“No purchase necessary to enter or win.” It’s a phrase we’re all familiar with as we’ve seen it accompany sweepstakes promotions on television, radio, and the internet. Businesses make it clear that you don’t have to buy anything to enter their sweepstakes and win anything, including the grand prize.
So why do companies use sweepstakes and giveaways to get customers in their doors—or on their website—if they specifically state “no purchase necessary”? What does this disclaimer really mean? And why is it so important that you include it in your own sweepstakes?
Here, we answer all those questions—and more—to help you ensure you understand the rules and regulations behind the phrase, as well as how it can actually help your business grow and increase customer loyalty.
What “No Purchase Necessary” Means
In a nutshell, “no purchase necessary” means exactly that. As the entity running the promotion, you can’t require people to pay to enter or win. In the U.S., it’s illegal to mandate anyone to exchange something of value for a chance to win a prize in a giveaway or sweepstakes.
The Law Behind It
The law that bars you from requiring anyone to buy anything to enter or win a giveaway or sweepstakes is known colloquially as the “Lottery Law” or the “No Purchase Necessary Law.”
The Federal Communications Commission (FCC), the United States Postal Service (USPS), and the Federal Trade Commission (FTC) work together to enforce it.
The law was created to separate government lotteries from giveaways run by private organizations. In the U.S., the only entities that can run lotteries are governments, which is why they can require you to purchase a ticket to win. Every ticket has an equal chance to win, and the law allows you to buy multiple tickets to increase your chances. However, as a way to protect consumers from scams and fraud when entering a giveaway with a private organization, the law only allows these organizations to run sweepstakes and lotteries as long as they don’t require a purchase or a consideration to enter or win.
Is It a Lottery or Not?
Giveaways and sweepstakes are considered lotteries under the following three conditions:
- They offer prizes that have value.
- Winners are chosen randomly.
- Entries require purchase, monetary payment, or something else of value for eligibility.
If what you’re doing meets these three criteria, you’re running a lottery, and that’s illegal. “No purchase necessary” takes you out of the realm of lottery and into the realm of a giveaway.
What’s a Consideration?
A consideration is giving something of value in exchange for the chance of winning a prize. Considerations also involve exchanging something of value for the prize itself.
If you’re running a game of chance and you’re not a licensed gambling establishment, you are not allowed to put considerations into place. You can’t require people to buy anything, and you can’t give preference to those who do.
Keep in mind that you also can’t require participants to fill out surveys, questionnaires, or anything similar to that in order to participate. And you can’t require entrants to do things such as sitting through presentations.
Loopholes and Gray Areas
One thing that you can do is require people to opt-in or subscribe to your newsletter in order to enter a giveaway. While this may seem like a consideration, it really is more of a loophole.
The difference is that newsletter subscriptions don’t necessarily translate into direct profit for you and they don’t give you any particular insights that will translate into profit. However, most companies find it safer to make these types of subscriptions optional so that no one perceives preference being given to people who choose to subscribe.
Another loophole involves offering giveaways and sweepstakes to paying members, such as a cable company’s subscribers. Why doesn’t this break the law? Because customers were already paying members before they were approached with a giveaway or sweepstake.
To put it another way, you would only offer these things to people who are already paying members. That means that if someone isn’t already a member, they can’t enter. And they can’t become a member in order to be eligible for that particular giveaway. If they do become, it will make them eligible for future giveaways and promotions but not for the current giveaway.
Alternative Method of Entry (AMOE)
What about bottle caps, game pieces on drinks, french fries at fast food places, and things of that nature? Those require people to purchase items that are of direct value to a company to enter. How is that legal?
Under the law, those companies must offer alternative methods of entry (AMOE) in addition to purchasing those items. If you look at the rules, regulations, and fine print for those sweepstakes, you’ll find a list of other ways to enter. Usually, it involves going to the company’s website and entering that way.
Creative and Skills Contests
Creative and skills contests are different from sweepstakes and giveaways in that they do involve a fee to enter and win, as well as a creative submission. After an entrant pays the fee, they have to produce creative work according to the rules of the competition. Judges then evaluate their work and that of the other competitors to decide on winners.
