What, if any, consequences exist in practice for "purchase required" sweepstakes & drawings?

Question

I frequently see promotions like the following: "If [and only if] you make a purchase or donation, you will be entered into a drawing to win X."

Larger and more conservative corporate sponsors of such drawings often have fine print saying "No purchase necessary, for official rules that include an alternative method of entry click here." This leads me to think that alternative methods of entry are required and that there are rules about requiring purchase or donation in order to be entered (and they probably fall under "illegal lottery" rules).

However, I also commonly see examples where there are no alternative methods of entry (e.g. no official rules, short official rules that don't include it, official rules that link to a 404 Page Not Found for alternative method of entry, or alternative method of entry pages that don't allow you to enter the drawing being advertised as tied to the purchase/donation).

From the perspective of a potential offerer of such promotions, I can see why there's clear incentive to simplify and only offer an actual chance to win to anybody who's doing the requested action.

From the consumer perspective, I don't see how any individual would have standing or individual damages that would motivate or permit anybody to do anything about it. Individuals/consumers also don't have places to report such observations (do they?), and any state or federal agencies would find even giveaways worth a few thousand dollars not worth doing anything about. Most prizes are worth a lot less; are there official thresholds where the rules do/don't apply?

As described above, incentives seem aligned to permit organizations to advertise publicly even if some percentage of observers will notice potential violations of rules/laws. What, if any, practical consequences could (or recently have) come to organizations for offering such an incentive?

Assume US law; if states matter try NJ, PA, NY, and/or CA and/or assume Web-based promotions, according to what's most convenient for you to answer.

Answer 1

In California, you are correct that this is an illegal lottery if you require that customers to purchase something in order to qualify for the drawing. The elements of a lottery are: a prize, distributed by chance, with consideration required to be eligible for the prize (e.g. "you must make a purchase to be eligible"). If the store would actually let someone enter without a purchase but represents that paying is necessary or helpful, or treats people who paid differently than those who didn't, it isn't a lottery, but is an illegal sweepstakes (source).

Running a lottery in California, with the exception of chartable bingo, charitable raffles, and the official state lottery, is a crime. So is running an illegal sweepstakes. It can be reported to the police; the entity with standing to bring a case is the People of the State of California.

As for lawsuits, it is possible that someone who paid to enter could sue under section 17200 of the Business and Professions Code, which allows those directly harmed by unlawful business practices to sue. A case before a California appellate court found that someone who paid to enter an illegal lottery could sue a payment processor who had actual knowledge that the site was a lottery; I can't find the ultimate result of the lawsuit (and the appeal doesn't cover the website itself), but it at least strongly suggests that someone who paid to enter can have standing to bring a lawsuit.