A Staff Report from the Straight Dope Science Advisory Board

Why do contests say "no purchase required"?

March 21, 2006

Dear Straight Dope:

I've always wondered, why do so many contests have "no purchase necessary" in their rules? It seems like every contest I've ever seen on candy wrappers and fast food joints and whatever else, always specifies that you can enter the contest by contacting them with a post card or going through their website rather than buying their product. Is there some sort of tax loophole here where they save money if they allow people to enter without buying the product? Is it just a publicity stunt (although I don't know of anyone who has actually taken advantage of it)? Or is it just tradition? What are they up to?

Eric, you've obviously given this a lot of thought--you've named three excellent possibilities. Unfortunately, they're all wrong, so it's up to me to give you the straight dope.

The explanation has to do with U.S. broadcasting laws. The Federal Communications Commission has a section in its rules called the "lottery" law. Under federal law, lotteries are illegal. Some lotteries, anyway. Not state or multi-state lotteries--those are OK under the lottery law. What's verboten are what the average person thinks of as contests. Confused? Just wait.

If a broadcaster wants to promote a contest, whether in a paid commercial or as a station promotion, he or she has to answer the three lottery law questions:

  1. Is a prize being offered?
  2. Is there chance involved in the selection of the winner (i.e., drawing a ticket)?
  3. Does the consumer have to buy something to enter the contest? (This is called "consideration" by the FCC.)

If the answer to all three is "yes," then the promotion is a "lottery" and can't be broadcast. One "no" and the lottery law doesn't apply and can be broadcast.

Let's imagine you're a promotion director in charge of a contest. Which question would be the easiest to say "no" to?

  1. If there's no prize there's not going to be much excitement, is there?
  2. How will we select the winner? Not much choice there, is there?
  3. There's your answer! Provide a way for those who don't wish to buy anything to enter the contest (postage stamps and a reasonable length of time driving to a location are exempt from this).

Back in my radio days, we gave away a trip to Hawaii provided by a new sponsor. We met with the sponsor's representatives and decided to do a "scavenger hunt" type of contest. One of the items required was an empty box of the sponsor's product. To avoid the "lottery designation" that would produce, the day we announced that particular item on the air, we also announced that anyone wishing to could pick up a free box of the sponsor's product at the radio station, or simply write the sponsor's name on a 3x5 card, and include that as part of the final hunt loot. See how that worked?

Note that this applies only to broadcast media, not print media. However, if a contest campaign in print also is being broadcast somewhere, then it must also contain the "no purchase required to enter" disclaimer.

Canadian law is a little different and applies to all media, both print and broadcast. They allow the "consideration" angle as long as the "chance" part is offset by a "skill" requirement. For instance, in a contest involving drawing a winner's name from a box of entries, a Canadian station could require an entrant to purchase the sponsor's product to enter. The winner would have to perform a "skill" test, such as correctly answering a mathematical or trivia question. Free entries as an alternative to the "skill tests" are being discussed, but as of right now the general consensus in Canada is to use "skill tests" to avoid running afoul of the law.

Sources

http://ftp.fcc.gov/cgb/consumerfacts/contests.html

http://www.nab.org/membersonly/nabsays/legal/lotcklst.asp

http://www.gaminglawmasters.com/jurisdictions/canada/SkillvsChanceOct2004.htm

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