The Chicago Association of Direct Marketing rescinded an offer late last week after an Illinois anti-gambling organization accused it of running an illegal promotion for next week's Direct Marketing Days conference.
The promotion, of which there were at least two versions — a letter and a self-mailer — offered early registrants a chance to win four direct marketing reference guides. The offer said in part, “We're only giving away 15 sets – and you can only be entered in the drawing if you pre-register for DM Days right now.”
Kathy Gilroy, a volunteer with the Northern Illinois Anti-Gambling Task Force, raised the question of legality in a faxed letter to CADM and the Direct Marketing Association on April 5. Requiring payment to enter makes the promotion illegal, she said.
At issue: Was the CADM's promotion a sweepstakes or was it a lottery?
Sweepstakes are generally permissible, but nongovernment lotteries are illegal.
“The question is, how do you make a sweepstakes not be a lottery?” said Andrew B. Lustigman, a partner at The Lustigman Firm, New York, and DM News columnist.
Lotteries must have three elements:
• Prize, in this case a set of books.
• Chance, a random ability to win.
• Consideration, an expenditure of money or something of value to enter.
To make the promotion a sweepstakes instead of a lottery, either the consideration or chance element must be eliminated, Lustigman said. Consideration is removed by offering an alternative way to enter, commonly known as the “No purchase necessary” method. Or, if consideration is kept, the chance element can be replaced with a skill component — answering trivia questions, for example.
Nowhere on the CADM's mail piece was there an alternative method of entry in the drawing.
At first, CADM officials said they would continue the promotion, but after reviewing the situation again, CADM president David McSweeney said they agreed it would be best to rescind the offer entirely.
“It's no longer in play,” McSweeney said. “We're notifying everyone who has signed up for the show that we've canceled the promotion. If by some wild stretch of the imagination someone signed up for the show just for the chance to get these books, we'll give their money back.”
Patricia Faley, vice president for ethics and consumer affairs at the DMA, recommended that businesses looking to conduct any type of promotion pass them on to an attorney familiar with the law.