CANADIAN CONTEST RULES & FORMS
Need contest rules and forms for a Canadian Contest?: I offer a selection of Canadian contest rules and forms for common types of Canadian contests. For more information see: Contest Forms.
What laws govern promotional contests in Canada?
In Canada contests are governed for the most part by the federal Competition Act and Criminal Code, privacy legislation and the common law of contract. In addition, Quebec has a separate regulatory regime governing contests.
What are the potential penalties for non-compliance?
Given that the improper operation of a promotional contest can lead to civil and/or criminal liability under the Competition Act, Criminal Code, based on a contractual (i.e., common law) challenge or failure to comply with Quebec’s legal requirements, it is important to review draft contest materials for legal compliance.
The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations), as well as court orders to stop conduct, publish corrective notices or compensate consumers (i.e., restitution).
What sections of the Competition Act apply to contests?
The Competition Act largely requires that certain disclosure be made when operating contests (i.e., conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …”).
Some of the key Competition Act requirements for contests include disclosure of: (i) the number and approximate retail value of prizes, (ii) regional allocation (if any) and (iii) odds of winning. The Competition Act also prohibits contest organizers from unduly delaying the award of prizes.
What are “short rules”? Are they mandatory?
Based on the disclosure requirements set out in the Competition Act, most contest organizers provide a short version of a contest’s terms (commonly referred to as “short rules”) for point-of-purchase materials – e.g., retail outlets, packaging and/or Internet web pages.
Point-of-purchase disclosure typically includes the mandatory Competition Act disclosure discussed above, as well as other key requirements (e.g., skill testing question requirement, opening and closing dates of the contest, etc.).
While short and usually straightforward, it is important that the statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and promotional materials ensure that the necessary disclosure be included in all public marketing materials – for example, print advertising, websites, social media pages, etc.
Are there other Competition Act provisions that apply to contests?
Yes. In addition to specific promotional contest rules, the “general misleading advertising” provisions of the Competition Act also apply to the operation of contests in Canada. In other words, it is also necessary to ensure that marketing materials for contests are not false or misleading generally.
The Competition Act also contains several other specific provisions regulating contests operated in the context of telemarketing and prize notices.
Section 52.1 of the Competition Act prohibits telemarketers from conducting contests where: (a) the delivery of a prize (or other benefit) is or is represented to be conditional on prior payment or (b) adequate and fair disclosure is not made of the number and approximate value of prizes, the area or areas to which they relate and the odds of winning.
Section 53 of the Competition Act prohibits prize notices sent by electronic or regular mail that give the general impression that a recipient has won (or will win) a prize and requires a payment (or incurring another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are satisfied by the sender.
What is the scope of the Competition Act’s misleading advertising provisions?
The criminal and civil misleading advertising provisions of the Competition Act prohibit representations to the public, for the purpose of promoting a product or any business interest, that are false or misleading in a material respect.
The potential penalties for misleading advertising can also be severe, and include civil fines of up to $750,000 (for individuals) and $10 million (for corporations), as well as court orders to cease the conduct, publish corrective notices or compensate consumers (i.e., restitution).
Does Canadian competition law apply to the Internet?
The Competition Bureau takes the position that the promotional contest provisions of the Competition Act, as well as the general misleading advertising provisions, apply to Internet marketing and advertising.
For example, in the Competition Bureau’s Internet Enforcement Guidelines, the Bureau states that special considerations may apply in the online environment to ensure that the required statutory disclosure for promotional contests is met:
“Pursuant to section 74.06 of the Act, in contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chances of winning. … The Bureau takes the position that all required disclosures must be displayed in such a way that they are likely to be read. In the context of representations made on-line, what is considered adequately displayed will depend on the format and design of the Web site. For example, a notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call, in order to obtain the required information. The Bureau does not consider clicking on a clearly labeled hyperlink as being an ‘active step.’”
What Criminal Code provisions apply to contests?
In addition to the contest sections of the Competition Act, the Criminal Code also governs contests in Canada (sections 206 and 207). The Criminal Code makes it a criminal offence to operate illegal lotteries.
What is an “illegal lottery”?
