Marketers take note: The New Jersey Assembly is considering a bill that would make sweepstakes promotions in the state almost impossible to conduct lawfully. Essentially, the bill prohibits a sweepstakes that requires the entrant to give any consideration when entering. This means that a sweepstakes that requires an entrant to complete a survey or visit a store may be unlawful in New Jersey.

The lottery laws in the United States typically prohibit a promotion that involves the elements of prize, chance and consideration. A legal sweepstakes avoids this prohibition by eliminating the element of “consideration.” Consideration has been generally defined as monetary or, in some circumstances, putting forth effort to the entrant’s detriment. Thus, consideration may be making a purchase of a product, buying a ticket or, in some states, writing an essay.

New Jersey is considering a bill that would make it one of the states that prohibits nonmonetary consideration. Specifically, New Jersey Bill Number 2950 broadly defines consideration as “doing any act.” The result of such an all-encompassing definition is that sponsors of sweepstakes may not be able to require entrants to perform any act as a condition of entering a sweepstakes other than submitting an entry form. Thus, the sponsor may not be able to require entrants to complete a simple survey form, navigate a Web site, refer a friend, answer trivia questions, submit an essay or photograph, or even drop off a completed entry at a nearby store. It appears that any activity beyond the submission of basic entry information would violate the law.

The New Jersey bill also requires sponsors to make certain disclosures in all advertisements, regardless of the type of media. In particular, it requires sponsors to disclose the odds of winning each offered prize, all conditions to receive a prize, whether all prizes will be awarded, every restriction on offered prizes, the “no purchase necessary” message, the name and address of the sponsor, limitations on eligibility, and any deadline dates. Even disclosure of the fact that the entrant has not yet won would be required. It is unclear what the reach of these regulations would be. For example, according to this bill, a sponsor of an on-pack promotion would need to include the complete details on how to enter for free on the product packaging

Creative advertisers may be given more freedom, however, because the bill includes a limited exception for a mere announcement or teaser. Specifically, it provides that sweepstakes “announcements” are not subject to the same disclosure requirements as sweepstakes advertisements, but sweepstakes announcements are narrowly defined to include no more than limited mention of the sweepstakes without more elaboration. Thus, a pop-up advertisement that reads “click here for your chance to win” may be vague enough to avoid the requirements.

Finally, the bill also provides an expansive definition of “sweepstakes” to encompass any promotion in which there is a mixture of skill or chance, irrespective of which element is dominant. This definition could, therefore, include hybrid games which might otherwise pass muster as games of skill under a dominant element analysis, but will be deemed prohibited games of chance under this New Jersey law.

Unlike the similar bills in other states, the New Jersey bill would apply to sweepstakes conducted in all media, not only to those in direct mail.

Arent Fox is monitoring this bill. For more information, please contact:

Anthony V. Lupo
202.857.6353
Lupo.anthony@arentfox.com

Sarah Bruno
202.775.5760
Bruno.sarah@arentfox.com