A rambling, non-lawyerly, completely non-official opinion piece that asks one simple question – “are design contests legal?” – and explores the myriad of laws, rules & regulations others have to follow.
Before I begin I should probably point out that I’m not a lawyer, nor do I play one on the tee vee. Thus, my legal advice, and whatever opinions I offer, are worth exactly what you paid for them. Nada. Having said that, I’m of the opinion that logo design contests, not the cute effort where the local church asks the kiddies to design some artwork for the Sunday picnic (or even contests aimed at fans of this or that organization,) but design contest sites popping up everywhere on the web, are skirting very close to the law, if not breaking it altogether. At least from what I understand about contest law and my admittedly limited experience with it. The design risks of these contests has been done to death. Any designer worth their salt knows that they’re bad for business. The opinion of the design community is well documented. But what if these sites are breaking a ton of laws, in jurisdictions all over the world, as well as running afoul of state and national lottery and gaming laws? A little far-fetched? I thought so at first, but after fairly intensive research, I’m beginning to think otherwise.
Running a contest.
Should probably start with a little history as to that research got started and why I’d pursue this seemingly absurd line of thought. Was talking with a colleague this afternoon, and we were reminiscing about design gigs from days gone by. In one of those previous incarnations, I was a magazine art director and was often tasked to come up with new and zany ways to publicize our humble publication. One such promotion was a ‘Holiday in Maui’ contest – a four month marketing blitz during which we’d give away posters, T-shirts and magazine subscriptions culminating in the grand prize, a two week cruise and vacation in Hawaii, thrown in by one of our advertisers. The sponsor hoped to get a promotional buzz going on with their logo plastered over 6-page magazine spreads that advertised the contest. We hoped to pick up a few percentage points in newsstand sales and some additions to our subscriber list.
Was a great idea – everybody would win – but we were advised by the legal beagles to tread ever-so-lightly. As the contest would technically be held in various jurisdictions (the magazine was published in several international languages) we had to be aware of some pretty nit-picky laws about what we said, didn’t say and our overall intentions when it came to allocating prizes. We had to use the legalese “void were prohibited by law” on every single bit of propaganda and ignore entries that came from various locales. We had to hold prizes in escrow (holding a contest without giving away the ‘prize’ is fraud, and breaks several gaming and contest specific laws.) We had to very clearly announce that “no purchase was required.”
“All told, setting up our contest cost thousands in legal fees, and our ‘terms and conditions’ pages took up 1/3 of the advertising space, even when typeset in 8pt Helvetica Condensed type (the minimum size allowed by contest regulations.)”
In some regions, charging people to enter contests opens up a Pandora’s Box of regulations, rules and provisos and redefines what the contest can be called and how it can be described. All told, setting up our contest cost thousands in legal fees, and our ‘terms and conditions’ pages took up 1/3 of the advertising space, even when typeset in 8pt Helvetica Condensed type (the minimum size allowed by contest regulations.) Bottom line, because we were holding a ‘contest’ and giving away ‘prizes’, we needed to obey a wide-range of state and national consumer and gaming laws, all of which were set up to protect contest entrants from shady practices, unfair disbursement of awards, and to ensure that – once the contest had concluded – entrants were awarded what we had promised in the first place. Would not the same types of laws apply to companies marketing their services as ‘logo design contests’? As mentioned earlier, I’m not a lawyer, but I think they just might.
A contest by any other name.
