E*Trade, AT&T Sweepstakes Raises Eyebrows

A new promotion sponsored by telecom giant AT&T and online brokerage E*Trade is raising eyebrows for its unusual tactics and wording, and concerns for what it bodes for the online promotions industry.

The two companies Thursday announced their Dream Account Sweepstakes, which offers a grand prize of $20,000 deposited in an E*Trade brokerage account.

Entrants must fill out an online form giving their name, address, email address, and phone number.

At issue is a pre-checked box at the bottom of the form, which says that entrants may receive marketing messages from AT&T.

Removing the check from the “opt-in” box disqualifies an entry.

“From my perspective as an Internet business lawyer, it’s odd,” said Jonathan Ezor, director of legal affairs for online printing services company Mimeo.com, and the author of a recent book on Internet promotions.

With the E*Trade-AT&T sweepstakes, “either you’re opting in, or you wasted your time filling out the form to begin with,” Ezor said.

That alleged waste of time, experts say, could potentially open a promoter to legal risk on several fronts.

Some states might frown upon the practice of asking entrants to fill out lengthy entrance forms, or to provide extensive user data, said John Feldman, a partner at D.C.-based law firm Arent Fox who specializes in promotional law.

These states, which include California and Illinois, forbid a contest-entrance requirement of excessive time and effort.

But AT&T spokesperson Burke Stinson defended the E*Trade-AT&T sweepstakes.

“Since there’s no insistence that a participant read the material or act in a certain manner, it seems a stretch to consider such activity as lost ‘billable’ time,” he said. “However, we are always open to suggestions and will consider their criticism.”

Sweepstakes also run afoul of the law when they require “consideration,” a payment required for eligibility — which, in the eyes of the law, blurs the distinction between sweepstakes and gambling.

Feldman said while an online sweepstakes might not explicitly demand payment for entry, regulators could perceive required opt-in marketing messages as monetarily benefiting the promoters — a “no-no” in many states.

“The money’s not immediately flowing out of the pockets of consumers, but there’s value in ad dollars, in marketing dollars, that are flowing into pocket of the sponsor,” Feldman said.

“Since, to a great extent, the online marketing and promotions world is based on third-party compensation for advertisements, for views, and for contact with consumers, it may not be money coming out of pocket of a customer, but money is flowing into pocket of sponsor,” he said.

The E*Trade-AT&T sweepstakes is “a little aggressive for my tastes,” he added, “because what they’re doing is saying outright that unless we get value, we’re not going to give you anything.”

Industry practitioners said the promotion’s requirements for entry make it unusual, but not unheard-of.

“There’s no hard and fast definitions, so in the end we do what the client wants, and that’s the way they wanted it,” said Gavin Skillman, a spokesperson for Promotions.com, the firm handling the sweepstakes.

“We don’t normally do sweepstakes like that, but that’s the way they wanted it done,” Skillman said.

Brian Heathman, president of online promotions company iPromotions concurred that required opt-in is not standard practice.

“Only one of our clients, a Fortune 25 client, requested that we implement a campaign in that manner,” Heathman said. “We did some investigation into legalities of it, but didn’t find any precedent to lead us to believe it was illegal. But it was something that raised my curiosity.”

No landmark ruling exists on this aspect of Internet promotions, nor is there any explicit state attorney general opinion on whether online promotions requiring opt-in information are equivalent to asking for an entry fee.

“But it’s not out of the realm of realistic possibility that someone could consider that as a lottery,” Feldman said.

The issue raises concerns for one of the most common, and most inexpensive, ways for companies to gather user data.

“Usually the main reason they run these types of promotions [is] to be able to understand who is coming to their site and be able to use that info — if the user gives them permission — to build additional long-term relationships with them,” said Tony Laxa, vice president of marketing and strategic alliances for online promotions company ePrize.

“Sweepstakes continue to be a highly effective means to gather information from site visitors and driving opt-in to newsletters,” Heathman said. “The primary goal of a sweepstakes event is acquisition of consumer data, and it is the single most cost-effective method of doing that — more so than couponing, voluntary survey registration, incentive marketing, or loyalty programs.”

Regardless of its implications for law or for future industry practice, the AT&T-E*Trade contest is likely to be viewed as offensive by many consumers — and could hurt the companies’ efforts to increase their user base.

“Good marketers know that the way they should be doing is to have something that people really want to get,” said Jason Catlett, president of anti-spam organization JunkBusters. “And this kind of playing with consent is really just to fill the meaningless numbers of the campaign, rather than building an actual, important relationship with the consumer.”

“Marketers often try to pretend that you’re opting in, where in fact, the permission given was extorted or coerced,” Catlett added. “And that’s no way to run a good marketing campaign.”

In June, AT&T appointed Michael Lamb to be the company’s first chief privacy officer, to oversee AT&T’s corporate-wide privacy policy and practices, work with government and industry leaders on initiatives to preserve consumer privacy, and help increase public awareness of the company’s efforts in these areas.

“AT&T has a strong record of safeguarding the personal information of our customers, but new technologies require new solutions to meet privacy needs,” Lamb said at the time. “We are developing those solutions and empowering our customers to control how their private information will be used.”

Lamb was not available for comment.

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