Running a Promotional Contest? Make Sure You’re in Compliance with These 3 Statutes

  • December 07, 2016
  • Fraser Turnbull

Promotional contests are a great way for the public to engage with your brand or company. They can also be utilized to drive product sales, increase subscriptions or mailing lists, and to make customers brand ambassadors on social media. However, promotional contests present legal risks for Canadian organizations and it is important to work closely with your marketing department to make sure the contest runs smoothly, or you may find yourself in a situation like Richard v. Time Inc., 2012 SCC 8.

It is important to make sure that any contest your organization puts on is in compliance with the following three statutes:

Criminal Code

While it might not be the first law you think of when running a contest, the Criminal Code has specific provisions in section 206 that affect how contests are run in Canada.

Section 206 prohibits schemes for disposing of property by “any mode of chance.” Note that this is for concerts of pure chance only –such as a lottery or raffle. Section 206(f) also prohibits the disposal of “any goods, wares or merchandise by any game of chance or any game of mixed chance and skill in which the contestant or competitor pays money or other valuable consideration.”

To comply with the Criminal Code, a promotional contest must (1) introduce an element of skill to change a contest of pure chance to one of “mixed chance and skill” (thus, our infamous “skill-testing question” for Canadian contests) and (2) provide a “no purchase necessary” option of entering the contest. 

Competition Act

The Competition Act also regulates how promotional contests are run in Canada and prohibits misleading advertising. First-time offenders can be liable for substantial penalties.

The Competition Act is concerned with the “nuts and bolts” of your promotional contest. Under section 74.06, your organization is required to disclose how many prizes are available to be won, the approximate value of those prizes, the geographic area where the contest is taking place, who is eligible to enter the contest, when the contest opens and closes, and any other fact that “affects materially the chances of winning”.

The best practice for your contest to comply with the Competition Act is to create long form and short form rules. The long form rules will generally be a separate webpage that go into detail about the terms and conditions of your contest. Meanwhile, the short form rules will be used in the advertising of your promotional contest, essentially setting up a “greatest hits” list of the most important conditions while providing a link to, and advising entrants to refer to, the long form rules.

Quebec Contest Law

If you’ve ever wondered why some contests are available across Canada – excluding Quebec – the additional regulations under Quebec’s Act Respecting Lotteries, Publicity Contests and Amusement Machines may provide the answer.

If you are running your contest across Canada, including Quebec, there are additional restrictions to think about. Generally speaking, if the value of your prize or prizes exceeds $100, you will be required to pay a duty (based on a percentage of the prize value) and provide notice to the Quebec government prior to the commencement of your contest start date.

Conclusion

This is merely a brief overview of some of the applicable laws to consider when running a promotional contest in Canada. Hopefully your organization can utilize promotional contests to increase awareness of and engagement of your brand, while minimizing the legal risks.

About the Author

Fraser Turnbull is Legal Counsel for SOCAN (Society of Composers, Authors and Music Publishers of Canada).

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