Bank Compliance Requirements for Facebook Contests
"Sign up for our Facebook page and get entered into a drawing to win a free trip to Fiji!" (Warning! This is NOT a contest and this statement is for example purposes only.) The truth is that Facebook (and other social media) contests are one of the trendiest ways marketers have been using to get customer engagement. The challenge is that there are several things that must be considered when a financial institution runs a Facebook contest. This Compliance Clip (video) explains several considerations that every compliance professional (and marketing employee) should review before running a Facebook contest.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to focus on Facebook contests. One question I receive quite often is: Are we permitted to run a Facebook contest where customers have to like our Facebook page to enter the contest and then we give one winner a cash prize?
The answer to this question is actually pretty complex and it's going to come from a number or areas. It's going to come from, first, your primary regulator’s rules on lotteries; it's going to come from your state's rules on lotteries and sweepstakes; it's going to come from Facebook terms and conditions; and possibly other places as well.
Let's take a quick dive into each of these areas.
First of all, each of the primary regulators have their own rules regarding lotteries. For example, the FDIC has a rule that says that FDIC banks cannot hold a lottery. And they define a lottery by saying that a lottery includes any arrangement other than a savings promotion raffle, which they actually define in the rules, whereby three or more persons advance money or credit to another in exchange for the possibility or expectation that one or more, but not all of the participants, will receive, by reason of their advances, more than the amounts they have advanced. And the decision on who's going to get that is going to come from a couple of places. It either comes from a random selection or a game, race, or contest.
As you can see, there's a lot here in the lottery rules but the main thing is it's any type of promotion whereby three or more persons have to - this is key here - advance money or credit in exchange for the chance to win something by a random selection, a game, race, or contest. As you can see, that is what it says. Now the key there is “to advance money or credit”. So the first thing we need to point out is on a Facebook contest, you cannot offer it to only customers. Why not? Because the customer has to advance what? Money or credit, right? In order to be a customer. They have to advance money or advance credit to you which is what we call consideration - they have to give you something in exchange for potentially getting something back. That's the first thing to understand, so if you want to avoid the lottery rules of your regulator and not become a lottery in your Facebook contest, you have to make sure that you open it up to everybody and not just offer it to customers. That's the only way you could potentially do this.
The second thing you have to look at are any state sweepstakes rules. Each state has different rules when it comes to lotteries and what is and what is not a lottery and what is actually a sweepstakes, which is the term most states use when there's not a lottery but they also have rules that you have to follow there. Generally, each state says that you have to have three elements in order for it to be a lottery. These three elements include a prize, a chance and consideration - giving something, giving money to buy a lottery ticket for example. Generally, when you have all three that's considered a lottery but if you pull any one of those elements out then suddenly you don't have a lottery that falls under the sweepstakes rules. So that's generally how you're able to avoid having a lottery under your state, But each state has different laws. They're actually very complex and some are very quite different, so it's extremely important that you check with an attorney because I am not an attorney, I'm not offering legal advice so you will need to check with an attorney to determine what is required in your state.
The third thing you have to check with running a Facebook contest is, of course, the Facebook terms and conditions. Believe it or not, Facebook has some requirements when it comes to contests. As of today and the day of recording this video, there was a number of requirements I've included here but I encourage you to check them because these requirements and their terms and conditions do change on a regular basis.
As of the day of recording this video, Facebook has a lot of conditions and they say that their promotions must include a couple of things. They must include, first and foremost, a complete release of Facebook by each entrant or participant. You may say my competitors aren't doing that. Well, turn them in, get them in trouble, they'll never be able to use Facebook again! I'm kidding! It's probably not a good thing to do, but you get the point. It's important to make sure you're following Facebook's rules because you risk the chance of not being able to use their platform in the future. Facebook also has as another requirement, this is not all their requirements, but another requirement is that you have to have an acknowledgement that the promotion is in no way sponsored, endorsed or administered by, or associated with Facebook. Pretty straightforward but you have to have some terms and conditions that lay that out. You also are not allowed to have a contestant share a status that's prohibited in Facebook contests. You can't also require them to tag somebody or post on somebody else's wall. So there's some very specific requirements you need to make sure you review the rules that Facebook has in regards to contest
The next thing you have to consider when it comes to Facebook contests are some other considerations. Things like case law. Again, I'm not an attorney so please seek one when it comes to this. Also there may be some fair dealing laws, such as equal dignity rules that require that you provide equality among entrants. Basically, you can't say if they enter this way they get five entries and if they enter this way they only get one. That could be a potential problem under fair dealing laws, so check with an attorney on that. Also, UDAAP could be a concern if your disclosures don't align with what you're actually doing. And of course there's probably even more considerations.
The bottom line here is Facebook contests can be done but it's very important that marketing teams consult with their compliance professionals in their organization to make sure they are doing their promotions properly.
That's all I have for you today.