Competition Law

I'm the webdeveloper for www.thecarshowcase.com. We're working on a site where visitors can pay to enter competitions. Competition winners are selected based on the best car modifications. Prizes will be auto hardware (donated by sponsors).

Anyway, my reason for posting is that we've heard that the above is classed as an illegal lottery? Can anyone provide us with a bit of information on this.

This is tricky stuff. I've seen large corporations fall into this trap! Be careful and get counsel review on what you are doing.

The problem is that when you ask people to pay a fee in order to get something that, by chance, may be worth more then that fee, you may be running a lottery.

I've seen this issue come up with trading cards. Kids by trading cards hoping that they will get a "valuable" card. The cards are "valuable" because they can be sold on ebay for a lot of money... thus the possibility of a lottery.

Be careful, talk with an experienced business attorney in this area. Even if the law is unclear, by reviewing it with counsel you have a defense that "your lawyer said it was OK, and who were you to know any different?"

Good luck! (pun intended)