Legal Question in Business Law in New York

In NY, is it legal to offer potential clients a $5,000 reward if we cannot provide a more cost effective solution? As part of a marketing ploy, my company would like to offer a real $5,000 reward if a potential client can provide a financial bill/statement that my company cannot offer similar service for a cheaper cost. Of coarse, the terms of the service rendered and bill would be specified in the "$5,000 Challenge" terms. The potential customer is not required to buy or sign up for our service to be eligible to receive the award, but it gives us the opportunity to pitch them our alternative service. From my understanding, Section 369-e of the New York General Business Law says that only prizes/rewards in excess of $5,000 have to be registered and regulated. Am I missing something?


Asked on 5/16/17, 12:09 pm

2 Answers from Attorneys

Roman Fichman Esq. Law Practice of Roman Fichman Esq.

Generally speaking, the answer is yes! One can offer a financial reward for a customer who can meet a challenge. However according to FTC rules, guidelines by the NY attorney general and being prudent about liability such offers should be subject to carefully crafted official rules of the promotion/contest.

I'll give you one simple example: by giving away the $5k, you should collect the receiver's SS# so you can issue them a W9 to satisfy IRS tax rules. This should be clearly noted in the rules so that people entering this contest know in advance that they will need to provide a SS# or tax ID#. As you can see this also raises a bunch of issues about the receiver having legal status to legally be able to receive compensation etc...

I have drafted quite a number of promotion/contest rules in the past so please contact me directly. Your promotion/contest seems to be straight forward, so drafting should be straight forward as well and relatively low cost.


Roman R. Fichman, Esq.

www.TheLegalists.com │ @TheLegalist

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Answered on 5/16/17, 12:52 pm
Frank Natoli Natoli-Legal, LLC

You're couching this as a contest/sweepstakes. I'm not so certain that is the case, but it makes sense to consider that. If, however, the offer is to be extended to residents outside of NY it will get a lot more complicated because these laws are governed state by state and they are not uniform.

Before you jump in, I suggest that you consult with a lawyer in private and discuss your objectives in more detail. You can start by calling around to several for a free phone consultation, get some insights then pick the best fit to work with.

If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

Our firm is now referred by the American Bar Association (see under the New York section):

http://www.americanbar.org/groups/delivery_legal_services/resources/programs_to_help_those_with_moderate_income.html

Kind regards,

Frank

www.LanternLegal.com

866-871-8655

[email protected]

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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Answered on 5/16/17, 2:14 pm


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