No Purchase Necessary Laws

Running a contest or giveaway is a brilliant (and surprisingly cost-effective) way to engage your audience, generate fresh leads and drive a ton of meaningful actions.

Any time you run a contest or giveaway it's important to exercise a degree of caution and ensure you're complying with any relevant laws that may apply. One of the most important laws you should be aware of when running a prize promotion are No Purchase Necessary Laws.

In this guide we'll walk you through everything you need to know about No Purchase Necessary Laws and answer all the questions you might have.

We'll cover:

• What Are No Purchase Necessary Laws?
• What Types of Prize Promotions Do They Apply To?
• What Are the No Purchase Necessary Laws in My Country?

No Purchase Necessary Laws are laws in some countries that prohibit chance-based prize promotions from incentivising entrants to make a payment, complete a purchase, or provide other forms of consideration.

These laws exist in the U.S. and several other countries around the world, and while they differ from country to country, they generally state that if you a running a giveaway, sweepstakes, contest or any other type of prize promotion where winners are determined by chance, you cannot:

1. Require people to make a purchase in order to enter your promotion.
2. Allow entrants to increase their chances of winning by making a purchase.

In several countries, including the U.S., No Purchase Necessary Laws operate around the idea of "Consideration". As we mentioned above, you may be at risk of violating No Purchase Necessary Laws if you are running a chance-based prize promotion that requires entrants to make a purchase or otherwise provide consideration.

Consideration refers to ways people can "buy" entries through monetary, and occasionally non-monetary actions.

• Monetary actions are ways people can enter promotions that require them to make a financial contribution. This can include purchasing a product or buying a lottery ticket.
• Non-monetary actions are ways people can enter promotions that require them to forfeit a significant amount of time. This can include having to fill out an in-depth survey or make multiple visits to a store. Non-monetary actions are infrequently counted as consideration and typically exist in a grey area if they are.

Remember, what does and doesn't count as consideration varies between states and countries. In the U.S. purchasing a product is considered consideration, but in other countries such as the U.K. and New Zealand purchasing a product isn't consideration unless the price of the product has been inflated to include an 'entry fee'.

If you're running a chance-based prize promotion in a country with No Purchase Necessary Laws it doesn't necessarily mean you can't ask users to make a purchase, it just means that you can't:

• Make it mandatory for entrants to make a purchase.
• Give extra entries or increase the likelihood of winning for entrants who do make a purchase.

Basically, you can still ask users to enter your giveaway by making a purchase as long as you offer a Free Alternate Method of Entry.

Alternate Methods of Entry (AMOE) are free and easy ways that users can enter promotions instead of making a purchase. So if you're running a chance-based promotion that lets people enter by buying your product you should make sure you also offer a free way for people to enter instead of making a purchase that awards them the same number of entries.

When you offer a free entry alternative the purchase is no longer mandatory and no longer gives people increased odds of winning your prize, which means that your promotion is no longer in violation of No Purchase Necessary Laws.

You just need to make sure people can't get entries for making a purchase and completing your AMOE, as that would still give people who make a purchase a distinct advantage and put you back to square one.

Some common types of AMOE are entering via email, mail, or completing an online form. If you run your giveaway with Gleam's easy-to-use Competition's app we can automatically add an Alternate Method of Entry to any campaign that can be entered by making a purchase.

The AMOE will be automatically added to your campaign's Terms and Conditions in any country where No Purchase Necessary Laws apply, completely taking the hassle out of having to create and manage your own free entry alternative. Have a play with our demo below to see our free entry alternative in action:

Click on 'Terms & Conditions' to see our free entry alternative ☝️

Our Alternate Method of Entry is specially designed to only be available in countries with No Purchase Necessary Laws where providing a free entry alternative is legally required. So if someone enters your promotion from a country without No Purchase Necessary Laws they will not be able to access the AMOE.

👉 Check if Alternate Methods of Entry Are Required in Your Country 🌎

Prize promotions generally fall into one of three distinct categories based on a few key criteria:

• Raffles & Lotteries
• Games of Chance (Sweepstakes & Giveaways)
• Games of Skill (Contests)

Generally speaking, people and businesses are prohibited from legally running raffles and lotteries, and No Purchase Necessary Laws don't apply to skill-based promotions (Games of Skill), so No Purchase Necessary Laws and Alternate Methods of Entry are generally only points of consideration when you're running a chance-based prize promotion (Game of Chance).

Keep reading to find out more about each type of prize promotion, and how No Purchase Necessary laws impact each of them.

Lotteries and raffles are two similar types of prize promotions where entrants are required to make a purchase and winners are randomly drawn. Businesses are typically prohibited from running these types of prize promotions, so it's important to make sure that your campaigns don't fit the definition of a lottery or raffle.

