Digital Advertising Compliance: Social Media, Sweepstakes & Promotions
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Digital Advertising Compliance: Social Media, Sweepstakes & Promotions October 20-21, 2015 Placing Your Bets on Gamification and Developing Creative Legal Strategies to Maximize Positive Exposure Thomas F. Knapp Melissa Landau Steinman VP, Business & Legal Affairs Partner CBS Sports Digital Venable LLP Tweeting about this conference? #DigitalAdvertising Mandatory Weasel Words Image source: www.wikipedia.org #DigitalAdvertising What is Gamification? Gamification applies “game-design thinking to non-game applications to make them more fun and engaging” by tapping into people’s “natural desire to compete and play.” See Adam Swann, Gamification Comes of Age, Forbes, July 16, 2012, available at http://www.forbes.com/sites/gyro/2012/07/16/gamification- comes-of-age/. #DigitalAdvertising Why Gamify? 1. New Way to Engage Customer and/or Capture a Certain Audience 2. Raise Awareness of Brand 3. Encourage Sharing of Brand Experience in Social Media 4. Strengthen Connection With Followers 5. Data Capture 6. Employee Engagement 7. Consumer Education ….Uh, fun (duh!) #DigitalAdvertising Lottery & Gambling Laws Regulated under Federal and State Laws: First step in evaluating any game or promotion is generally to ensure that it is not an illegal lottery or some other type of gambling. Lotteries generally have three elements: 1. A prize is awarded 2. Winners are determined on the basis of chance. 3. Participants must provide consideration to enter • Consideration=something of value that must be given to participate (monetary or non-monetary) #DigitalAdvertising Legal Framework • Regulated at state and federal level • Federal: • Section 5 of FTC Act used to regulate deceptive sweepstakes • FCC Act regulates sweepstakes on TV and radio, telemarketing and mobile • Deceptive Mail Prevention and Enforcement Act • CAN-SPAM—Refer-a-Friend • Children’s Online Privacy Protection Act (COPPA) • Wire Act, RICO, UIGEA #DigitalAdvertising Legal Framework, cont. • State law • Many state laws have specific requirements on RULES: • Should be readily available to all participants and clearly set forth the details • Required disclosures in advertising: odds of winning, eligibility, deadlines, description and ARV of prizes, identity of sponsor • Some states require posting rules (e.g., MA, RI); some states also require posting of winners’ lists • Best practice to include liability disclaimers/releases • Registration and/or bonding • Sweepstakes over $5,000—NY and FL ($500 for RI) • “Amusement contests” in AZ • Most social media sites have their own rules, require special disclosures, prohibit gambling #DigitalAdvertising Gambling A person engages in gambling if he stakes or risks something of value (wager) upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome. Trends: • Legalization of some online gambling in US and related regulation • “Free” sweepstakes sites—are they really free? • Regulation of free-to-pay conversion sites • Attempts to ban Internet cafes through legislation— VA, OH, MS, NC • Redefine definitions of “lottery” or “illegal gambling” to explicitly include electronic sweepstakes games • State AG regulations and guidance also address growth of Internet cafes • Practical and Constitutional issues with overbroadness? • Issues with taking a share of the “rake” #DigitalAdvertising Issues in Gamification • Rewards programs • Endorsements and Testimonials • Use of alternative platforms • Partnering, sponsorships and product placement • Native • Intellectual Property • CAN-SPAM and email marketing • Privacy • Virtual Currency • Kids • International #DigitalAdvertising Marriott Social #Xplor with Hertz and Pepsi Integrations #DigitalAdvertising Marriott Social Xplor Legal/Practical Issues: • Registration and bonding required? • Importance of trademark knockout search and registration • Email and mobile marketing efforts: compliance challenges • Mobile app—need for carrier approval, compliance with TCPA requirements for express consent • Mapping out social media campaign • Implications of proposal to expand play to other countries? What are the issues when running an international contest? E.g., taxes, prize fulfillment, translation, registration • Privacy • Use of Rewards Program to appeal to core customer • Practical challenges posed by complexity of gameplay • Integrations/in-app brand marketing #DigitalAdvertising International Considerations Online gaming and sweepstakes law varies drastically across