What you need to know about running a competition

19 Sep 2017

  • Governance

Businesses often run competitions (also known as trade promotions) to increase consumer engagement with their brand, product or service or to boost brand and product visibility.  A Trade Promotion is a free-entry competition held by a business to promote its goods or services. 

A business can run a trade promotion as either:

(1) a game of chance where all entrants have an equal chance of winning; or
(2) a game of skill where the winner is chosen against set criteria. 

All trade promotions, whether a game of chance or a game of skill, must comply with all consumer protection and privacy laws, such as the Australian Consumer Law and Privacy Act.  This may include for example ensuring that any activities or conduct relating to the competition or trade promotion is not, or is not likely to be, misleading or deceptive and that no misrepresentations are made in relation to the competition or trade promotion.

In addition, you must ensure that you provide all entrants with your privacy policy, including accurate information about what personal information you will collect, what you will use it for, how you will use it, and whether it may be disclosed or shared (including with third parties, online, and overseas). 

If the trade promotion or competition is a game-of-chance, you will also need to comply with the applicable trade promotions laws.  Trade promotions laws are state-based laws that set the rules for how trade promotions can be run in the relevant state.  These laws vary from state to state and usually require businesses to apply for a permit to run a game of chance, sets criteria for Terms and Conditions, and sets out rules for drawing a winner.

As trade promotions laws are State-based, businesses must take extra care to ensure compliance with the various rules of each State when running an online competition.

What is a Trade Promotion?

A trade promotion is a free-entry competition run to promote your brand, business, products or services. 

When running a trade promotion, you must satisfy the following three criteria:
(1) The competition must be free to enter and must not require entrants to buy tickets or to provide anything of value.  There is an exception to this rule which allows a business to require entrants to purchase goods or services at their regular retail price as a precondition for entry into the competition. For example, entrants cannot redeem loyalty or reward points for entry and you cannot charge an entrant $10 to enter a trade promotion, but you may require a customer to buy a particular product to enter the competition.
(2) The competition must genuinely promote your business, or one of its products or services.
(3) Your business must have an ABN or ACN.

What is a Game of Chance?

A Game of Chance is a trade promotion that is free for entrants to enter and where all entrants will have an equal chance of winning the prize based on the element of ‘luck’ or ‘chance’. While games of chance can involve some element of skill – chance decides the outcome.
For example, a draw may be conducted by using a computer pick generator that randomly selects a winner from a pool of contestants.

Businesses running a game of chance in NSW must apply for a permit.  Businesses running a competition with a prize value of more than $3,000 in ACT or more than $5,000 in South Australia will also be required to apply for a permit in order to run a game of chance competition. In addition, all States require businesses to abide by certain trade promotion rules, including for reporting, Terms and Conditions, and random selection.

What is a Game of Skill?

A Game of Skill is a trade promotion where the winner is decided by qualified or expert judges against set criteria.
Businesses running a game of skill are not required to apply for a permit in any State in Australia.

Do I need a Permit for my Trade Promotion?

When deciding to run a Trade Promotion, you should consider in which State the Trade Promotion will be run in order to determine whether you need a permit.  If you run an online competition, for example on Facebook, you will need to ensure you obtain the relevant permit for each State as outlined in the table below:

STATEGAME OF CHANGEGAME OF SKILL
NSW
 

Permit is required for all trade promotions, regardless of value of the prize

Note: if the proposed laws are approved by the NSW Parliament at the end of 2017, a permit will only be required for trade promotions where the ordinary retail value of the prize or prize pool exceeds $10,000

No permit required
ACT
 
Permit is required for all trade promotions where the ordinary retail value of the price or prize pool exceeds $3,000No permit required
VIC
 
No permit required, but businesses must still abide by certain state trade promotions rulesNo permit required
SA
 
Permit is required for all trade promotions where the ordinary retail value of the price or prize pool exceeds $5,000No permit required
TAS
 
No permit required, but businesses must still abide by certain state trade promotions rulesNo permit required
QLD
 
No permit required, but businesses must still abide by certain state trade promotions rulesNo permit required
WA
 
No permit required, but businesses must still abide by certain state trade promotions rulesNo permit required
NT

Permit is required for all trade promotions where the ordinary retail value of the price or prize pool exceeds $5,000

Note: no permit will be required if the business has a valid permit to run the particular trade promotion in any other State.

No permit required

What should the T&C’s cover?

It is essential to ensure that your Terms and Conditions that accompany a trade promotion comply with the Australian consumer protection laws and are not misleading or deceptive.

In addition, the various trade promotions laws across all states require that you provide at least the following information in your Terms and Conditions:
• eligibility criteria or other conditions to enter into the competition
• how long the competition will run for, including the promotional period and closing time and date for submitting the entry
• prize details
• how a winner or winners will be determined
• how a winner or winners can claim the prize
• procedure that will apply if the winner fails to claim their prize within a set period of time
• privacy policy, including how you will collect, use and disclose entrants’ personal information

In addition, if you run a game of chance you must also ensure that:
• the date of the draw occurs within the 12 month period of the permit being issued
• details of the winners are published within 48 hours of the draw
• the winner is able to claim the prize for three months from the date of the draw
• if the prize has a value of $500 or more, you publish a public statement of the winner(s) online (or via print).

Need more info?

CATEGORY Governance