Numerous television producers recently have been incorporating sweepstakes into their game shows and reality television shows, including Deal or No Deal, The Apprentice, America’s Got Talent and 1 v. 100.  Viewers are given the opportunity during these shows to participate in a sweepstakes program that awards both cash prizes and merchandise.  The predominant number of entrants enter via an SMS text message sent from a wireless device; however, viewers may also enter via the Internet.  Entrants who enter via text message must pay an additional $.99 in addition to the standard text message fees assessed by their wireless provider; however, no fees are charged to persons entering via the Internet.

The use of SMS text messages as a means of entry into sweepstakes has resulted in numerous legal challenges.  The first case challenging the legality of these sweepstakes was filed in Georgia state court in February 2007.  In Bentley v. Trump, et al., the plaintiffs alleged that the sweepstakes conducted during The Apprentice was actually an illegal lottery despite the fact that the defendants offered a free alternative method of entry via the Internet. The plaintiff argued that by requiring a $.99 premium fee from entrants who use the text-messaging method, the defendants are operating a lottery with respect to those entrants regardless of other players’ free entries through the Internet. The plaintiff’s further argued that a free method of entry can cure the consideration exchanged for a purchase of a product that comes with a chance to win, but it does not cure the consideration exchanged solely for the chance to win a prize.  No decision was reached in this case as the plaintiff voluntarily dismissed it.

A similar case, Hardin v. NBC Universal, Inc., was later filed in federal court in Georgia alleging that the sweepstakes conducted during the shows Deal or No Deal, 1 v. 100 and America’s Got Talent were illegal gambling games conducted in Georgia.  Plaintiffs sought to recover the $.99 charge paid to the defendants under a Georgia statute that allows money paid as consideration in gambling to be recovered from the winner.  The plaintiff’s alleged that they had entered into a “gambling contract” by paying $.99 as gambling consideration and that the defendants were the “winners.”  The federal court certified this question to the Georgia Supreme Court who held a gambling contract did not exist in this case because the contract between the plaintiffs and the defendants did not involve a bet or a wager and the text-message fees were paid regardless of the outcome of the contest.  Thus, plaintiffs could not recover under the statute and the case was dismissed.

Four similar cases were filed in California in mid-2007 challenging the same sweepstakes.  All four cases contain the same basic arguments.  The plaintiffs argue that the game conducted during Deal or No Deal is an illegal lottery because a free alternative method of entry only cures consideration when the promotional scheme is used to increase the purchase of legitimate goods, not when the game itself is the product being promoted.  They further argue that the contest is illegal because entrants paid only for the privilege of entering and received nothing of equivalent economic value in return. The federal district judge agreed with this interpretation of California law, held that the plaintiffs had sufficiently alleged that the conduct was illegal, and refused to dismiss the suit.  In response, the defendants asked for an interlocutory appeal to the Ninth Circuit so that the question could be certified to the California Supreme Court.  These cases are currently stayed pending the appeal to the Ninth Circuit.

A similar set of cases challenging the games was filed in California in 2008 as well; however, these cases are against various cellular providers such as AT&T Mobility, Verizon, and Sprint.  The complaints alleged that the phone service providers and 10 unnamed parties entered into agreements to share the profits resulting from the $.99 premium text message fees.  These cases differ because they argue that the free alternative method of entry was not equal to the paying method because it forced people to enter their telephone number, full name, e-mail address, date of birth, and state of residence.  The entrants were also asked if they would like to receive alerts or other promotional materials.  This additional information, plaintiffs argue, is a thing of value and was consideration provided to defendants for a chance to win.  These cases are also currently stayed pending the appeal of the cases discussed above.
 
There is currently only one court decision involving these types of games and it deals with a particular Georgia statute rather than the interpretation of the consideration element.  Although the court concluded that the games were not illegal lotteries, the numerous cases pending in California have survived initial motions to dismiss and should be a concern to anyone who wishes to pursue a sweepstakes that involves a premium text message fee.  A clear answer from these cases may not come for some time. 

Companies that are considering using text messages as a means to enter sweepstakes are advised to seek counsel prior to conducting such promotions.  For further information regarding Arent Fox’s work in this area, please contact:

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

Sarah L. Bruno
bruno.sarah@arentfox.com
202.775.5760

Matthew R. Mills
mills.matthew@arentfox.com
202.715.8582