency of the State of California. While this publication is written to provide accurate general information about the law, the reader should consult an attorney or consumer expert in particular cases.