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What’s the Difference between a Promotion and a Lottery?

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A few months ago, a friend pointed me to this news story about a Seattle car dealership, Jet Chevrolet, having to pay out money for a promotion it ran. The promotion was that if the Seattle Seahawks shut out the NY Giants, they'd give away $420,000 to 12 people ($35,000 each). I'm not sure where they came up with the $35,000 number, but I'm guessing the picked the 12 for Seattle's famous 12th man, another term for the fans.

Life does crazy things sometimes. This time, it caused havoc for the car dealership as the Seahawks actually did shut out the Giants. One of the owners said, "This is crazy. We never expected that we'd actually be giving away the money." My response would be, then don't offer it and advertise it everywhere.

Fortunately for the dealership, they bought insurance for $7,000. They were paying $7,000 anyway, so this is almost a best case scenario since it got them so much extra publicity. Sure that insurance company is going to raise the insurance premiums on the car dealership, but I hope they'll never run a promotion like this again they ran it again with increased premiums, but didn't have to pay up again.

Before I get to the main point of the article, I'll share one other oddity that my friend, Kosmo, spotted:

Reached Sunday night, Johnson said he still doesn't know how the dealership will actually work the drawing and was waiting on guidance from the insurance company.

"We're a car dealership, we're not used to doing something like this," Johnson said.

His email to me nailed exactly what I was thinking:

Uh, what? You paid the insurance company $7000 to insure against a shutout. Once they give you a check for $420K, their job is done. If they are smart, they don’t touch the drawing with a ten foot pole – that’s just begging for a lawsuit.

Ahhh the drawing. Let me tell you about those details. The company worked with their legal department (kudos to them) and realized that they had to make the opportunity available to everyone. It's for the same reason you always hear the "no purchase necessary." If you charge people money for a chance to win a big jackpot you are essentially running a lottery, which is only legal for the government I guess. Similarly, in many states 50/50 raffles are illegal... and in some they have extensive restrictions.

Jet Chevrolet made the opportunity available to the public. You could enter the drawing without buying a car (I presume by going to the dealership and filling out an entry.) If you bought a car during the promotion, you got 100 entries. It turns out that 12 people filled out a form who didn't buy cars and 20 people bought cars. Thus there should have been 2012 entries in the "hat" when the 12 names were picked.

There's some information on the winners here, but I couldn't tell if they were the ones who bought cars.

Clearly the odds are greatly, greatly (it bears repeating) in favor for those who bought cars, right? Jet Chevrolet made up their own terms for the promotion and they had their legal team involved, so of course everything is on the level, right?

I'm not going to comment on the specific representation of their promotion. They said that they ran it by their lawyers and it was legal. However, I was thinking about extrapolating it as an example for myself. Let's imagine that I create a one-page ebook with just average content... nothing special about it at all. I sell it for $10 and offer a prize of $100 where people who buy the book get a million entries and other people can enter once for free. While it is technically open to the public, it is essentially a contest where the only reasonable chance to win is to buy my book.

Suddenly it looks a lot like running a lottery, right? Running a lottery is illegal in most states (perhaps all of them).

At what point does running a "promotion" become running a lottery? I don't have the answer, so I'll just end with that question.

Last updated on March 20, 2014.

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3 Responses to “What’s the Difference between a Promotion and a Lottery?”

  1. Steve says:

    Furthermore, how is the “insurance” they bought different than placing a bet on the game?

  2. Lazy Man says:

    I hadn’t thought of that. Maybe it is because they weren’t actually collecting the insurance themselves. Still they used the value of the promotion to bring in business, so they did benefit.

  3. J. Money says:

    Pretty interesting – never heard of this before. And not smart enough to leave an interesting comment about it here either, other than I enjoyed reading this, haha…

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