Did you know that if you’re a sweepstakes winner in Canada, you’ll have to do a math problem before collecting your prize? Or that the value of a prize you win in Japan may not exceed JPY 100,000 JPY (approximately USD 700) if you are required to purchase a product to participate? Or that if you live in Brazil, it’s unlikely you’ll be able to enter at all, even if the sweepstakes is being offered all around the world?
Global promotional campaigns come with a complex web of international legal requirements. Countries across the world have their own rules and regulations on promotions, and there can be dire consequences for any company that does not follow the law. Corporate lawyers, by nature, tend to hate ambiguity and risk. If you’re an attorney with a major brand, you might be tempted to hide under your desk when someone from marketing suggests a sweepstakes campaign.
That said, sweepstakes and contests are powerful marketing tools when executed correctly. They can grab attention and build long-term loyalty, and they are one of the most reliable drivers of opt-in, first-party data. The benefits often far outweigh the hurdles for those who understand the law.
Global promotion laws can get complex (and strange)
Promotional laws vary significantly across countries and can seem pretty unusual. For example, in Canada, games of pure chance that require money (including in the form of a product purchase) to enter are considered criminal offenses. To circumvent that issue, skill-testing questions are required as part of the process. Before the winner collects their prize, contest winners typically must correctly answer a two-digit, four-step mathematical question, without the use of any external aid (such as mechanical assistance).
In Japan, under the Act against Unjustifiable Premiums and Misleading Representations (Act No. 134 of 1962), when a prize awarded via a sweepstakes is related to a product purchase, the maximum value of the prize may not exceed JPY 100,000 (approximately USD 700). And in Brazil, sweepstakes can only be run with prior government approval, and a request for authorization must be filed with the Ministry of Finance between forty and 120 days prior to the start of the sweepstakes. Authorizations are granted to Brazilian legal entities only, so a foreign company wishing to offer a sweepstakes in Brazil must establish a business relationship with a Brazilian company. Given these not insignificant requirements, many brands sidestep Brazilian markets entirely.
When running international sweepstakes, it is best practice to provide all promotion materials in the official language of each target country, but there are some countries that have laws requiring you to do so (e.g., Canada (must be translated into French if open to residents of Quebec), Germany, France, Italy, Spain). Also, in some markets the promotion sponsor may be required to pay taxes on the prize pool or withhold taxes from the winner, depending on the country’s laws. Some countries have rules regarding prize fulfillment (e.g., in the Philippines, for prizes that exceed 500 PHP in value (approximately USD 9.00), the winner(s) must be notified via registered mail).
The various countries’ requirements mean that successfully running an international sweepstakes or contest often requires collaboration among legal experts stationed across the globe. To avoid potential pitfalls and navigate the global landscape effectively, legal and marketing teams must remain vigilant and up to date. Quebec, for example, was known for its complicated bond and registration requirements. In recent years, however, it has simplified its rules regarding sweepstakes and promotions. Puerto Rico, too, has also significantly reduced its regulatory requirements. Brand teams that haven’t kept up with these changes could miss what might be big opportunities by erroneously concluding that a given market features legal protocols that have since been mitigated or abolished altogether.
Leaving your data unprotected can cost more than a few emails
Additional legal challenges surround the collection and handling of participant data in international promotions. Since the implementation of Europe’s General Data Protection Regulation (“GDPR”), global privacy standards have tightened. GDPR rules require companies to notify authorities of a data breach within seventy-two hours. Breaches can carry steep fines for violations—as much as EUR 20 million (over USD 23 million) or 4 percent of a company’s global revenue. It’s also important to remember that in the EU, sub-brands are not considered separate from their parent companies. This means that any percentage penalty will be calculated based on the revenue of the whole organization—not just the smaller brand. In other words, the penalty can seem disproportionate if related to a minor/low-profile sub-brand’s data breach.
Where European regulations go, much of the world follows. Led by recent California regulations that mirror GDPR, US-based companies now face GDPR-level privacy standards in markets both at home and beyond the EU. For legal teams, maintaining compliance involves strict adherence to standards for data collection, storage, accessibility tracking, deletion timelines, and backend encryption. Data security isn’t optional; it’s a global mandate, and even a minor misstep can result in reputational and financial damage.
So you’ve picked a winner—now what?
Even after a brand has selected its winners, there are regulations and protocols to follow, and they can vary from country to country. For example, US law permits extensive winner screening, including criminal background checks. Many companies also use what’s colloquially known as a “moral turpitude clause,” which gives them the right to disqualify participants based on specific behaviors or details from their past that could negatively affect the brand.
However, while technically legally compliant, automatically disqualifying a potential prize winner based on a past conviction still may not be prudent as the affected person may claim that the sponsor violated their rights. (Note that a comprehensive background check requires the express written consent of the individual in question.) To mitigate the risk to at least some extent, it is appropriate to explicitly outline the factors that may result in exclusion in the sweepstakes rules. A common option for flexibility is prize modification, such as replacing an in-person meet-and-greet prize with an alternate reward that achieves similar campaign objectives, like a conversation conducted online, or a personalized video.
Regulations regarding the use of a background check may vary globally, requiring completely different approaches to winner verification. Not only must brands adhere to the rules concerning the logistics of sweepstakes and contests, but brands must also align their prize processes with the local laws of each country.
Key takeaways
For lawyers supporting international promotions, consider whether your clients need the following:
- Specialized knowledge: Understanding marketing law within a global context is essential.
- Proactive compliance: Staying ahead of data privacy regulations and adapting to evolving global and local rules ensures smoother execution.
- Local expertise: Collaborating with local experts helps address specific nuances in varied markets.
- Clear communication: Transparent promotional rules prevent misunderstandings regarding winner rights and other important parameters.
If the above sounds daunting, that’s because it can be. Conducting a single promotion across twenty countries may involve more than twenty lawyers worldwide, and missteps can result in heavy fines and lawsuits. Navigating these complexities benefits from a steady hand backed by years of experience and global reach. Experts that specialize in international promotions can help legal teams minimize risks while meeting clients’ marketing goals.
When executed correctly, promotional campaigns provide exciting and impactful opportunities for brands to connect with their audience. Legal teams must understand laws and requirements around the world to follow them appropriately. A brand must never let sweepstakes become a gamble.
