# How to handle free Give-aways, cash prizes, etc?



## LYO37 (Oct 27, 2007)

What's going on your T-shirt fanatics

Quick question for you all. I too am starting up my own t-shirt line. I have a VERY UNIQUE name to my company and I want to be able to radomly give away prizes to my customers. I realize I may need a company that specializes in over-seeing the process. Can anyone recommend a company for this type of promotion, and is this unheard of in the t-shirt industry? 

Thank you to all who reply and review this post!


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## Jasonda (Aug 16, 2006)

*Re: Free Give-away, cash prizes, misc. prizes*

Hmm. Well it's not too hard to do it yourself.  Unless you want to do this on a huge scale (thousands of prizes) I think that would be the way to go, just to save money.


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## LYO37 (Oct 27, 2007)

*Re: Free Give-away, cash prizes, misc. prizes*

Sure it is easy to do it yourself. I totally agree. But this is on a large scale and I just want to be legally covered. I see randomization as a process that if done right, can be fair for all. 

I do not want to get into any type of trouble with those few customers who may submit complaints. So how do I prove that my company is honest when using the process of free give-aways as a way to promote continual hits on my site? 

Seems easy but legality issues are always a concern with any type of business.


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## MiNGLED (Aug 22, 2007)

You don't say where you are based but if you're in the UK then the Institute of Sales Promotion ISP - Institute of Sales Promotion are the governing body which regulates all forms of promotions, competitions etc. They would be able to give you advice and let you know all the rules you have to abide by. However each countries rules are different so be careful.


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## maddog9022 (Sep 5, 2006)

*Re: Free Give-away, cash prizes, misc. prizes*



LYO37 said:


> Sure it is easy to do it yourself. I totally agree. But this is on a large scale and I just want to be legally covered. I see randomization as a process that if done right, can be fair for all.
> 
> I do not want to get into any type of trouble with those few customers who may submit complaints. So how do I prove that my company is honest when using the process of free give-aways as a way to promote continual hits on my site?
> 
> Seems easy but legality issues are always a concern with any type of business.


 
how large are we talking about. if you can give us more dtails we may beable to help you more.


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## LYO37 (Oct 27, 2007)

*Re: Free Give-away, cash prizes, misc. prizes*

Sorry, should have been more specific.

I am located in NY. I want to give away some monthly prizes to my customers just as a thank you for buying from me. I want it to be random, which is why I thought I had to offer 'prizes'. Above, it was suggested I call it gifts. But I don't know if I can get away with giving away a gift as large as say a car, which is why I am concerned.

Most prizes are small, like a playstation, free shirts, gift cards. It would be easy for me to randomly chose customers. Depending on my sales that month would determine how much I give away. But I plan to get big over time, with a lot of profit going back to the 'prize/gift' pool. Anyone out there already give away stuff for free? If so, what is your method?

I hope this helps a bit more. I'm excited about my theme for this t-shirt business of mine. If I had my business name trademarked already, I would reveal the name of my business. My company name certainly shows why it is a prize/gift related theme.


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## AustinJeff (May 12, 2007)

Whether you call it a prize or a gift makes absolutely no difference. It's how the giveaway operates that matters. The big thing is that you can not charge (which includes requiring a purchase) for entry. Non-customers must be able to enter and have the same chance of winning as customers. You don't have to make it easy for them to enter, however. Different laws apply to contest that require some kind of skill -- an essay contest for example.

There are companies that specialize in this stuff, but you're probably not looking at large enough numbers to make that worthwhile. For simply covering your bases legally, just find an attorney. One easy way is to check with your state bar association. They can probably recommend someone who specifically handles this type of stuff.

By the way, one "rule of thumb" that I have been told is that your total budget for a promotion should be at least 10 times the value of all prizes. If you are giving away $1,000 you need to spend at least $10,000 promoting that give away or you likely won't see a sufficient return on it. I have no idea if this is true, but it sounds good.


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## LYO37 (Oct 27, 2007)

You mean to tell me that I cannot randomly thank some of my customers with free giveaways without allowing the whole country to be involved? I want to say thank you to my customers by giving them the opportunity for me to choose them to receive some giveaways.

I charge say $18.00 for my shirt. The customer gets what they want (paid clothing), I get what I want (purchase--profit). I want the customer to be happy with the shirt without expecting anything more. However, thats where I get creative and each and every month I would like to give away a few items as a way to say thanks to my customers. It's not expected of me to do so, the customer purchased a t-shirt, and a t-shirt only. The little extras I want to be for paid customers only.