The format of these contests is what allows them to not fall under the same rules as sweepstakes or lotteries. Since the winner is chosen based on their work and not by random chance, creative and skills contests don’t fall into the category of a giveaway. And they don’t meet the three criteria necessary to be considered a lottery. The Flash Fiction Challenge is a good example of a creative contest.
The FTC, FCC, and USPS are all responsible for enforcing the No Purchase Necessary Law. State attorney generals also enforce this law.
Federal Trade Commission (FTC)
The FTC promotes fair competition and enforces laws protecting consumers from abuse on the part of businesses. They ensure that people entering a giveaway or sweepstakes don’t get defrauded, tricked, or lied to about what’s required to enter.
They also have rules and regulations for sweepstakes and giveaways that all businesses must follow. You can read about them here.
Federal Communications Commission (FCC)
The FCC regulates the content on the internet and over the airwaves, including giveaways and sweepstakes. They get involved in the advertising aspect of promotional giveaways and sweepstakes, and they go after those guilty of false advertising.
Check out this link to learn more about the FCC’s involvement with giveaways and sweepstakes.
United States Postal Service (USPS)
Any mail-in sweepstakes and sweepstakes ads fall under the USPS’s jurisdiction. The USPS recommends that potential entrants read all sweepstakes rules before entering to be certain they completely understand them.
If you are running a mail-in sweepstakes, the USPS recommends that you take the following questions into account:
- Are the entry instructions and rules easy to find?
- Can people understand them easily?
- Are the prizes worth the entry?
- Are you awarding the grand prize to a single winner, or do you plan to have multiple winners?
- Do you clearly explain what people’s chances are of winning each prize?
- Can they be sure that you’re the actual sponsor and that the mailer isn’t a scam?
- Is this actually a giveaway, or is it some other kind of promotion?
Regarding that final question, the USPS warns that it’s easy to confuse prize promotions with sweepstakes and giveaways. A legitimate prize promotion, also known as a premium promotion, comes with a disclaimer that says, “This is not a sweepstakes.”
These promotions probably involve calling a 900 number or mailing something back to see if you’ve won. However, 900 numbers cost money to call, so it’s a good idea to also offer the free mail-in option. However, it’s important to let your audience know that their chances of winning don’t improve with either action.
Keep in mind that there are some problems with prize promotions, including the high probability that if it says someone has won, they probably have not won any of the major prizes.
Check out the USPS site for more information.
Your State Attorney General’s Office
State laws govern sweepstakes, too. To learn more about how your state regulates sweepstakes and giveaways or to report a possible scam or fraud, contact their offices.
Sweepstakes, Giveaways, Contests, and Raffles
Now that you understand that “no purchase necessary” applies to sweepstakes and giveaways but not contests, it’s important to be clear on the differences between these three things.
Sweepstakes are drawings in which participants pay zero charges to enter and win. While sweepstakes involve a game of chance, they are not considered a form of gambling since people do not pay to enter and they do not lose anything if they don’t win.
People often associate cash prizes with sweepstakes. Think Publishers Clearing House, for instance. That’s probably one of the most well-known sweepstakes in the United States.
Companies can use a platform such as Random.org to ensure the drawings for sweepstakes are completely random and compliant with rules. They also must include a disclaimer that says “no purchase necessary” or offer an alternative method of entry, such as a website.
What’s more, the disclaimers and other important information must be easy for people to see and read.
Giveaways are like sweepstakes, except people don’t tend to think of cash prizes with giveaways.
Many big brands host giveaways where the big prizes are products rather than cash. Men’s Health, for instance, has held promotional giveaways that require subscribers to enter via their website. Prizes included home gyms and nutritional supplements.
Domino’s Pizza ran a promotional giveaway involving free pizza for a year. People had to register on their website and give their email addresses and phone numbers. Once they were notified they’d won, they could go to the nearest Dominoes and claim their year of free pizza.