A lottery is a type of prize promotion that is defined by 3 key features:

1. The promotion gives participants a chance to win money or a prize with value.
2. The winners are chosen at random (i.e. by chance).
3. Participants need to buy tickets or otherwise provide consideration (without a free entry alternative available).

In the U.S.A. and many other countries, lotteries are, for all intents and purposes, illegal unless you’re the government!

A raffle is a lot like a lottery in the sense that users buy entries with money or other consideration (e.g. donations), and winners are chosen randomly. There are however, two key features which differentiate raffles from lotteries:

1. Raffles must have a winner every time, the prize pool cannot be "carried over".
2. Raffles can be privately run.

This second point may make it seem like raffles are a roundabout way of running randomised giveaways that require a payment or purchase (i.e. lotteries), but this is not the case.

In the U.S., the U.K., and most other countries, raffles are limited to non-profit organisations. Exceptions are sometimes made for charitable events run by private organisations, but as a general rule raffles are off limits to all for-profit businesses.

As a general rule, business or individuals cannot run lotteries or raffles, which means that in order for you to run a legal prize promotion that doesn't violate any No Purchase Necessary laws you must eliminate one of the three defining factors of lotteries and raffles:

1. The promotion gives participants a chance prize with value.
2. The winners are chosen at random/by chance.
3. Participants must provide payment to enter.

You can easily eliminate these factors and stay on the right side of No Purchase Necessary laws by:

• Not asking entrants to make a purchase.
• Offering a free Alternate Method of Entry to any entry actions that require a purchase.
• Choosing winners based on merit or skill, rather than chance.

Games of Chance, which are more commonly referred to as Giveaways or Sweepstakes are a type of prize promotion you can legally run as a business without violating No Purchase Necessary laws.

For a promotion to be considered a sweepstakes it should include three key features:

1. The promotion gives participants a chance to win money or a prize with value.
2. The winners are chosen at random.
3. Anyone can participate without making a purchase or providing other forms of consideration.

The main factor separating Games of Chance from Lotteries is that a purchase is not required to enter a game of Chance, making these promotions legal to run in the U.S. and other countries with No Purchase Necessary Laws.

You can still give entrants the option of entering your campaign by making a purchase, you just need to ensure that you are always offering a free Alternate Method of Entry (AMOE).

Remember, if you're running a prize promotion in a country without No Purchase Necessary Laws you are allowed to run chance-based promotions that incentivise purchases without using Alternate Methods of Entry.

👉 Take a look at the No Purchase Necessary Laws and AMOE requirements in your country 🌎

When you're running a chance-based prize promotion your ability to ask entrants to make a purchase depends on where you are running your promotion.

Countries With No Purchase Necessary Laws: You can ask entrants to make a purchase as long as you offer a Free Entry Alternative.

Countries Without No Purchase Necessary Laws: You can ask entrants to make a purchase.

Games of Skill, also known as Contests are a type of prize promotion where entries are skill-based and winners are chosen on merit or skill rather than chance. This means that winners cannot be chosen randomly.

Examples of skill-based contests include:

• "Best Photo" Competition
• Voting Contest
• Sports-Based Contest
• Essay Competition
• "Tell us in less than 20 words..." Competition

Since winners are not chosen by chance, this type of prize promotion cannot be considered a lottery or raffle, and No Purchase Necessary Laws do not apply.

This means that as long as you are running a skill-based contest where winners are chosen on merit you are typically allowed ask users to make a purchase or provide other forms of consideration.

With this in mind, you can run awesome contests which task users with creating and sharing photos and videos of your product in action, or any number of other skill-based contests which you can create with Gleam's Competitions app, just check out the demo below:

No Purchase Necessary Laws essentially prevent chance-based prize promotions from asking people to provide payment to enter, unless a free entry alternative is readily available.

While this is key information, it is important to remember that No Purchase Necessary Laws don't apply in every country, and what is actually considered 'payment' can vary quite substantially.

To help you find the No Purchase Necessary Laws that apply to your promotion, we're going to take you through some country-specific laws.

If you're running an international promotion it's generally a good idea to comply with the laws and regulations of each country your promotion can be entered from.

• U.S.A.'s No Purchase Necessary Laws
• U.K.'s No Purchase Necessary Laws
• Canada's No Purchase Necessary Laws
• Australia's No Purchase Necessary Laws
• New Zealand's No Purchase Necessary Laws
• No Purchase Necessary Laws Around the World

The No Purchase Necessary laws in the U.S.A. are fairly straightforward. If you are running a promotion where winners are chosen randomly you cannot ask for a purchase or other forms of consideration as an entry unless you also offer a free entry alternative.

If you run a skill-based contest where winners are selected based on merit, you are free to ask for purchases or any other form of consideration.

