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Contests That Go Wrong Can Cost You!

If you give away a house with a client and the client goes bust are you still on the hook for the prize? That's what clear channel is dealing with in Fort Myers Florida after a local developer went bankrupt after running a house-giveaway contest with the Clear Channel cluster. The case is going to mediation in August where someone will decide whether the developer bears 100% of the responsibility for failing to deliver or if Clear Channel has to pony up some cash. The contest also stated the winner would get a lump sum of $150,000 if not the house. But there is more than just a local court, big brother also watches over you. The FCC does not have a lot of tolerance for botched contests. We turned to attorney John Garziglia to give you all a detailed update on contests, contest rules and the do's and dont's.

John Garziglia:  The FCC dangers in radio station conducted contests encompass two general areas.  The first area is a failure to fully and accurately disclose all material terms of the contest.  The second area is a failure to conduct the contest substantially as announced or advertised. 
The station should have detailed written contest rules.  While those rules do not have to be read in their entirety every time the contest is mentioned on the air, the FCC requires that the material terms of the contest be broadcast periodically.  The FCC has defined material terms as encompassing (1# how to enter or participate; #2# any eligibility restrictions; #3# the entry deadline dates; #4# whether prizes can be won; #5# when prizes can be won; #6# the extent, nature, and value of the prizes; #7# the basis for valuation of prizes; #8# the time and means of selection of winners; and #9# any tie-breaking procedures.

The FCC regards a contest as any promotion in which a prize is offered.  Thus, even something as simple as the giveaway of concert tickets to the 10th caller should have contest rules in place, and the material terms of that contest must be broadcast.  For instance, is there an age restriction on who can call? Is there a requirement that the concert tickets must be picked up at the station and will not be mailed?  Things like this are material terms and must be stated at the time the contest is conducted.  For more complicated contests, a full set of written contest rules and the periodic broadcast of the material terms of the contest is a must. 

Broadcast stations manage to get themselves into trouble in a variety of ways with contests.  The FCC is particularly sensitive to contesting rule violations as the history of FCC regulations in this area goes back to the early days of television and rigged contests. 

Thus, a radio personality offering to give away the "keys" to a luxury car #but not the car#, a five night cruise #where the daylight hours must be paid for#, or dinner with Garth Brooks #a local dude who just happens to have the same name as the country music star), are all very bad ideas that can backfire on a radio personality who thought he or she was having a bright idea moment.  There are numerous examples of similar goofs on the air that appeared funny at the time resulting in an FCC notice of violation.

The contest prize that becomes unavailable is the classic conundrum for a radio station.  If Super Bowl tickets are offered, and the radio station finds out that the NFL really frowns on broadcast station promotions using its trademarked game name and is therefore unable to give away Super Bowl tickets, the radio station will likely also have an FCC problem if a complaint is filed. 

Comprehensive well-written contest rules, possibly prepared in conjunction with your FCC counsel and local counsel, are a must.  While it is impossible to write contest rules that cover every situation, detailed well-thought-out contest rules that management requires station personnel to absolutely adhere to can guard against contest mishaps.  It should also be noted that a contest rule that states that the station can do whatever it wants, whenever it wants, for whatever reason, will not pass muster with the FCC,

On the more dangerous, sad, side of radio station contesting are water drinking contests and treasure hunts where injuries and death have occurred.  Keep in mind that even benign contests and promotions can have a potential for injuries or damage, and can create a host of liabilities for radio stations.  Be sure that the radio station's insurance covers the contest and any liabilities.  Scrub the contest completely beforehand by asking "what can go wrong?" 

Violations of the FCCs contest rules not only have the potential to incur fines and penalties if an FCC complaint is filed.  In addition, radio station management is likely spent many hours, and tens of thousands of dollars of legal fees, in responding to the FCC.  It is not fun, nor does it help to get ratings or meet goals, to answer an FCC contest rule violation inquiry.  Accordingly, be sure to fully and accurately disclose all material terms of a contest, and to conduct a contest substantially as announced or advertised. 

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