Friedman Law Group, LTD.

September 10, 2007 - Recent filings in Georgia and California call into question the legitimacy of text messaging promotions in the entertainment industry.

In May 2007, a class action complaint was filed in California against Endemol USA, Inc., NBC Universal, Inc., Don Jagoda Associates, Inc. and other involved in the Lucky Case Game, a promotion featured during the NBC television program Deal or No Deal.

The Lucky Case Game features a series of six gold briefcases. Viewers of the Deal or No Deal program are invited to enter the promotion for a chance to win cash and other merchandise by submitting their guess as to which is the winning gold briefcase. Prior to the end of the “Deal or No Deal” program, the night’s winning case is revealed. All entrants who submitted a correct guess are then entered into a random drawing. The winner is announced prior to the end of the program. The primary method of entry communicated to viewers is to send a text message, which costs the viewers a standard text message rate plus a premium fee of $.99 per entry. An alternative free method of entry is also available vis the Internet, but this method is not as prominently communicated to viewers.

A similar case was filed in Georgia against Donald Trump, NBC Universal, Inc., and others involved in a promotion called Get Rich with Trump that ran in connection with The Apprentice television show. Viewers of The Apprentice were invited to enter the promotion by texting their vote for contestants on the program. Each vote submitted entered the viewer into a drawing for prizes. As with Lucky Case Game a free method of entry was offered via the Internet.

The Lucky Case Game complaint alleges that because viewers are paying for a chance to win a prize, the promotion violates California law (as well as Massachusetts state law, where part of the promotion is conducted).

California Penal Code section 319, states

(a) lottery is any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property…

The Get Rich With Trump complaint alleges that because viewers are paying for a chance to win a prize, the promotion violates Georgia law.

Section 16-12-20(4) of Georgia Code states:

“Lottery” means any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win such prize…

However, the statute goes on to state:

A lottery shall not mean … a promotion giveaway or contest which conforms with the qualifications of a lawful promotion specified in paragraph (16) of subsection (b) of Code Section 10-1-393…

Section 10-1-393 (b) states:

By way of illustration only and without limiting the scope of subsection (a) of this Code section, the following practices are declared unlawful:

(16) Failure to comply with the following provisions concerning promotions:

(c) A promotion shall be a violation of this paragraph if a person is required to pay any money including, but not limited to, payments for service fees, mailing fees, or handling fees payable to the sponsor or seller or furnish any consideration for the prize…in order to receive the prize

Legitimate consumer sales promotions generally contain two methods of entry. The first method is combined with the consumer’s purchase of a good or service. Included in that purchase is an entry into the game promotion. But, the amount paid by the consumer is strictly for the good or service, not for entry into the game. The second method of entry, known as the alternative free method of entry, allows the consumer to obtain an entry (or entries, in keeping with equal dignity to the purchase method) without making a purchase (and no good or service is received when the free method is utilized).

The argument in cases such as The Lucky Case Game and Get Rich With Trump is that no good or service is purchased. Rather, the viewers are simply purchasing a chance to win a prize. Although there is a free method of entry for the chance to win the prize, this method does not negate the fact that some people are paying for their chance to enter and win, which constitutes illegal gambling.

The defense to such charges is that viewers are in fact paying for a good or service when they text into the show… the good or service being the entertainment value or input value associated with the text. Such a defense might make sense in the Get Rich With Trump case where the text includes a vote for a contestant as well as an entry into the promotion. However, since the free entry method in the Win with Trump promotion included a vote as well as an entry into the promotion, the argument is weakened.

What do these pending cases mean for promoters, and how do promoters seeking to keep up with current technology, when running a legitimate sales promotion, avoid the risks presented in these types of promotions? Since the cases are pending, and laws vary from state to state, there are no clear and definitive answers. But, some things to consider in avoiding the pitfalls encountered by the defendants in the Lucky Case Game and Get Rich With Trump include:

1. Do not include a premium text fee for test message entries. Arguably, the standard text message fee is akin to the fees one pays for standard telephone access, which does not go to the sponsor, and is therefore arguably not payment for a chance to enter the promotion.
2. Make sure the method of entry involving a payment includes a good or service in exchange for the payment, and that such good or service is not included in the free method of entry. But note, the payment should be reasonable for the value of the good or service. If the price for the good or service is increased above the customary price, then the entry arguably is not fee with the purchase.
3. The free method of entry in any promotion should be disclosed as frequently as the purchase method of entry, and such disclosure should be prominent.

This entry was posted on Thursday, October 18th, 2007 at 2:11 pm and is filed under Promotion. You can follow any responses to this entry through the RSS 2.0 feed.