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Attracting Customers Through Prizes

Raffles, sweepstakes, contests, and giveaways are some of the best ways for a small business to attract and perhaps create repeat customers. However, depending on the nature of the business, a small business may find itself restricted on the kind of game of chance it might use to drum up business.

Generally, people are prohibited from setting up lotteries in Florida, except if the lotteries are national, part of the state lottery, or conducted by a charitable organization as a fundraising endeavor. However, for businesses that wish to promote themselves through giving consumers a chance to win a prize, there are specific laws that allow this with a few limitations.

One of the key things to remember is that if you set up a giveaway as part of a promotion, you cannot make a customer’s participation in the promotion dependant or conditioned on their paying a fee or buying a product of a certain kind. This is where the disclaimers “no purchase necessary” or “no proof of purchase necessary” stems from. This can get confusing when a business sells a product that is supposed to contain a sticker or stamp showing that a prize has been won. However, even in these cases, the person who wins is not necessarily the person who purchased the item, and so technically winning is not contingent on purchase.

If a small business decides to award prizes through a giveaway with multiple entrants, the business has to make all the rules of the game clear, including what would cause a person to be disqualified from the giveaway, and how prizes will be distributed. Not only will this help the business comply with the law, it may also give consumers participating in the game a sense of security in their participation.

Depending on the nature or value of the prize, a business that is conducting a competition or prize giveaway may be required to take additional steps. For example, if the prize to be won is valued at over $5,000, then the business is required to file a bond with the Department of Agriculture and Consumer Services, as well as a copy of the rules and regulations. The rules cannot be changed after they have been filed in this manner. In some cases, a business may be required to place the amount of the prizes offered in a trust account to ensure that participants will get paid.

There are additional concerns that are not necessarily legal when deciding whether or not to set up a competition or giveaway to promote your business. As a business owner, you should consider both the financial aspect of giving away your products, as well as the potential social backlash if an aspect of the competition does not go as planned. While you cannot predict all eventualities, you can plan for them and be prepared as best you can.

Contact An Experienced Business Attorney

If you are a small business owner looking to structure your business or seek advice regarding personnel related rules and regulations, contact an experienced West Palm Beach business attorney at Pike & Lustig, LLP for a consultation today.

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