SO, is it a prize, is it a gift, or am I creating something new here? I can't believe there would be regulations on something to this effect. If I bought a t-shirt expecting only the shirt for say $18 bucks, I think it would be pretty cool to find out that I was randomly chosen by the company to receive a free gift just for being a customer.


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## AustinJeff (May 12, 2007)

LYO37 said:


> You mean to tell me that I cannot randomly thank some of my customers with free giveaways without allowing the whole country to be involved?


Yep. If you require a purchase it is considered an illegal lottery. Personally, I disagree with this law. But it is the law in the US.

Here's a good article that describes this and other restrictions on contests.


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## LYO37 (Oct 27, 2007)

Jeff, what a great article. I really appreciate you taking the time to reply with such info. I am still dumbfounded that the federal law cares so much about a company wanted to thank customers in a fun way.

Maybe this question to you all would help. If I go ahead and allow a sweepstakes to run through my company, I realize I will have to allow it to be open to all 50 states. Are there some things I could do to make the non-customer entries very hard and tedious to complete right from the start? Is there a way to discourage non-customer entries with long, drawn-out forms and such? Got to be a way. Thanks!


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## maddog9022 (Sep 5, 2006)

LYO37 said:


> Jeff, what a great article. I really appreciate you taking the time to reply with such info. I am still dumbfounded that the federal law cares so much about a company wanted to thank customers in a fun way.
> 
> Maybe this question to you all would help. If I go ahead and allow a sweepstakes to run through my company, I realize I will have to allow it to be open to all 50 states. Are there some things I could do to make the non-customer entries very hard and tedious to complete right from the start? Is there a way to discourage non-customer entries with long, drawn-out forms and such? Got to be a way. Thanks!


 
making them fill out s whole bunch of stuff or an essay.


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## AustinJeff (May 12, 2007)

ImageIt said:


> It makes all the difference in the world.


The rules of the contest matter. Whether you call the winnings a prize or a gift does not. Your example doesn't address this, as far as I can tell.



ImageIt said:


> Take for example just about every lottery have promotional t-shirts produced. These shirts are given away as the lottery sees fit. They can be given to million dollar winners or a pile of them can be left with a lottery retailer to give away. If you happen to be in the right place at the right time, you might even be given a free t-shirt.
> 
> At times lotteries do offer shirts as a prize and in this case, the shirt would fall under the lottery regulations.


Lotteries are a red herring. In the United States, lotteries are only operated by state government, and are therefore exempt from the laws that businesses must live by.



ImageIt said:


> Frequent shopper programs are an example of a giveaway which requires a specific amount of prior purchase.


Yes, so if the original poster wanted to set up a program where he gave a Playstation or a *car *to *everyone* who bought a certain number of T-shirts, that would be fine. That's not what he's talking about, though.



ImageIt said:


> Contests are another example of a giveaway. For example, i could give a free prize to whoever uploads the best photograph to a web site. In this context, i might request people to upload pictures of themselves wearing one of my shirts. Whichever picture is selected as the best gets the prize. At the end of the year, the best photo of all the winners is given a grand prize. Part of the upload process, i would include a photo release to display the photo and cause the person making the entry to agrees to the rules of the contest.


As I said in my first post, different laws apply to contests that require some kind of skill -- an essay contest for example. That does not mean that there are no legal restrictions on how they can be operated.



ImageIt said:


> What is illegal is to make people believe that they have an even chance to gain a prize, but to distribute the prizes otherwise.


That's true, but that doesn't mean that there are not a whole host of other things that are illegal. The article I linked to explains it pretty well.


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## AustinJeff (May 12, 2007)

LYO37 said:


> Are there some things I could do to make the non-customer entries very hard and tedious to complete right from the start? Is there a way to discourage non-customer entries with long, drawn-out forms and such?


There are. But this is a complicated issue that involves not only federal law, but the law in each of the 50 states. If you are going to try to work the gray area you _really_ need to talk to a lawyer. The fact that some anonymous person on a T-shirt forum told you that it's OK is not going to hold much weight if you get sued.


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## hobby (Nov 26, 2007)

Could you send them an email and tell them that on their next order they will receive blah, blah, blah as a lucky customer drawn by random?


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