Legal Issues Affecting Promotions and Sweepstakes

For years, direct selling companies have used promotions and incentives such as cruises, cars and jewelry to motivate and reward their distributors. Well-run promotions enhance good will, can generate brand awareness and may improve sales. However, these promotions have grown increasingly more sophisticated and the method of conducting them more complicated. Promotions such as sweepstakes, gift cards and awards are governed by a collection of inconsistent laws. Direct selling companies want to avoid conducting raffles or lotteries that violate federal or state laws and should be aware of federal and state regulations when offering legitimate promotions and sweepstakes.

Private lotteries or raffles (unless charitable) are illegal in most states. Federal and state jurisdictions define a lottery as a promotion that contains three elements:

a. A prize

b. Chance

c. Consideration

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