Promotions Law

Many states have specific laws that regulate promotions, including sweepstakes, contests, coupons, premiums and rebates and should be checked before initiating any type of promotion.

Rebates

Defined as a refund of part of the purchase price of a purchased item; offered as an incentive to purchase the item. Rebates are monetary.

Governed by the Federal Trade Commission.

The Grocery Manufacturers of America recommends that mail-in rebates should clearly state that the refund is via the mail and not payable at the store.

Should include same information as in coupons, as well as:

• Statement such as “Proof of Purchase Required,”
• Specify that product must be purchased in US (to avoid “grey” goods market),
• Eligibility requirements,
• Statement such as “Rebate fraud will be prosecuted to full extent of the law,”
• Fulfillment requirements, how long it will take product or refund to arrive,
• Statement such as “Sponsor not responsible for items lost, delayed, or damaged in the mail,”
• Date redemption must be received,
• Avoid allowing the use of P.O. Boxes, because they are used for fraud.

Coupons

Coupons cannot be deceptive, and are subject to the Federal Trade Commission Act, prohibiting “unfair methods of competition “ and “unfair or deceptive acts or practices.”

“Free”- See FTC Regulation of Advertising above. The use of the word free applies to coupons.

The following information should be included, if applicable on the coupon:

• Sponsor of the coupon,
• Clear and precise description of the product involved, including model, size and quantity,
• Expiration date,
• Nominal cash value (this is a requirement in some states),
• A complete disclosure of all limitations and conditions applicable,
• Limit of coupons per household, person or product,
• Statement such as “Not valid on sale merchandise,”
• Statement such as “One item per coupon,”
• Minimum purchase requirements,
• Any time period limitations,
• “Void if copied, transferred, purchased or sold,”
• “Any other use constitutes fraud,”
• Geographic or specific store limitations,
• A statement that the customer is responsible for sales tax,
• Bar code / SKU,
• Manufacturer’s coupons should also include retailer instructions for redemption, such as the handling fee due the retailer and the redemption address.

The “Grocery Manufacturers of America” has promulgated specific trade practice recommendations for the industry. Their Web Site can be accessed at http://www.gmabrands.com. Although not legally binding, the recommendations are consumer oriented and compliance may reduce the risk of claims of fraud and misrepresentation.

• Some of the recommendations include: putting the terms of the coupon in simple easy to read language; the value of the coupon and the purchase requirements should be prominent and clearly stated; if possible expiration dates should not be used; promotions should not look like coupons unless they actually are coupons.

A coupon should not look like a check. Some states require that if a coupon looks like a check, a disclosure must be made that it is not a check.

Sweepstakes, Contests, Games of Chance

Lotteries

It is illegal under federal and state laws to conduct a lottery, which is generally defined as having three elements - consideration, chance and a prize. Therefore, a sweepstakes with an entry fee may be considered a lottery and should be avoided.

Contests

In contests, skill determines the winner. The skill must be genuine.

Generally, a winner’s list must be made available.

In many states, but not all, contests may allow for an entry fee to enter. Since the chance element is eliminated it is not considered a lottery.

Sweepstakes

Generally involves chance and a prize, therefore no consideration is permitted to be required to participate. Participation must be universally available, thus there should be alternate methods of entry.

Winners are selected at random.

Should include in the rules that “no purchase is necessary.”

The name of the sponsor must be conspicuously placed.

Premiums

Defined as free or significantly discounted items offered in connection with the purchase of another item. Premiums are products.

The Federal Trade Commission regulates premiums.

The Consumer Products Safety Act may also govern premiums, especially if targeted to children.
       > The premium should be age appropriate and include age disclosures. Certain toys are prohibited.
       > Avoid toys that may be hazards.

State laws should be checked as they have different requirements.

The Better Business Bureau has guidelines with regard to premiums:
     >Specific guidelines for premiums offered to children on the Internet.
     >Specific guidelines relating to language used in premium offers directed to children.
     > The Better Business Bureau’s Web site can be accessed at http://www.bbb.org.

Major Broadcast networks also have guidelines relating to premiums.

     > Premium offers should include same language as suggested for coupons and rebates, where applicable. Also include:
     > Specifics on shipping and handling costs,
     > Statement such as “Sponsor reserves the right to substitute premium of equal value,”
     > Statement such as “Good only while supplies last,”

Products must be shipped within time period designated in premium offer. Under the FTC’s Mail Order Rule, if no time period is stated, shipments must be made within 30 days of order being placed, or a notice must be sent offering an opportunity to cancel and receive a refund.

Federal Hazardous Substances Act (FHSA)

Cautionary Labeling - Any product that contains a hazardous substance is required to have a cautionary statement on its label or outer container. The label must provide information as to safe handling and use of the product, as well as, information on first aid in the event an accident occurs.

Hazardous Substances include products that are toxic, corrosive, flammable or combustible, irritants, strong sensitizers, or that generate pressure through decomposition, heat, or other means, and, if the product may cause substantial personal injury or substantial illness during or as a proximate result of any customary or reasonable foreseeable handling or use, including reasonable foreseeable ingestion by children. If a product meets these criteria a warning must be provided.

Evaluation is specific to the individual product, and considerations must include consumer exposure to the product during reasonable foreseeable use and handling, as well as, how the consumer will use the product and how it will be stored.

Labeling must include (on the principle display panel) a signal word such as WARNING, CAUTION, DANGER, OR POISON (for caustic poisons). There must be an affirmative statement of principal hazards, i.e. "Harmful if Swallowed," "Corrosive."

If not included on the principal display panel, the back of the label must include, the manufacturer's name and place of business, the common or usual name or chemical name, precautionary measures to follow, first aid instructions, if appropriate, instructions for handling and storage, and the phrase "Keep out of the reach of children."

There are specific labeling requirements for certain substances, as well as, suggested label formats. This link provides a fact sheet on the FHSA requirements, as well as information in determining whether your product meets the criteria for requiring a cautionary statement, 

FHSA allows the Commission to ban a hazardous substance if it determines that a product is so dangerous that a cautionary warning is inadequate to protect the public. Under the Act, toys or other articles intended for children may be banned if they present a mechanical, electrical or thermal hazard, or if they contain a hazardous substance and the child can gain access to the substance.