The concept of these outfits is quite simple. Customers (sponsors) pay the site owner to have their design contest listed. Designers (the entrants) work up design concepts and enter their logo artwork in order to ‘win’ a prize (the money offered by the sponsor.) Despite all their lofty verbiage, sure sounds like a typical run-of-the-mill contest to me. But what type of contest? I would assume that your average logo contest site offerings would fall under the ‘skill testing‘ category (an important distinction, as we’ll discover later.) Turns out there are very important laws regarding running a contest of any kind, in this case a ‘skill-testing’ contest, and there’s some hefty demands (varied by location) regarding the content and subsequent publication of said rules and regulations. Among a lengthy list of recommendations found on their site, the DMA (Direct Marketing Association) offers a list of disclosures that are required under US law, including; The number of rounds or levels of the contest, the maximum cost to enter all rounds, the method used in judging (we’ll see later that “cause we like it” ain’t good enough) and the date prizes will be awarded (I’ve seen logo contest deadlines extended by months to squeak in more entries from hapless designers.) Many will carp that these are only ‘little’ design contests, hurting no-one. US-based cyber lawyer and internet specialist Parry Atfab has this to say about contests on the internet, regardless of the size –
“Most web operators don’t realize that there are laws that apply to even the most innocuous contest – and that, because of the reach of the Internet, they must comply with all the myriad contest laws in the world. Because that’s far too cumbersome to deal with, the first thing web operators should know is to limit their contests to the United States. So now there are only 50 different sets of laws to deal with. And the contest has to comply with all of them – or make clear that residents of a particular state are not eligible to participate.”
Now, that doesn’t square with any logo design contest site that I know of. Some states even require that companies offering prizes worth (in aggregate) over $5000 need to register the contest and post a bond for the prize amount. One of the newer logo contest sites proudly boasts on the footer of their home page that the amount of “prize money up for grabs” is in the tens of thousands. Wouldn’t that qualify them for registration and the posting of prize money bonds?
In some jurisdictions, and where applicable, I’d think yes.
Also, most state and federal laws require that contests “must have a closing date, and the distribution of prizes to the winners must be carried out in a timely fashion, without any undue delays.” On another of these contest sites, contest holders are actually advised that they can ‘abandon’ the contest if they like (thus, the ‘prize’ is never paid out) but probably shouldn’t, because the the entrant designers’ feelings might get hurt. I’d assume abandoning an advertised ‘contest’ and not paying any prize money to entrants is a lot more legally provocative than just hurting someone’s feelings. I’d also expect that it would be the site owner, not the sponsor, who’s on the hook for the prize money and whatever legal fallout there might be. In any case, there are legal protections for the awarding of prizes after a contest has run its course. These sites seem to believe that it’s the designers’ tough luck when the sponsor walks with the prize money without selecting a winner, but I’m willing to bet that contest and gaming laws state otherwise. There has to be a winner. The advertised prize has to be awarded. See, that’s the point of a contest and why there are laws about running one.
What others learned about contest law.
Major sites and corporations aren’t immune to the plethora of laws either. Craft sales site Etsy tried to have a rather simple sweepstakes giveaway recently and found the process rather daunting –
“Contest law is very complicated due to, for example, lottery laws, gaming and gambling laws, consumer laws, trading laws, and tax laws. And to make things even more complex, contest law varies from state to state and from country to country. In fact, depending on the contest, certain states require the posting of a bond.”
When they contacted their lawyers, Etsy staffers were told that in order to hold an international contest (logo design contest sites boast about their international cadre of designers,) they’d have to consult a licensed attorney who is a specialist in contest law “for each and every country eligible for the contest.” In many cases, the contest rules would need to be translated into the various languages by certified lawyers in the applicable country. In the end, Etsy gave up, opting for a contest that was ‘open to US residents only’ and slapping ‘void were prohibited by law’ all over place.
What type of “contest” is this?
Then, there’s the issues of chance, skill and the requirement of payment to enter. Generally speaking, contests of chance can fall under lottery laws (that’s why many contests require the answer of a ‘skill testing question’ to get around this restriction.) Logo design contests, as mentioned earlier, might qualify as a skill-testing contest (though such contests require a clear definition of who’s doing the judging, the procedure and the rules). Surely that should be cut-and-dry? Maybe. Maybe not. Tech Firm has an excellent look at internet contests, and weigh in on what constitutes ‘judging’ , appropriately when it comes to creative work :
“The bad news is, if you fail to provide objective criteria for picking a winner, your game of skill could degrade into a game of chance. Therefore, be sure your rules are clear and describe the objective criteria for picking a winner, whether you run an objective trivia contest or a subjective essay contest.”
