Crack Down

Every promotion is vulnerable to fraud. Marketers have come to expect it. Agencies administering them have learned to establish layers of protection to prevent it. Still fraud continues to creep through the cracks.

Who can forget McDonald’s famed Monopoly fraud when a Simon Marketing employee fixed winning prizes and swindled more than $13 million, sending shockwaves through the industry. The covert operation to hijack the big-prize winnings became the poster child for companies who engage in contests, games and sweeps.

Since then, marketers and agencies are ever more cognizant of the risks and have tightened controls to ensure they do not become the next victim. But despite the efforts, with big ticket giveaways and captivating prizes continue to attract fraudsters.

“Fraud exists in this business as it does in any business,” says Neal Frank, president of Marlin Entertainment, Westport, CT. “The way to combat fraud is to really understand how people can bypass the legal requirements and fraudulently participate in something they’re not entitled to.”

Take Subway restaurants. Last year, the franchise discontinued a Sub Club promotion that had been underway for at least 25 years because of rampant fraud. Under the program, customers received a card, which was stamped each time the customer bought a six-inch sandwich. After eight stamps, the card could be redeemed for a free sandwich. Counterfeit stamps emerged and Subway had no choice but to end the program and replace it with electronic loyalty cards or other in-store promos.

Fraudsters are sneaky and swiftly change tactics if one is discovered.

In some instances, scam artists download programs that create hundreds of e-mail addresses with slight variations, which then automatically submit entries multiple times to online sweeps, says Joseph Lewczak, partner in advertising/marketing promotions at Davis & Gilbert LLP, New York City.

Also targets: promotions that allow consumers to vote online for their favorite entrant. Consumers use these contests to submit entries then repeatedly vote for themselves. To combat the problem organizers have resorted to placing cookies (a virtual fingerprint) on participants’ computers to prohibit multiple votes that skew the results, Lewczak says.

One tool considered the first line of defense is the “official rules” guiding campaigns. In recent years the rules have undergone some tweaking to accommodate changes in technology that broadens the ways consumers can enter to play.

Disclaimers, such as “sponsor may disqualify at its sole discretion any entries it believes are created by an automated system” or “sponsor may disqualify at its discretion any entries it believes exceed the weekly minimum,” are now common.

Many organizations are surprised when 10,000 entries arrive but only 1,000 or 100 are unique, says Duncan McCready, executive-VP IC Group Inc., Toronto. To remedy the problem online, some marketers have implemented CAPTCHA (for Completely Automated Public Turing test to tell Computers and Humans Apart), a technology that distorts letters on the Web. Consumers have to interpret and enter what they see before completing an online submission; this bars computers from automatically creating entries. The method has helped weed out illegitimate entries, McCready says.

To catch potential problems early on, an agency should launch promotions when they can be monitored, says Linda Goldstein, chair of the advertising and marketing group Manatt, Phelps & Phillips LLP, New York City.

“If promotions go wrong and there’s a chance for someone to win a prize they shouldn’t have, it typically happens early,” Goldstein says. It’s better to launch a contest at nine in the morning than at 12 midnight so that administrators can keep their eyes peeled for anomalies, she says.

“No one person should have all the information related to a game” or have access to certain elements of a promotion, Goldstein says. The McDonald’s case proved that lesson.

In light of what happened to the fast food franchise, experts say that marketers should audit agency’s security procedures and protocols before signing on the dotted line.

“It used to be that once in a blue moon someone would come in and check an agency’s system, now it’s a regular thing,” says Bruce Hollander, executive-VP, Don Jagoda Associates Inc., Melville, NY.

In instant-win games, cameras continue to play an integral part of the redemption process. Videotaping the opening of envelopes with redemption information proves helpful when disputes arise. For example when a consumer claims they mailed in a winning piece the claim can be refuted by playing back the tapes.

Then, there are fraudsters who tamper with checks mailed as prizes to change the dollar values, Hollander says. “Because of the level of sophistication of personal computers, consumers can change $50 to $500 or $10 to $100,” Hollander says. Although rare in occurrence, companies need to keep tabs on accounting measures to ensure that each check amount issued is the amount endorsed, Hollander says.

Scam artists have also sought to outwit game organizers by modifying and erasing the words such as “Sorry Not a” from “Sorry Not a Winner” game pieces so that they read “Winner.” Fraudsters employ high-tech copy machines to doctor other game pieces, Hollander says.

Some scam artists are skilled enough to decipher winning and non-winning packages, especially if they are not printed at the same time or have slight variations in the run.

“It’s become a cottage industry,” Marlin Entertainment’s Frank says.

For other promotions, administrators have integrated anti-counterfeiting devices into pieces so that any tampered piece can be easily identified, Goldstein says.

Still others continue to use the time-tested approach of tracking where winning claims originate. If a disproportionate number of winning claims are submitted from a specific region, they are separated and red flagged for closer scrutiny.

With all these security measures and layers of protection in place, promotions are somewhat protected. But given the fact that they could be subjected to fraud hasn’t deterred marketers.

“A couple of isolated companies that have experienced fraud…should not prevent other companies from taking advantage of a powerful marketing tool,” Frank says.