Guide
The Complete Guide to Running Corporate Giveaways: Legal Requirements & Best Practices
Running a corporate giveaway can supercharge your marketing efforts, but one misstep could land you in legal hot water or destroy customer trust. This comprehensive guide covers everything major companies need to know to run compliant, transparent, and successful promotional contests.
1. The Legal Foundation
Before launching any giveaway, you must understand the fundamental legal distinction between sweepstakes, contests, and lotteries. Getting this wrong isn't just a minor oversight—it's potentially criminal.
Sweepstakes
Winners selected by chance. No purchase necessary. No skill required. This is the safest option for most corporate giveaways.
Contest
Winners selected based on skill or merit. Can require purchase. Must have objective judging criteria.
Lottery (Illegal for Private Companies)
Contains all three elements: Prize, Chance, and Consideration (payment). Only government-run lotteries are legal in most jurisdictions.
Critical Warning
If your promotion requires a purchase AND winners are selected by chance, you're running an illegal lottery. Always include a free method of entry (AMOE - Alternative Method of Entry) for sweepstakes.
2. Writing Official Rules That Protect Your Company
Official rules aren't just legal boilerplate—they're your contract with participants and your shield against litigation. Every major giveaway should include comprehensive official rules that address:
- Age restrictions (typically 18+ or 13+ with parental consent)
- Geographic limitations (specify eligible countries/states)
- Employee exclusions (company employees, families, affiliates)
- One entry per person/household limitations
- Exact start date and time (with time zone)
- Entry deadline (date and exact time)
- Drawing/selection date
- Winner notification timeline
- Prize claim deadline
- NO PURCHASE NECESSARY statement (for sweepstakes)
- Void where prohibited clause
- Sponsor identification and address
- Disclaimer of platform endorsement (if using social media)
- Limitation of liability
- Dispute resolution/arbitration clause
Sample Rules Template Opening
NO PURCHASE NECESSARY TO ENTER OR WIN. A PURCHASE WILL NOT INCREASE YOUR CHANCES OF WINNING.
The [GIVEAWAY NAME] (“Promotion”) is sponsored by [COMPANY NAME], located at [COMPLETE ADDRESS] (“Sponsor”). The Promotion begins at [TIME] [TIME ZONE] on [DATE] and ends at [TIME] [TIME ZONE] on [DATE] (“Promotion Period”).
3. Prize Disclosure & Management
Transparency in prize management isn't just good practice—it's legally required. The FTC and state attorneys general actively prosecute companies for deceptive prize promotions.
Required Prize Disclosures
- • Exact description of each prize
- • Quantity of each prize available
- • Approximate Retail Value (ARV) of each prize
- • Total ARV of all prizes
- • Odds of winning (or method of determining odds)
- • Any prize restrictions or blackout dates
Tax Implications Warning
Prizes valued over $600 require IRS Form 1099-MISC. Winners are responsible for all taxes, but companies must report prizes over $5,000 to the IRS and withhold 24% for federal taxes. Always clarify tax responsibilities in your official rules.
4. Winner Selection & Announcement Timeline
The winner selection process is where trust is won or lost. Your process must be transparent, verifiable, and communicated clearly to all participants.
Recommended Winner Announcement Timeline
Contest Ends
Clearly communicate the exact end time. No entries accepted after deadline.
Within 5 Business Days: Selection
Conduct winner selection using your stated method. Document the entire process.
Within 7 Business Days: Notification
Contact winners via method specified in rules. Require response within 48-72 hours.
Within 30 Days: Public Announcement
Post winner information (with consent) on your website and social channels.
5. State & International Compliance
Promotion laws vary dramatically by jurisdiction. What's legal in Delaware might be prohibited in Rhode Island. International promotions add another layer of complexity.
High-Risk Jurisdictions
Typically Excluded States
- • Rhode Island (registration required)
- • New York (bonding for prizes over $5,000)
- • Florida (registration for prizes over $5,000)
- • Quebec (French rules, special requirements)
International Considerations
- • EU: GDPR compliance required
- • Canada: Skill-testing question required
- • Australia: Permit required in some states
- • Brazil: Local registration often required
6. Best Practices & Common Pitfalls
Best Practices
- ✓ Use abbreviated rules in ads with link to complete rules
- ✓ Include winner's list availability in official rules
- ✓ Require affidavit of eligibility and liability/publicity release
- ✓ Use independent judging organization for contests
- ✓ Document entire winner selection process
- ✓ Consider purchase of promotion insurance for high-value prizes
Common Pitfalls to Avoid
- ✗ Changing rules mid-promotion
- ✗ Using terms like “free” when purchase is required
- ✗ Failing to award advertised prizes
- ✗ Discriminatory eligibility requirements
- ✗ Inadequate free alternative method of entry
- ✗ Using participant content without proper rights
The Bottom Line
Running a successful corporate giveaway requires careful planning, legal compliance, and transparent execution. The investment in doing it right—legal review, proper documentation, and verifiable selection methods—pays dividends in customer trust and brand reputation.
Disclaimer: This guide provides general information about promotional law but does not constitute legal advice. Laws vary by jurisdiction and change frequently. Always consult with a qualified attorney before launching any promotional giveaway.