Office.com has a little more on what constitutes ‘judging’ –
“Judges should apply objective criteria, which bear a reasonable relation to the contest, when evaluating the entrants. Contestants should be advised of the standards of comparison that will be applied by the judges – not that the “best” entry will win. For example, acceptable criteria for an essay contest might be: appropriateness (25 percent); creativity (40 percent); clarity (25 percent); and sincerity (10 percent).”
Once again, this is nothing like any logo design contest site that I’ve poked around on -‘I like that logo’, the usual barometer wouldn’t seem to cut it. Nor would ‘wow, that groovy icon is the best.’ Further, as every logo design contest on these sites has a different prize, as well as arguably different judging criteria, shouldn’t every single contest feature its own unique set of terms and conditions? I’ve also seen ‘ties’ on logo design contests, where ‘winners’ split the ‘prize’ or the winner is determined by a ‘draw’. Apparently that’s a no-no too. In many jurisdictions, ‘skill-testing’ contests that end in a tie must pay both winners duplicate prizes. Any other method might turn the contest into a sweepstakes type contest where the outcome is determined by chance. And if your contest is judged as being one of chance, then any payment for entry will constitute a lottery. And that, my dear friends, falls under gambling and lottery laws – a much more serious kettle of fish. Many logo design contests seem to be free for designers to enter, but even that may not be cut and dry –
Besides making certain that you don’t charge a fee to enter, you’ll need to ensure that no purchase of your goods or services is required to win. But the problem is, some state courts might conclude that even though you didn’t charge a dime to enter, your Web contest still wasn’t “free.”
In some jurisdictions, simply requiring someone to register on a website can meet the threshold of paid entry. Some contest sites even charge entrants a ‘membership’ fee. Most contest laws require that the judging criteria, number of ‘entries allowed‘ and ‘maximum number of rounds‘ be stated beforehand, as part of the published contest rules, not as the contest progresses or as the sponsor sees fit. Accordingly, I’d imagine submitting multiple logos and variations at different times as requested by the sponsors could even be looked upon as ‘consideration’ – legalese for payment. And payment can represent illegal wagering. In some states the mandatory ‘purchase’ itself is a violation of the law. Etc. Rummaging through these legally complex factors would determine what laws apply to a contest, as well as the obligations that the contest would have to meet in order to remain legal. And as the contests are internet-based, in a mess of jurisdictions than span the globe.
Being treated like professionals.
While I’m not sure if the methods logo design contest sites employ are completely illegal or not (hence the question mark at the end of the title,) I’m reasonably sure that many of these sites are skirting contest and gaming laws, especially when it comes to their rules, regulations and their payment of advertised prize money. If nothing else, I’d think they’re on murky legal territory and judging by most of their TOS, aren’t too acquainted with anyone in the legal profession in their own backyard, let alone around the globe. Contest rules on logo design contest sites are positively spartan compared to the typical rules required for other contests. Everyone else has to pay excruciating detail to state and national level contest laws and gaming restrictions. Why shouldn’t logo design contest sites? They want to be treated as professional design ‘alternatives’? Fair enough. Following laws and regulations is part and parcel of being a professional, and especially if you arrange a legion of contests as part of your business promotion. As we’ve seen, the laws regarding contests, on and off the internet, are complex, varied and difficult to navigate – even for the biggest companies – and I’m willing to bet that most logo design sites haven’t even thought about most of these issues. I’m thinking it’s time they should.
As usual, this post is open for comments and I’d especially like to hear from anyone with experience in these areas. Unfortunately, my legal knowledge only goes as deep as can be expected with a few hours on Google and a couple of pots of coffee.