countries. #DigitalAdvertising Alternative Gamification Platforms What are the implications of using mobile, social, video streaming? #DigitalAdvertising What issues arise with product placements? #DigitalAdvertising Everybody Wants to Play Words With Friends! CBS: Grammy Awards Words With Friends Starbucks: Created a mini game-in-game interstitial ad between moves in New Words With Friends. Progressive: Play Words With Friends with Flo #DigitalAdvertising Can you get around problems by partnering? #DigitalAdvertising IP and Right of Publicity: Heineken Instagram Game #DigitalAdvertising Right of Publicity • Game sponsors and developers featuring celebrities, athletes and even individuals in games (video, fantasy or “gamified”) may be vulnerable to law suits for right of publicity • See Noriega and Call of Duty: Black Ops; Lohan v. Rockstar Games; EA v. NCAA Football, No Doubt v. Actvision, EA v. Kirby • Is the use sufficiently transformative to merit First Amendment protection? • Heineken US Open Instagram Contest Photo Hunt—users had to follow series of clues in photo captions to reach final photo and comment special code. 20% increase in follower numbers in 7 days. But were there ROP issues? #DigitalAdvertising Is “free-to-play” really always free? What problems come from that? #DigitalAdvertising Gamifying Charitable Donations: Zynga Poker Helping Hands #DigitalAdvertising Zynga Poker Leagues Sweepstakes Rake mechanic used pre-promotion period for players to “contribute” towards a better Grand Prize. #DigitalAdvertising Zynga Poker Leagues Sweepstakes, cont. Excluded various states due to restrictions on poker and sweeps. U.S. only. Points could be converted to sweeps entries at the end of season. #DigitalAdvertising Amerifreight and the FTC • Amerifreight offered a $50 discount to consumers who reviewed its services online, increasing cost by $50 if did not review • Consumers leaving review were automatically entered into a $100 “Best Monthly Review Award” • Advertised it had "more highly ranked ratings and reviews than any other company in the automotive transportation business“ • After settlement with FTC for Endorsements and Testimonials Rules violations: • TransportReviews.com now requires reviewers to disclose if they've received any incentives or compensation by checking a box. • On website: If you are submitting the review form for any reason other than because you are a nice person wanting to share your experience, you MUST check the box. If a company tries to tell you not to check the box and tries to explain their incentive does not apply, please contact us to let us know. The company is likely asking you to break our sites policies and federal law. #DigitalAdvertising Virtual Currency and Games What is virtual currency? • US Treasury – “a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency” • European Central Bank – “a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community” • European Banking Authority – “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically” #DigitalAdvertising Types of Virtual Currency • Fully-closed loop • E.g., World of Warcraft Gold • Partially-closed loop • E.g., Farmville Farmcash • Convertible • E.g., Linden dollars for Second Life; BitCoin • Centralized • Single repository/administrator; purchaser of centralized VC transfers real $ to entity that credits purchaser’s account with VC • E.g., Linden Dollars • Decentralized • No central repository/authority for managing currency; usually obtained by purchase on open market or completing tasks to aid in operation of currency • E.g., BitCoin #DigitalAdvertising Using Virtual Currency in Games and Promotions Key Question: Does the form of virtual currency you are using have a real world value? #DigitalAdvertising Virtual Currency: Tax and Other Legal Implications • Is virtual currency property? • Bitcoin – according to the IRS, it is property • Do you need to collect sales tax on it if you sell it? • State-by-state analysis • Escheatment issues • Transferability – what about accounts/unused amounts? • FinCen rules • Money services business and money transmitter regulations • Watch for state rules regulating VC • E.g., NY Dep’t of Financial Svs rules re: cryptocurrency like Bitcoin #DigitalAdvertising Gamification Tips and Takeaways • Gamification done right is an effective tool -- generates buzz and encourages interaction • One size does not fit all--game should have a strategic purpose • Gamification for sake of gamification does not necessarily work • Planning is important—and Legal should be involved