No, we do not believe that you need to include the disclosures required by the Illinois Prizes and Gifts Act (PGA) in your advertisements. However, it would be prudent to include the material terms of the contest in the advertisements to comply with the Consumer Fraud and Deceptive Business Practices Act (CFDPBA).
The PGA’s disclosure requirements apply only to written promotional offers for a “prize.” The PGA defines a “prize” as a “gift, award, or other item or service of value” offered in a “contest, competition, sweepstakes, scheme, plan, or other selection process that involves an element of chance.” The promotion that you have described requires a public vote, which does not involve an element of chance. Consequently, we do not believe that the PGA — including its disclosure requirements — applies to your giveaway advertisement.
Nonetheless, the CFDPBA requires an advertisement to consumers for a “prize giveaway” (which is undefined in this law) to clearly and conspicuously disclose the prize giveaway’s material terms. While these protections apply to individual consumers, they also apply to businesses that are consuming an advertiser’s goods, and even in some cases where a deceptive prize giveaway’s advertisement “alters the natural competition in the marketplace.” Consequently, we recommend adhering to the CFDPBA’s disclosure requirements — which are to clearly and conspicuously disclose “all material terms and conditions relating to the offer” — out of an abundance of caution.
Note, too, that if the cash giveaway is for $600 or more, you also must issue an IRS Form 1099-MISC to the prizewinner.
For resources related to our guidance, please see:
- Prizes and Gifts Act, 815 ILCS 525/10 (“‘Prize’ means a gift, award, or other item or service of value that is offered or awarded to a participant in a real or purported contest, competition, sweepstakes, scheme, plan, or other selection process that involves an element of chance.”)
- Prizes and Gifts Act, 815 ILCS 525/25 (“A written promotional prize offer must contain each of the following in a clear and conspicuous statement at the onset of the offer: . . .”)
- Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2P (“It is an unlawful practice for any person to promote or advertise any business, product, utility service . . . by means of offering free prizes, gifts, or gratuities to any consumer, unless all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer so as to leave no reasonable probability that the offering might be misunderstood.”)
- Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 (“The term ‘consumer’ means any person who purchases or contracts for the purchase of merchandise not for resale in the ordinary course of his trade or business but for his use or that of a member of his household.”)
- Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 (“The term ‘person’ includes any natural person or his legal representative, partnership, corporation (domestic and foreign), company, trust, business entity or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, trustee or cestui que trust thereof.”)
- Cosmetique, Inc. v. ValueClick, Inc., 753 F. Supp. 2d 716, 719–720 (N.D. Ill. 2010) (“Illinois courts have allowed non-consumers to bring actions under the Illinois Fraud Act in certain situations, such as when a deceptive statement to consumers alters the natural competition in the marketplace. . . . In the instant action, Cosmetique alleges that Illinois consumers were deceived by Defendants and that Cosmetique was harmed as a result of conduct that implicates consumer protection concerns. Thus, under the unique circumstances of this case, Cosmetique has standing to bring the instant action.”)
- IRS Webpage, Form 1099-MISC