Plan for Merchandising by Lottery

No. 399, Plan for Merchandising by Lottery. The Commission issued an advisory opinion relative to proposed weekly drawings for wigs.

The wigs are purchased at $5 each wholesale and retailed to consumers at $50. None have ever been sold at retail below this price. It is proposed to establish a method by which each buyer of a wig would be assured of a wig at a price of $50 or less. The method of operation would be as follows: Customers would be divided into groups of 10. Each week, each such customer in each such group would pay $5, and a drawing would be had, the winner to receive a wig. The next week, the nine remaining persons in the group of 10 would each pay $5, and one of them would receive a wig. This process would continue, until finally the last person in the group would pay the full price of $50 for the wig.

The Commission expressed the view that the proposed course of action would constitute a scheme to sell merchandise by means of a lottery or game of chance, a sales device long held to be illegal under the Federal Trade Commission Act, Section 5. The mere fact that each participant receives a thing of value for his contribution does not negate the existence of a lottery nor change the plan’s essential nature as an appeal to the public’s gambling instincts. Clearly, the participants in this drawing would be motivated by the chance of receiving something of more value than the amount they contributed. Hence, the nature of the appeal is unmistakable. (File No. 703 7051, released Jan. 19,1970.)