I know it's legal for our
agency to give away an airline ticket, tour or cruise as a
promotional item at a charity event and cruise night. Is it also
legal for us to operate a raffle that requires participants to pay
a dollar or so for a chance to win? What if we require paid
admission to a cruise show? What if we publish a newspaper ad about
the promotion?
A: The laws on prizes, raffles and sweepstakes
vary from state to state. Therefore, be sure to check with a local
attorney to see whether the general advice given here applies in
your state.
In most states, you can do all the things you asked about:
charge for a chance to win, charge admission and publicize the
contest -- as long as you meet certain disclosure requirements.
Typically, in any written solicitation material, including ads
and fliers, you must spell out all the conditions for eligibility,
along with a description of the prize, plus:
• The retail value of the prize, using your good-faith
estimate.
• The odds of winning, which also would require your good-faith
estimate of the number of people who will enter the contest.
• Any charges required, such as a processing fee or an entry
fee; these charges must be your actual costs and not a hidden
profit center for you.
In addition to state laws, the Federal Travel Commission has
rules that limit how you can use the word "free" in an ad for a
product or service.
Here are two of the most important rules:
• You cannot offer something for free if you require that the
customer purchase one product or service in order to get another
one for "free," unless the price for the first product is no more
than the regular price, including any regular discounts in your
local area.
For example, you cannot advertise that the third person in the
cabin will travel for free, unless the first two will pay no more
than the regular, discounted cruise price.
• You cannot make "free" offers during more than six months in
any 12-month period, and you cannot advertise more than three free
offers in any 12-month period in your sales area.
However, under the FTC rules and the rules of every state, you
are free to give away as many trips as you like as long as there
are no entry costs or conditions, except to fill in any entry form
or put a business card in a bowl.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].