Legal requirements for running promotions and competitions

It may seem like a very mundane topic to write about, but in fact it’s one of the most important elements to running consumer promotions, competitions, Facebook promotions, loyalty programmes, or any other type of lottery or sweepstake. So spare a few minutes and take a read of the following guide to make sure you are covering all your legal bases – it might just save you time and money in the long run!

Do I really need Terms & Conditions or Permits?

Terms and Conditions are required for EVERY competition you run, whether it’s a game of skill or game of chance and are considered the ‘rules of the game’. They cover the mandatory things like open and close dates, prizes, prize value, conditions of entry, competition mechanics and promoter details. They also protect the promoter in limiting liability and providing recourse in the event of a dispute.

All Terms and Conditions must be made freely available to anyone who is likely to enter your competition. Common practice is to have abbreviated terms on your promotional materials or promotional website with reference to a full set posted online. These abbreviated terms need to comply with specific regulations from the State Lottery Departments and have certain mandatory details included.

Rules for running competitions are different in every state with only some states requiring permits, and various types of competitions being exempt. You could call each of the various State Lottery Departments (which can be very time consuming), or work with an experienced agency who can assist with the correct up-to-date information and application processes.

These specialists can also ensure that you’re running a smart competition; this is where the science of promotions and prizing comes in, and the expert knowledge of how to run a promotion can assist in minimising costs and maximising ROI.

Game of Skill VS Game of Chance – What is the difference?

• A game of chance is when the winner is determined by an element of random chance i.e. “Buy this product to go in the draw for the chance to win $50,000 cash.”

• A game of skill is a competition with a judged element to determine the outcome i.e. “Tell us in 25 words or less why you like to win a trip to Fiji.”

• A game of skill is generally judged on either creative or literary merit. It cannot contain any element of chance in determining the winner.

• Merely asking someone a question does not constitute a game of skill; as soon as more than one person can get a correct answer, the rules change and the competition becomes a game of chance (requiring permits). Skill requires unique answers capable of being judged, which is why most questions in a game of skill are based around “why” e.g. “tell us in 25 words or less why xxxx”

When are Permits required?

All promotions which contain an element of chance in the determination of winners (e.g. via a draw, instant win, etc.) are known as ‘Trade Promotion Lotteries’ and generally may require a permit number. Permit requirements vary depending on State or Territory, promotion mechanics and total prize pools. Permit fees are calculated on the total value of the prize pool.

Blanket Permits, available in NSW and ACT, are a great option if you plan to run several trade promotions in a defined period (within 1 year). This is how the radio stations are able to constantly have competitions on-air. They still require permits, but you can apply for a blanket permit and then update the Terms and Conditions for every promotion. Blanket Permits, however, are subject to strict requirements and limits on prize pools and values so they should only be used for small competitions with low value prizes.

Unfortunately permits can be considered expensive, time consuming and an all-around hassle, however as they are a legal mandatory when running a promotion that has an element of chance, in certain States and Territories, they are a necessity. Working with a specialist in this area can ease the burden and make for a smoother, more timely process.

CONSEQUENCES – What can go wrong?

Terms and Conditions play an important role in protecting all parties involved in the promotion and create a fair playing field leaving no room for misinterpretation. The promoter and agency will use these as a reference when speaking with entrants and winners to ensure all information being communicated is correct.

The Terms and Conditions form a legal binding contract and in most circumstances cannot be altered once the promotion has commenced. If permits have been applied for, these allocated permit numbers MUST appear on all promotional material along with other mandatories such as open/close dates, draw dates, onerous conditions, etc. If amendments are required after the permit numbers have been allocated, changes can be made prior to launch or publication but they need to be applied for. This can take additional time, so getting all details right the first time is crucial.

Don’t make Terms and Conditions an afterthought and think that nobody reads them. In fact, they are more widely read than you would think and sadly, in many cases consumers are looking for ways to get around the rules or to see if there is some type of loophole within the promotion. Remember, you don’t want the negative PR story on ACA from a jilted winner.

If you have a question or need advice on the requirements of competitions, we have been successfully running them for our clients for over 12 years and are more than happy to help. Contact us at [email protected].