Texting Dilemma for Reality TV
Recent settlement concerning fees to text voting may present challenges for TV competitions.
The September settlement of Glass v. NBC Universal, Inc., et al.should prompt businesses to re-evaluate using, as a method of sweepstakes entry, text messages that require payment of premium fees in addition to standard text messaging fees charged by wireless carriers.
This settlement, which was approved by a federal district court in California on Sept. 19, 2011, will require Fox Broadcasting Company, NBC Universal, and numerous other companies that produce reality television shows — including “American Idol” and “Deal or No Deal” — to refund 99-cent premium text message fees paid to these defendants by millions of unsuccessful sweepstakes entrants, and pay more than $5 million in attorney’s fees.
The settlement prohibits these companies, for five years, from conducting any sweepstakes where text message entrants do not receive something (other than the sweepstakes entries) of comparable value to any premium fee charged to submit an entry by text message.
The parties reached this settlement after the district court denied the defendants’ motion to dismiss. The defendants argued that the option of entering these sweepstakes through websites constituted free methods of entry, meaning that that no payment was required from sweepstakes participants. Consequently, according to the defendants, these sweepstakes did not violate state laws that consider sweepstakes that require mandatory consideration in exchange for entries to be illegal lotteries.
In denying the defendants’ motion to dismiss, the court allowed for the possibility that premium text message fees in connection with contest entries may constitute “pay to play”, even when a free method of entry is available and, as such, may violate state sweepstakes laws.
Although this settlement is only binding upon the parties to it, companies that conduct sweepstakes with premium fee text messages as a means of entry should consider the potential liability that may arise from this practice. Specifically, this settlement calls into doubt whether offering a free alternative to premium fee text message sweepstakes entries is sufficient to avoid liability under sweepstakes laws. One possible strategy for managing this potential liability may be to offer something of value, such as an application or a ringtone, in exchange for premium text message fees. The argument that something of value is being offered in exchange for a premium text message fee would likely be strengthened if, apart from the sweepstakes, this thing of value is offered for purchase for at least the amount of the premium text message fee.
This settlement should also stand as a reminder to companies that improperly conducted sweepstakes can expose them to significant criminal and civil liability. On the most basic level, an illegal lottery exists where a prize is offered in a game of chance and consideration is paid by entrants in exchange for the opportunity to win that prize. In order for a sweepstakes to avoid being deemed an illegal lottery, no payment can be required from entrants; if entries are granted to purchasers of goods or services, a free method of entry must also be offered. But this is only a basic summary; sweepstakes law is a complex area and each state has its own unique requirements. Companies should retain qualified counsel to help them navigate the myriad state sweepstakes laws and regulations and properly structure their sweepstakes.
Reprinted with permission from Law Technology News. Further duplication prohibited.
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