Contests are different things entirely. As discussed earlier, the sponsors don’t determine the winners by random chance as they do with sweepstakes and giveaways.
Entries in contests usually involve something creative such as a picture, a story, a video, etc. Each entry gets judged, and then prizes are awarded based on who had the best entries. Major brands especially love to hold contests. Here are some examples:
Dove has run contests asking participants to submit selfies for a chance to win a spa experience.
Lego ran one where participants had to submit their most creative Lego build with Legos they already owned, new Legos, or a combination of both. The grand prize included exclusive Lego packs and placing the winners’ builds on display at the Lego House in Billund, Denmark.
If you want to put on a contest instead of a promotional giveaway, ask potential contestants to build or create something relevant to your brand. And be sure that the prizes are worth what you are asking of them.
Keep in mind that these kinds of contests must be skills-based in one way or another. For instance, guessing the number of buttons in a jar doesn’t count as a contest because it introduces an element of chance into the giveaway. But having each person who enters make lemonade in a jar and then choosing who has the most delicious lemonade is an example of a contest because you’ve removed the random chance aspect.
Another important thing to know is that these contests are illegal in Arizona, New Jersey, North Dakota, Vermont, and Tennessee.
In the Event of a Tie
If you have a tie between two entrants in your contest, you can’t use a random drawing to determine the winner. That brings random chance into the contest and renders it illegal.
So what are your alternatives? The easiest one is to have those who tied for first place either share the grand prize or, if that’s not possible, have a type of runoff or sudden death round. How you do that is up to you.
Raffles are giveaways in which you have to buy a ticket. They are similar to lotteries in that random chance determines the winners. However, unlike lotteries, the entities running raffles aren’t the government. So how is that legal?
You can legally sponsor a raffle if you’re a non-profit organization using the proceeds to raise money for a legitimate cause. People usually run raffles in conjunction with other fundraising efforts. If you’re a for-profit company, though, raffles are strictly off-limits.
What “No Purchase Necessary” Means for You and Your Brand
Now that you have a better understanding of “no purchase necessary,” you may feel a little discouraged that you can’t require purchases to get people to enter and that you can’t give preference to people who do buy something for winning.
Yet brands choose to run such sweepstakes and giveaways all the time. Why would they? Surely they’re not making much money.
Or are they?
The Relationship Between You, Your Customers, and Your Contests and Giveaways
You already know that the purpose of advertising is to get people thinking about your brand enough to walk through your doors or go to your website. Not all advertising is direct and meant to get people to buy right away. Because of that, advertising in the form of a giveaway can actually provide you with more value than traditional advertising.
Giveaways and sweepstakes are meant to make more people aware of your brand, especially if your business is young, small, and has low brand awareness.
Creative and skills contests can work quite well as forms of advertising because you can ask people to create something using your products or to promote a service. Examples include asking people to do the following.
- Build something using materials you sell.
- Create a dish using ingredients you sell.
- Make a video promo for a new product launch, an existing product, or maybe even something like a television show or film.
- Write a short essay about something relevant to your company.
The winner or winners will benefit by getting their work featured on your website, but you also get a lot of advertising for a reasonable amount of money. And since it’s a skills contest where you don’t determine the winner using random chance, you can require a modest entry fee.
Giveaways or contests allow you to see who enters and then use the information you gather from those entries to conduct valuable market research.
If you include an optional survey, some will fill it out and send it back to you. You can use that to better tailor your products and services to your target market, among other things.
Contests, whether they’re skills contests, giveaways, or sweepstakes, can strengthen your customers’ loyalty and enhance word-of-mouth advertising, which is the most potent form of advertising there is.
Why? Those who enter will have fun with it, even if they lose. They not only learn about your products and services, they also have a good time doing so. And if someone enters who doesn’t know about your brand, that person will learn about it during the contest.
How To Run a Giveaway or Sweepstakes
If it’s profitable to have people enter your giveaway without paying money, then how do you do it? After all, you will incur the costs involved with getting the word out, including paying for mailers, a website page, the advertising for the promotion, and anything else you’ll use to get people to respond.
