One of the struggles that entrepreneurs and small business owners have is that they typically do not have the money and resources that larger organizations have. As a result of this, small business owners often times open themselves up to liability since their HR, Finance or Legal team (read themselves or the person that they outsource these activities to) may not be creating/reviewing everything that is created. Staying with the theme of our blog to be transparent and to help other entrepreneurs, we are going to share a recent experience that we got ourselves into. Please make sure to read to the end so that you can avoid this situation with your business.
It was coming up on our second holiday season since our wine and liquor store opened. We knew we wanted to do some special promotions to get people in the store, after all, who doesn’t like alcohol as a Christmas gift? On top of offering some holiday discounts, we decided to do a giveaway! We wanted to reward our loyal customers with a chance to win a nice gift right before Christmas. What we came up with: spend $50 in the store and be entered to win a wine rack with 4 bottles of wine! This was the first time we had ever offered anything like this, and the last.
About 2 weeks later, we got a surprise visit at the store. The person provided no indication for who they were or what they were there for, but wanted to know our intentions for us running the ad. Tom gave the agent an official statement explaining that we were try to promote our store and reward a customer during the holidays. After providing the statement, the lady informed us that our promotion was illegal gambling. We were completely blind-sided. We had no idea that this type of giveaway wasn’t allowed!
Here is what I learned that day.
The 3 Criteria for Illegal Gambling?
- A giveaway or sweepstakes with a prize
- Winner is chosen by chance
- Requiring a purchase or some benefit to the seller to be entered to win
A contest, giveaway or sweepstakes containing all 3 of these criteria constitutes as illegal gambling by the U.S.
How to Avoid Illegal Gambling
Make sure you know the laws in your country & state. We made the mistake of offering our holiday giveaway without doing any research, and found out the hard way that what we offered was a big no-no. Offer your giveaway to everyone. There is a reason you always see “No purchase necessary” in the small print when stores have promotional sweepstakes. By not making a purchase required to enter, and offering a free way to enter, you don’t violate rule #3 and you promotion will then not be illegal gambling.
Please share this post to get the word out to other entrepreneurs and small business owners.
Note: This post is for informational purposes only. We are not attorneys and this post is not meant to provide legal advice. We are simply sharing our experience. We recommend that you consult an attorney to verify the information in this post and before taking any action based on this post.