Scam of McDonald's Sweepstakes Has Lessons for Marketers

Source: DMNEWS

Revelations that long-standing McDonald's prize contests may have been rigged could damage the already shaky consumer trust in the sweepstakes and promotions industry, experts said this week.
The FBI arrested eight people this week in Georgia, South Carolina, Florida, Texas, Indiana and Wisconsin on charges of stealing $13 million in prizes by fixing the outcome of popular McDonald's promotional games. Prizes were stolen from McDonald's decade-old Monopoly game and from its Who Wants to Be a Millionaire game, among others, authorities said. No McDonald's employee is accused in the case.

"It may continue to create the impression that certain sweepstakes are fixed and people don't have a chance of winning," said Andrew B. Lustigman, a partner in Olshan, New York, and a columnist for DM News. "We need to be aware that people are under the impression that they do not have a chance of winning."

One of those arrested was an employee of Simon Marketing Inc., Wakefield, MA, the company that administered the games and other McDonald's promotions. The employee is accused of stealing winning game pieces and distributing them to associates who recruited accomplices to claim the prizes illegally.

The sweepstakes was promoted on McDonald's Web site, via direct mail and print and broadcast ads.

The incident underscores the need for diligence by both the companies that hold contests and the agencies that promote and administer them, Lustigman said. Companies that outsource their promotional activities should take a hands-on approach to their business partners and not be lulled into a false sense of security because an outside agency is handling the promotion.

"You have to stay on top of things," Lustigman said. "You can't just delegate."

Sweepstakes and contest marketing has suffered several blows recently, including a federal law enacted in 2000 requiring increased disclosures and other regulations. One stipulation called for establishing an easy-to-use system that allows consumers to contact a marketer to have their names removed from marketing lists used for sweepstakes and contests.

In the past year, two of the nation's most famous sweepstakes holders, Publishers Clearing House and Reader's Digest, made multimillion-dollar settlements with state authorities who sued over their marketing practices. PCH paid $18.4 million and $34 million in two separate suits, while Reader's Digest paid $8 million.

Companies can work to regain consumer trust by keeping a closer watch on the firms that run the promotions, said Marc Roth, lawyer for New York firm Brown, Raysman, Millstein, Felder & Steiner. They can combat negative press generated by scandals by making good with consumers when a problem arises.

In a classic lemons-to-lemonade twist, McDonald's is launching a $10 million promotional giveaway to try to regain customer trust. The company promises to give all of the stolen prize money back to consumers in future contests.

Customers who visit a McDonald's location from Aug. 30 to Sept. 3 will have a chance to win a grand prize of $1 million. McDonald's is giving away five $1 million grand prizes and 50 $100,000 prizes at randomly selected restaurants.

McDonald's announced the promotion to the public in national newspaper advertisements. McDonald's also is marketing the promotion on its Web site, McDonalds.com, and is posting information about it in its restaurants.

McDonald's severed its relationship with Simon Marketing, cutting off the promotions marketing firm's largest account. McDonald's represented two-thirds of the $750 million the company made in sales in 2000.

"I think McDonald's took the right road there," Roth said. "In this environment, you don't want any ill will with consumers."

The marketing firm's parent company, Simon Worldwide, said it would cooperate with investigators and McDonald's, and that it first learned of the situation the morning of the arrests. Simon Worldwide also said it had hired a law firm to review its operations.