Are Text Contests Against the Law?

Suits Allege Promos Used on 'Apprentice' and Other Shows Violate Lottery Rule

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SAN FRANCISCO (AdAge.com) -- For a few seasons, it looked like TV producers had tapped into the mobile mint of premium text messaging as they encouraged viewers to win money by voting for their least favorite Donald Trump wannabe or enter other contests via cellphone. But those kinds of promotions are being challenged by a hairdresser and a secretary from Georgia, among others, who have filed a class-action lawsuit against "The Apprentice," "Deal or No Deal" and "One vs. 100" alleging the shows' mobile games constitute illegal gambling.
No 'Deal'? Do contests on game shows constitute lotteries?
No 'Deal'? Do contests on game shows constitute lotteries? Credit: Trae Patton

The suits, which are pending in federal court in Los Angeles, point to the lack of legal clarity when it comes to nascent marketing technologies -- and to just how careful media companies and marketers must be to ensure their promotions fall within the law.

The lawsuits attack the games on the grounds that they charge viewers a 99ยข premium text-messaging fee to participate, a violation of what is known as the Standard Lottery Rule. That premium fee is applied on top of the basic text-message fee. The show's producers, the network and the cellphone carrier split the revenue.

Official rules for entry
For the contests to be considered lotteries, and therefore illegal, three elements must be present: a prize, chance and consideration -- which means something of value is required in order to participate (this is more commonly known as a bet). The 99-cent charge to enter, the suit said, technically makes the games illegal lotteries. The plaintiffs are demanding an injunction against the games, as well as attorneys' fees and their 99 cents back.

"The right to conduct a lottery is reserved to the state and not to the entertainment corporations," said William A. Pannell, an Atlanta attorney involved in the lawsuits. The lawsuits for "Deal or No Deal" and "The Apprentice" were both filed and dismissed in Georgia and re-filed, along with the "One vs. 100" lawsuit, in federal court.

More than 210 million wireless subscribers have participated in NBC's "Deal or No Deal" Lucky Case Game. The contest has received more than 57 million entries and awarded more than $1 million in cash prizes. It's unclear how many of those 57 million entries were premium text messages since the show doesn't break down how many people enter for free online vs. via premium text message. Also unclear is how many "Apprentice" viewers paid 99 cents for a chance to win a $10,000 grand prize in a promotion titled "Get Rich With Trump."

Loophole
The games, which offer the option of entering for free online, could have gotten around the lottery laws had they offered something of value in return for the 99 cents, according to legal experts. For example, if a beverage marketer offers a drink-and-win bottle-cap sweepstakes, the people purchasing the beverage get a cold drink in exchange for the money they spent to enter. Producers may have been better off if they'd offered cellphone users ringtones or wallpaper in exchange for sending the text.

"It's a serious shot across the bow to some of these promotions," said Joseph Lewczak, an attorney with Davis & Gilbert who specializes in mobile-related legal issues.

"Charging a premium fee for a text message, which provides the entrant with no bona fide product or service, may be deemed illegal," he said. "It is important not to overlook the fact that, though mobile entertainment may be a new and fast-developing medium, this medium is not exempt from the laws that would otherwise apply in the brick-and-mortar world."

Eric Levin, CEO of Rip Road, a mobile-marketing company, suggests following guidelines from the Mobile Marketing Association and federal regulators. "We all try to push the envelope because we're trying to be creative -- make something happen that hasn't happened," he said. "But on the legal side, there's not a lot of case law."

None of the companies named in the suit -- Endemol USA, NBC Universal, Verisign, M-Qube, Don Jagoda Associates and others -- returned calls for comment by press time.

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Contributing: Abbey Klaassen
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