The FCC’s new Licensee-Conducted Contest Rule became effective this past Friday. Under the new rule, a broadcast licensee conducting a contest still has the obligation to disclose the material terms of the contest “fully and accurately” and to conduct the contest substantially as announced. However, as we wrote last September, the new rule allows broadcasters to meet these requirements by posting the contest terms on their websites rather than reading them on-air. To take advantage of this new flexibility, broadcasters must:
- Post the terms on the station’s or licensee’s website, or if neither the station nor the licensee has a website, on a free website that is available to the public 24/7, without registration;
- Broadcast the website address with sufficient information for a consumer to find the terms easily, using simple instructions or natural language;
- Broadcast the website address periodically throughout the term of the contest;
- Establish a conspicuous link or tab on the home page of the website that takes consumers to the contest terms;
- Maintain the terms on the website for at least 30 days after the contest has ended and conspicuously mark those that are expired, including the date a winner was selected;
- On the rare occasions that a change in terms occurs during the contest, announce the changes on-air within 24 hours and periodically thereafter, and direct participants to the written terms on the website; and
- Assure that the contest rules posted online conform to those announced on-air.
The effective date of the new rule has been eagerly anticipated by broadcasters as the change grants them more flexibility in announcing contest terms, avoids long and complicated contest announcements on-air, and permits participants to review the rules at their leisure. However, in making the change, the FCC noted that “[a]s with all elements of contest-related announcements, the burden is on the broadcaster to inform the public, not on the public to discern the message.”
Indeed, the law views the rules of a contest or sweepstakes to be a contract between the sponsor (station) and anyone who enters the contest, or even anyone who tries to enter and fails to do so successfully. If the sum total of your on-air contest rules are “be the 103rd caller after X song is played” and a vague “station policy” somewhere on the website that says you can only win once every 30 days, you have left a lot out of your “contract.” For example, when a station ran a contest on-air like the one above and did not get many callers, the DJ simply awarded the prize to the last person to call in after hours of trying to attract more callers. The station was fined by the FCC because it did not run the contest substantially as advertised. Properly written contest rules should account for such situations, as well as other foreseeable developments, such as the phone lines going down after the trigger song has been played. A station with contest rules that don’t address likely (or even unlikely) contest developments is inviting challenges from both contestants and regulators.
In that regard, as we noted in FCC Proposes to Clear Airwaves of Boring Contest Disclosures, But State Issues Remain, stations should remember that the FCC is not the only regulator watching out for contest and sweepstakes violations. For example, some states’ contest laws require that all announced prizes be awarded in order to prevent “bait and switch” contests. For stations giving away “time sensitive” prizes such as concert tickets that have to be used on a specific date, the rules should address the situation where a winner is chosen but then turns down the prize or simply does not claim it because they cannot attend on the date specified. If the rules say that an alternate winner will be chosen after 10 days, there may not be enough time left before the concert to award the prize. The station with poorly written contest rules must then choose between violating the law by failing to award a prize, or violating the law by failing to conduct the contest in accordance with the announced rules. Badly-drafted contest rules are a liability for any business, but are worse for broadcasters, as in addition to all of the state and federal laws governing contests, broadcasters are uniquely subject to the FCC’s contest oversight as well.
Finally, while you might imagine that contest complaints come from those who lost the contest (and indeed they often do), many come from contest winners. While professional contestants who enter every contest will complain about the valuation placed on a prize for tax purposes, first-time winners are more likely to complain about having to sign a release to claim the prize, or where the prize is large, having to provide the station with their Social Security Number, appear in person, or attend a further event, such as the day when all the winners of keys must try them out in the grand prize car. These obligations need to be clear in the contest rules, not just to avoid liability, but to ensure the station is able to get the promotional value it anticipated from the contest. Contestants who demand anonymity and refuse to sign releases greatly undercut the promotional value of a big contest.
The bottom line is, now that the FCC will let you post your rules online for contestants and regulators to scrutinize, you need to ensure you have rules that can withstand scrutiny.