Since your goal is to create brand awareness and not make money directly from your giveaways, there are some excellent and easy ways to do it without spending a lot of money.
Social Media Marketing
If you promote your giveaway via social media, you can generate some free advertising for your business. Sure, you might have to pay for ads on different platforms, but if you’re a good company with an attractive giveaway, people will share your page with others—and that’s free advertising for you.
Social media is so integral to our lives that it naturally improves brand awareness. It also does the following things for your business.
- Improves your ranking in the search engines.
- Increased website traffic, which leads to more sales.
- Generates new business leads.
- Improves relationships with customers.
Since not everyone is on every platform, you may want to use multiple platforms to run your giveaway and select different winners on different platforms. Just be sure that part of your informative post includes the fact that there could be more than one winner, and that depending on what the grand prizes are, the winners may share the prizes.
Deciding What Works Best
If you’re a private entity, you can run sweepstakes, giveaways, or contests. If you’re a non-profit, you can also run raffles. And if you’re a for-profit business, you’re limited to sweepstakes and giveaways.
So how do you know what will work the best? The truth is, you don’t know until you try them.
If you sell something expensive, like trips or cars, or if you have the ability to offer these types of prizes, then a giveaway might work better than a contest.
If you can’t offer such grand prizes, then a contest might work better. And since a contest involves people paying a modest entry fee, you could even earn some goodwill by having the proceeds from the contest go to a charity.
Companies That Specialize in Running Giveaways
If you’re a small business, a sole proprietor, or a single-person LLC, you might have no idea how to get started.
These companies have prospective entrants give their email addresses and social media handles and can help you award bonus points for liking or following you.
They can also help you offer bonus points for referring friends and family (although these bonus points can’t be considered as part of the giveaway).
You need to be sure that everyone has equal access to these perks and an equal chance of winning. That’s possibly the most considerable thing these companies offer.
What “No Purchase Necessary” Means for Your Customers
When customers don’t have to buy anything, they can use your sweepstakes or giveaway to make a little money of their own. Because they aren’t buying anything, any prize they win is a profit for them.
Selling Prizes for Profit
Say you’re a health and fitness organization, and your grand prize is a big giveaway of a home gym, free membership to all online personal training for one year, and a supply of your health and nutrition supplements.
Your secondary prizes may include a set of free weights or a complete nutritional kit. Your customers might enter because they want these things and can’t afford to pay for them.
However, they might also enter because they know what they can sell those things for, especially if the items are brand new and still in the box. And this can actually help your business. When the person sells the item they won, they’re telling potential buyers where they got the item—from your business. That’s more advertising for you.
Never discount the power of word-of-mouth advertising. It’s the cheapest and most powerful form of advertising there is. Your customers and their friends and family may buy more stuff from you because of your giveaway.
Saving Money by Winning Prizes
There are lots of people who want what you have to offer but can’t afford it or would prefer to use that money for something else. Therefore, they’ll enter your sweepstakes to try and win certain items.
When you don’t require a purchase to enter and win, these customers come out on top if they win.
People don’t get tax breaks for winning, but if they win something with a quantifiable value, they may choose to donate it and deduct it from their taxes so long as it falls outside the standard deduction. And the more they win, the more they can donate.
Also, remember that people often donate things because they believe in a cause and don’t care about whether they get a tax break. So even if your prizes have no quantifiable value, some might enter because they see a prize they can donate to their favorite charity.
To run a sweepstakes or a giveaway, you first have to understand what you legally can and cannot do, and your customers and participants need to know that there’s no purchase necessary to win or even enter.
Make that disclaimer clear and easy to see, and don’t take any chances looking for gray areas and loopholes to exploit.
If you want to charge an entry fee or otherwise have people pay to enter, run a creative or skills contest instead. Because you don’t use random chance to decide these, you can structure them quite differently under the law.
Sweepstakes and giveaways are great things for your business and your customers. Think of it as a win-win situation. Certain customers will win the giveaway while your business wins from the publicity and word-of-mouth advertising.