April 27, 2007
Retail Promotion or Illegal Gambling?
By Tom Ryan
A new crop of retail promotions offering refunds based on the outcome of sporting events or weather conditions may be illegal gambling, according to law experts.
In Massachusetts, for example, Jordan Furniture is offering a full rebate on any purchase made between March 7 and April 23 if the Boston Red Sox win the World Series.
Michael Barkow, of the law firm Manatt, Phelps & Phillips, told The Boston Globe that these types of promotions fit the three defining elements of a lottery: offering a prize, an element of chance, and consideration, usually a payment of money.
“It seems to me fairly clear-cut,” said Mr. Barkow, who advises firms on how to conduct legal retail promotions “It strikes me as a substantial risk to run a game like this.”
Eliot Tatelman, who runs Jordan’s Furniture, a division of Berkshire Hathaway, told the newspaper his attorneys concluded the Monster Deal was legal.
“We all feel comfortable with it,” Mr. Tatelman said. “It’s been a great promotion.”
These deals appear to be gaining in popularity, particularly among retailers of higher-priced items.
Similar
to Jordan’s, Cowboy Maloney’s Electric City in Mississippi last August offered
full refunds to anybody who bought an HDTV if the New Orleans Saints won the
2007 Super Bowl. Park Avenue Home Furnishings in Illinois is currently offering
refunds if the Chicago Cubs win the World Series. At Alpha Omega Jewelers in
Massachusetts, customers get a $500 refund if the Red Sox win on the day an
engagement ring is bought and a Red Sox player hits a homerun. The refund rises
to $1,000 if a Red Sox player hits a grand slam; and to a full refund if a
Red Sox pitcher pitches a no-hitter.
At Elyse Jewelers in Massachusetts, the cost of wedding and engagement rings is refunded if more than a half-inch of rain or snow falls over a six-hour period on the couple’s wedding day.
Traditionally, retail promotions are adapted to comply with laws prohibiting lotteries. The element of chance can be eliminated by creating a game where skill is required, like writing an essay, drawing a picture or shooting baskets. The consideration can be eliminated by allowing people to play without paying. That’s why the ubiquitous “no purchase necessary” accompanies many cereal promotions.
A spokeswoman for Massachusetts Attorney General Martha Coakley said the office is monitoring these new promotions but hasn’t taken any action because the law is murky and consumers aren’t being harmed.
“We’ve seen no consumer complaints and seen no evidence of consumer harm,” said the spokeswoman, Amie Breton.
But Edgar Dworsky, a former Massachusetts assistant attorney general and the current editor of Consumerworld.org, believes the promotions are illegal and even unhealthy for consumers.
“The final prices we pay for goods will be determined not by smart comparison shopping but by the bets we make on sporting events, the amount of snow that falls, or what the high temperature will be. How crazy is that?,” he asked.
Discussion Questions: Are these new prize-based retail promotions violating gambling laws and even unhealthy for consumers? Or are they harmless and fun and do they even stand out as examples of innovative promotions? Should they stay or should they go?
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This seems harmless to me. This type of promotion has been going on for years. It sounds like some government regulators have too much time on their hands.
Retail promotions that offer refunds based on an unlikely weather event have been going on for years. In one famous example in the 80s, New York City’s Fred the Furrier promised a refund on the purchase price of mink coats if it didn’t snow before a designated winter date. A similar example involved snowblower purchases at a Midwest retailer.
Then there are the field-goal kicking and half-court shooting contests that are so popular at sporting events. A million bucks to sink a basket? What are the odds?
Interestingly, there are companies that insure these promotions. Retailers can take out a policy that covers their loss in the unlikely event of mass or large value payout. The whole package including the insurance premium may be calculated in advance, and booked as a marketing expense.
Linking refunds to the outcome of a sporting event is a new wrinkle that sounds like gambling–at first. The key distinction, I think, is that the customer has no risk of any loss. That is, regardless of the outcome of the “wager,” they keep the merchandise they purchased.
If attorneys general are truly worried about the implications of “gambling” they should set their sights on mail-in rebates. Last time I checked, a surprising percentage of rightful payments were never received by consumers. If that’s not a bad bet, what is?
I would hope the privacy wonks and ‘protectors of the consumer’ don’t get involved in any of this. Its harmless, fun and painless. Consumers don’t have to play or buy from any given merchant at any time.
Retail promotions based on sporting events, the weather, and newsworthy events can generate terrific free publicity and word of mouth. This is Grade A Sales Promotion. If the retailer goes to jail, it’s even better publicity.
I can’t imagine the state governments weighing in on this since they are getting the taxes when the merchandise is purchased.
I fail to see how this can be considered gambling. You’re not paying extra for your engagement ring as a ‘bet’ that the Red Sox will win that day. You are just getting “something for nothing” while the retailer gets a slightly greater likelihood that you will shop there.
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This seems harmless to me. This type of promotion has been going on for years. It sounds like some government regulators have too much time on their hands.
Retail promotions that offer refunds based on an unlikely weather event have been going on for years. In one famous example in the 80s, New York City’s Fred the Furrier promised a refund on the purchase price of mink coats if it didn’t snow before a designated winter date. A similar example involved snowblower purchases at a Midwest retailer.
Then there are the field-goal kicking and half-court shooting contests that are so popular at sporting events. A million bucks to sink a basket? What are the odds?
Interestingly, there are companies that insure these promotions. Retailers can take out a policy that covers their loss in the unlikely event of mass or large value payout. The whole package including the insurance premium may be calculated in advance, and booked as a marketing expense.
Linking refunds to the outcome of a sporting event is a new wrinkle that sounds like gambling–at first. The key distinction, I think, is that the customer has no risk of any loss. That is, regardless of the outcome of the “wager,” they keep the merchandise they purchased.
If attorneys general are truly worried about the implications of “gambling” they should set their sights on mail-in rebates. Last time I checked, a surprising percentage of rightful payments were never received by consumers. If that’s not a bad bet, what is?
I would hope the privacy wonks and ‘protectors of the consumer’ don’t get involved in any of this. Its harmless, fun and painless. Consumers don’t have to play or buy from any given merchant at any time.
Retail promotions based on sporting events, the weather, and newsworthy events can generate terrific free publicity and word of mouth. This is Grade A Sales Promotion. If the retailer goes to jail, it’s even better publicity.
I can’t imagine the state governments weighing in on this since they are getting the taxes when the merchandise is purchased.
I fail to see how this can be considered gambling. You’re not paying extra for your engagement ring as a ‘bet’ that the Red Sox will win that day. You are just getting “something for nothing” while the retailer gets a slightly greater likelihood that you will shop there.