However, there are some exceptions to this rule. Colorado, Maryland, Nebraska, North Dakota and Vermont all prohibit purchase requirements, even in contests where winners are chosen on their merit.

Promotions run by private businesses are governed by different laws depending on which state you operate in, so checking out your local laws or consulting a lawyer is always a good idea.

If you are running a chance-based prize promotion in the U.K. where winners are randomly chosen, you are still allowed to ask people to enter your promotion by making a purchase as long as these conditions are met:

1. Entrants are purchasing a product or service at a price not exceeding the usual retail price
2. The entrant is not required to pay direct or indirect consideration to enter the promotion (other than purchasing the relevant goods or services).

This means that you can require entrants to purchase your product at it's normal price without offering a free entry alternative, but you cannot require people to pay you just to enter your promotion.

✅ YOU CAN run a promotion where entrants are required to purchase your product.

❌ YOU CANNOT run a promotion where entrants are required to pay you a $10 entry fee.

❌ YOU CANNOT run a promotion where entrants are required to purchase your product AND pay an additional fee to enter the promotion.

If you run a skill-based contest where winners are selected based on merit, you are free to ask for purchases or any other form of consideration.

In Canada, you can run chance-based prize promotions as long as you meet two criteria:

1. A purchase is not required to enter the promotion. You cannot ask people to enter your promotion by making a purchase unless you offer a free entry alternative.
2. Winners cannot be drawn based purely on chance. Any chance-based promotions must also include a skill-testing component.

The easiest way to include a skill-testing component into your contest is by having all participants complete a skill-testing question and then randomly drawing your winner from entrants who successfully answered the question. This will turn your contest into a legally compliant game of mixed chance and skill.

For skill-testing questions, time-limited, multi-step and multi-operational mathematical questions without assistance are generally sufficient.

If you run your contest Gleam's Competitions App including a skill-testing question is incredibly easy. All you need to do is use our Secret Code or Question action to create a skill-testing question and make it mandatory so that only users who correctly answer it can access the other actions and enter your contest.

If you are choosing contest winners based on skill without any element of chance, then you are free to incentivise purchases and not worry about skill-testing questions.

If you are running a chance-based or skill-based prize promotion in Australia you don't have to worry about No Purchase Necessary Laws. You can freely ask entrants to purchase a product or provide other forms of consideration without needing to offer a free entry alternative.

When running a prize promotion in Australia it's good to be mindful of any Competition Permits that may be required. You can read about Australian Competition Permits right here.

In New Zealand you are allowed to run chance-based prize promotions where winners are randomly selected and entrants are required to make a purchase as long as:

1. People are entering by purchasing a product or service at a price that does not exceeding the usual retail price.
2. People are not required to pay direct or indirect consideration to enter the promotion (other than purchasing the relevant goods or services).

This means that if you are running a chance based promotion in New Zealand you can incentivise purchases without offering a free entry alternative as long as the purchase meets the conditions above.

✅ YOU CAN run promotions where entrants are required to purchase your product.

❌ YOU CANNOT run promotions where entrants are required to pay you a $10 entry fee.

❌ YOU CANNOT run promotions where entrants are required to purchase your product AND pay an additional fee to enter the promotion.

If you run a skill-based contest where winners are selected based on merit, you are free to ask for purchases or any other form of consideration.

The following table provides a summary of the No Purchase Necessary Laws in various countries and which countries require you to offer a free entry alternative if you are asking entrants to make a purchase.

Remember No Purchase Necessary Laws generally only apply to chance-based promotions, and if you are running a skill-based promotion you typically don't need to worry about them.

If you are running a prize promotion in a country not listed in this table should seek legal counsel, or to stay on the safe side you can avoid requiring users to make a purchase or offer a free entry alternative.

When you run your prize promotions with Gleam's Competitions App we'll save you the hassle and let you automatically add free Alternate Methods of Entry that will only be available to entrants in countries where No Purchase Necessary Laws apply.

The impact of No Purchase Necessary Laws may make you consider using your contest or giveaway to incentivise other meaningful actions in addition to (or even instead of) purchases.

Adding more entry methods to your campaign is generally an excellent move, as allowing people to earn more entries by completing more actions is a great way to drive more engagement and maximise the value you're getting from your promotion.

When you run a contest or giveaway with Gleam's Competitions app you can easily add heaps of powerful additional actions to your promotion which will help you grow your audience, generate leads, build engagement, strengthen your brand, drive future sales and more.

With Gleam you can use your contest or giveaway to:

• Grow your mailing list
• Drive social media engagement
• Collect user-generated content
• Generate reviews and testimonials
• Incentivise peer-to-peer referrals
• Conduct market research
• And heaps more!

Take a look at this demo we've put together to see just some of the awesome ways you can use Gleam to drive growth and increase your immediate and long-term sales.