Ever wanted how to run a competition or prize giveaway for your business but don’t know where to start?
In this article, Art & Commerce’s Melbourne-based lawyer Jonathan Williamson gives you the low down on trade promotions and how to set them up and run them successfully.
So, what is a trade promotion?
A trade promotion is a competition designed to promote your business’ goods and services and increase customer engagement.
There are 2 types of trade promotions, either:
- a game of chance; or
- a game of skill.
For the competition to quality as a trade promotion (and not another form of lottery or gambling activity), the general requirements are:
- anyone can enter (although maybe subject to age limits);
- entry is free;
- must be offered by a company; and
- may require purchase of goods or services provided that they are the usual cost, and not higher on account of the competition.
Game of chance
A game of chance is where the winner is selected at random, typically through a physical draw or software-based selection process (Game of Chance).
This type of trade promotion can be referred to as a ‘lottery’, a ‘draw’ or ‘instant win’ competition.
Each Australian state and territory have laws regarding how Games of Chance are conducted. Promoters may also be required to apply for a permit or authority to run the competition. Fees apply for permit/ authority applications.
Here’s a snapshot of the position in each state and territory (noting there are specific conditions and requirements in each jurisdiction):
| State or territory | Permit or authority required? |
| New South Wales | Yes |
| Victoria | No |
| Queensland | No |
| South Australia | Yes |
| West Australia | No |
| Tasmania | No |
| Australian Capital Territory | Yes |
| Northern Territory | Yes |
The permit or authority application process varies depending on the jurisdiction. Sometimes, it can be a relatively simple process where the applicant supplies the Game of Chance competition details and then pays the respective fee.
However, in other instances, the application process is more detailed and requires more information such as the finalised terms and conditions of entry, which can take additional time to complete. If your application is incomplete or non-compliant, the application may be rejected or you may be required to submit additional information to the authority for its consideration.
Applications for a Game of Chance permit or authority can also take time to be assessed and approved. For example, NSW Fair Trading can take at least 10 business days to be approved. Permit numbers also need to appear on all creative and marketing collateral, so the earlier the permit or authority is applied for, the better.
It’s also important that the application is carefully prepared to avoid setbacks and costly delays which may disrupt your launch date or worse, cause you to cancel the trade promotion.
Because the promoter is not involved in reviewing every entry individually in a Game of Chance, once the trade promotion has launched, the promoter’s involvement is less of a burden than with a game of skill. However, there are certain formalities that the promoter must follow, eg: with respect to the conduct of the prize draw and notification of winners.
Game of skill
A game of skill is where the winner is determined based on the merit of their entry, and each entry is judged against a published entry criterion. There cannot be any element of chance in the way winners are decided.
There is less regulation of games of skill specifically however, other laws may apply (see below). For example, the entry process and judging criteria still must be communicated to entrants before entry. Terms and conditions also need to be accessible to entrants.
Each entry must also be judged on its merit separately and be subject to the same judging criteria as all other entries.
While a game of skill may be attractive to a promoter due to the potential lower set-up costs and compliance requirements, they are typically more time-intensive for the promoter in conducting the draw and entrants in completing their application, which can result in less uptake from would-be participants.
Will I need a permit to run my trade promotion?
The requirement for a permit or authority for your trade promotion depends on:
- the promotion mechanic (eg game of chance or game of skill);
- the value of prize pool being offered; and
- the states and/or territories in which you plan to run the competition.
See below for information on the regulatory requirements.
Which option should I use?
In considering the right option for your trade promotion, you need to determine:
- the mechanic/method and ease of entry;
- the amount of lead time you have before commencement;
- the value of the prize pool;
- location of competition/potential entrants; and
- amount of involvement you are willing to have in choosing the winner(s).
How are trade promotions regulated?
As noted above, each Australian state and territory has laws regarding the conduct of trade promotion lotteries – so unfortunately, there is no ‘one-size-fits-all’ regulatory approach.
This means promoters need to pay particular attention to the requirements of the jurisdiction where they plan to run the competition. If the trade promotion running nationally, you need to comply with the regulations in every jurisdiction, not just where your company is based.
The Australian Consumer Law and the Privacy Act may apply in relation to:
- the entry requirements and statements made about the mechanics of the promotion (eg are they misleading and deceptive); and
- how you collect and use the entrant’s personal information.
What about marketing and promotional collateral reviews?
In addition to assessing the type of trade promotion and ensuring it is compliant with the relevant regulations, promoters need to consider whether the copy, images and sounds they use in their creative to describe the goods or services, and the mechanics of the competition may need to comply with:
- the Australian Consumer Law;
- any third party intellectual property rights (eg trademarks, copyright and designs); and
- Australian Association of National Advertisers (AANA)’s code of ethics.
How we help clients with trade promotions
We advise our clients in advising on and setting up trade promotions by:
- advising on the appropriate competition mechanic (eg game of chance or game of skill);
- preparing and filing applications for permits and authorities;
- drafting competition entry terms and conditions in clear and concise language;
- reviewing marketing copy and other elements in the creative for a compliance review;
- advising on intellectual property matters;
- reviewing trade partner and promotion agreements with prize suppliers and other third parties;
- drafting/ reviewing talent and influencer agreements; and
- drafting/ reviewing contractor/ licence agreements with creatives (eg designers, digital strategists, social media promotions teams.
We carefully consider the aims of the promoter and then assist them to set-up their trade promotion in a compliant and user-friendly manner.
We recommend consulting with us at the earliest opportunity so we can guide you through the process to ensure the trade promotion is set up correctly and runs smoothly and on time!
How to access legal help with my trade promotion?
Should you require assistance with a trade promotion in Melbourne, contact Art & Commerce either by email or book a free 15-minute consult via our website so we can discuss your project and provide a scope of work and fixed fee proposal.
Disclaimer
The information in this article is general in nature, does not constitute legal advice and should not be treated as such. You must not rely on this information as an alternative to legal advice from a qualified lawyer.
Photo by Nick Fewings on Unsplash