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Restaurants frequently market through a sweepstakes or contest on Facebook or other social media. A prize promotion can publicize an updated menu, the opening of a new location, the revamping of a menu, or promote loyalty among followers.

Yet, in their enthusiasm for using this exciting marketing tool, restaurateurs frequently expose themselves to legal risk. Here is a list of ten mistakes that restaurants frequently make in launching a social media prize promotion.

  1. Failing to determine if it is a sweepstakes or contest. In a sweepstakes, winners are selected randomly. In a contest, typically, the dominant element will be skill. If a restaurant fails to consider the legal distinctions, it may unwittingly be running an illegal lottery. That can raise the attention of either a state regulator or even the FTC.
  2. Drafting incomplete rules. Rules are the contract with the consumer. They provide the sponsor of the prize promotion protection in the event something goes wrong in the promotion (e.g. a virus infects the entry platform, yielding multiple winners). Too many restaurants act casually in this area. By failing to draft one set of comprehensive rules, they are foregoing an opportunity to mitigate risk.
  3. Failing to publicize the rules. Yes, Twitter and mobile devices offer limited text space, and nobody wants a Facebook page to be crowded with legal disclaimers. But the rules can only protect a restaurant if they are disseminated to the public. Restaurants should use shortened links to their websites or third party applications to publicize rules, and remember to obtain entrants’ consent to the official rules prior to entry.
  4. Forgetting to obtain an email address.  Restaurants have latched onto social sign-in. It’s a way to allow patrons to order their meals online without filling out laborious forms. Yet, social sign-in may not provide restaurants with the email addresses of participants in a prize promotion.  Without the email addresses, operators will have difficulty notifying winners since Facebook prohibits notifying winners on its platform.
  5. Entering by “liking” a Facebook page. Facebook’s May, 2011 promotions guidelines left industry members confused about using a “liking” function to enter a prize promotion. Restaurants may require patrons to “like” their pages only as a precursor to entering a sweepstakes or contest and not as the actual method of entry. Facebook will shut down promotions that use its functionalities to operate a prize promotion.
  6. Trading “likes” or “tweets” for sweepstakes entries. The FTC has made it clear that offering sweepstakes entries in exchange for mentions in social media creates a material connection between the promotion sponsor and the consumer. The onus falls on the restaurant to ensure that consumer’s testimonials disclose that such a material connection exists. Otherwise, the restaurant may find the FTC investigating it for violating its 2009 Endorsement and Testimonial Guidelines.
  7. Soliciting entry via mobile devices. Pursuant to various federal statutes (e.g. the CAN-SPAM Act and the TCPA), restaurants should not send text messages to its customers without their express opt-in to a specific marketing program. The Mobile Marketing Association and other industry groups offer comprehensive advice about how to execute the opt-in. Legal counsel can help a restaurant determine whether its prize promotion would require an opt-in to solicit entries on cell phones or tablets.
  8. Choosing winners without background checks.  In the age of social media, bad publicity spreads quickly. Restaurants should remember that the winners they choose reflect on their brand’s reputation. They should draft rules to permit background checks for potential winners of high-end prizes. Restaurants typically do not want to publicize an association with a criminal or a political extremist.
  9. Forgetting about releases with user generated content.  When running a photo or video contest, the restaurant should remember to obtain releases prior to posting not only from the person who took the photograph but also from every individual in the entry. Failing to do so may expose the restaurant to claims of violation of rights of privacy or publicity, copyright infringement, and other legal causes of action.
  10. Running copycat promotions. Just because your competition is running a prize promotion does not mean it is legal or has been cleared by legal counsel. Restaurants should create their own marketing programs and remember to include legal counsel in the concept stage. By including its attorneys early in the process, a restaurant can develop a prize promotion that meets its marketing objectives and minimizes its legal risk.

This post will also appear in Collen IP's Spring A La Carte Newsletter, covering legal issues aimed at the restaurant industry. Please contact me if you would like to subscribe to this newsletter.

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