While the relevant provisions of the Criminal Code are complex and somewhat archaic, in general an illegal lottery consists of: (a) a prize, (b) chance and (c) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest).
The Criminal Code also contains a pyramid selling offence, which sometimes must be reviewed as well where entrants are required to pay money or securities to participate in a promotion.
Why is a “no purchase necessary” option and skill-testing question typically included in Canadian contests?
Based on the illegal lottery offences in the Criminal Code, contest organizers often remove either the consideration element (e.g., a “no purchase necessary” entry option), total chance element (e.g., adding a skill element, for example making the contest a skill contest or including a skill-testing question requirement to make a contest mixed skill and chance).
It is worth noting, however, that the determination of what constitutes “consideration” and “chance” can be complex in some cases, and a number of other fact specific issues can arise in connection with a particular contest or promotion.
Are contests contracts? What are the legal requirements?
In addition to the regulatory requirements of the Competition Act and Criminal Code, promotional contests have been held to be contracts. As such, contests are also governed by the common law of contract.
For this reason, in addition to ensuring compliance with the statutory requirements of the Competition Act, Criminal Code, privacy law and Quebec legislation (if applicable), it is also important for promotional contest terms to be precisely drafted to accurately reflect the type of promotion, anticipate potential contingencies and give a promoter the ability to take steps in the event issues arise.
Does Canadian privacy law apply to contests?
Contest organizers should be aware of the basic key privacy law requirements, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest. This typically includes obtaining consent for the collection of personal information, disclosing the uses for which it will be used and destroying the information once a promotion is completed.
What are some of the key practical considerations to operating a contest in Canada?
The following is a list of some of the key tips, though not meant to be an exhaustive check-list, for operating a successful contest in Canada:
1. Criminal Code. Take care to avoid the Criminal Code illegal lottery offences.
2. Short Rules. Include “short rules” including all of the required Competition Act disclosure requirements for point-of-purchase materials (e.g., print and in-store marketing, social media and Internet sites, packaging and labeling, television spots, etc.).
3. Long Rules. Ensure that precise “long rules” are prepared that reflect the details of the contest, cover potential contingencies (e.g., technical problems) and set out the details of the promotion as clearly as possible – for example, eligibility; how to enter; prize descriptions, number and value of prizes; draws and award of prizes; odds of winning; and indemnity and release provisions.
4. General Misleading Advertising Provisions. Ensure that none of the advertising or marketing materials are generally false or misleading (i.e., comply with the “general misleading advertising” sections of the Competition Act).
5. Checklists. If contests are routinely used for marketing, consider developing an internal checklist to ensure that all key legal requirements are included.
6. Quebec Laws. Ensure that Quebec legal requirements are met for contests run in Quebec (or that eligibility is limited to Canadian residents, excluding Quebec).
7. Intellectual Property Consents. Consider whether consents are needed (and if necessary obtained) to reproduce 3rd party intellectual property or transfer ownership in contest materials – for example, where contestants create original material as part of a contest or promotion.
8. U.S. Advice. Seek U.S. legal advice if the contest will be open to U.S. residents (or limit the contest to Canada).
10. Other Competition & Advertising Rules. Consider whether other competition or advertising law rules may apply. For example, in addition to a stand-alone contest provision, the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising and telemarketing that involves prizes.
I offer a full range of Canadian contest legal services for compliance with the Competition Act, Criminal Code and other relevant laws. My services include: preparing contests to comply with relevant federal laws, drafting short and long contest rules and statutory disclosure, reviewing promotional contest marketing and advertising materials for Canadian advertising law compliance and winner releases.
I help clients practically navigate Canada’s advertising and marketing laws and offer Canadian advertising law services in relation to print, online, new media, social media and e-mail marketing.
My Canadian advertising law services include advice in relation to: anti-spam legislation (CASL); Competition Bureau complaints; the general misleading advertising provisions of the Competition Act; Internet, new media and social media advertising and marketing; promotional contests (sweepstakes); and sales and promotions. I also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers and native advertising.
I offer business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
My experience includes counseling clients on the application of Canadian competition and regulatory laws and I have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal, pricing and distribution, Investment Canada Act and merger matters.
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