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Contests

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.

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OVERVIEW

Contests in Canada are largely governed by the Competition Act, Criminal Code and common law of contract.  In addition, Quebec has a separate regulatory regime governing contests (with some additional requirements) and several other areas of law and rules can apply, depending on the type of promotion including: privacy law, intellectual property law, Canada’s anti-spam legislation (CASL) and social media sites’ terms of use.

Given that the improper operation of a promotional contest can lead to civil or criminal liability, it is important to review proposed promotional contests for compliance with key federal and provincial laws.

Operating contests in Canada typically includes the preparation of “short rules” (for point-of-purchase materials), “long rules” (or “official rules” as they are sometimes referred to), winner releases, a skill-testing question and a review creative materials for misleading advertising compliance.

The following discusses these key aspects and some other considerations that can arise in connection with the operation of contests in Canada.

COMPETITION ACT

Short Rules

The Competition Act largely requires that certain disclosure be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …”

Key Competition Act requirements include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning.  The Act also prohibits contest organizers from “unduly delaying” the award of prizes.

Based on these requirements, most contest organizers provide a short version of a contest’s terms (frequently referred to as “short rules”) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with a full version of the contest rules available on request and commonly posted on the sponsor’s website.  Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosure and other key contest elements.

While short, and usually straightforward, it is important that the mandatory statutory disclosure be drafted precisely and correctly.  It is also important that the timing for the launch of a contest and accompanying promotional materials ensure that the necessary disclosure is included in point-of-purchase and similar marketing materials where entrants first see a contest promoted.

General Misleading
Advertising Provisions

In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to contests, as with any other advertising or marketing in Canada.

In this respect, sections 52 and 74.01 of the Competition Act prohibit materially false or misleading representations to the public for the purpose of promoting products or any business interest.  The potential penalties for contravening these provisions can be severe and include civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and court orders to cease the conduct, publish corrective notices or compensate consumers.

As such, it is important that creative materials be reviewed for misleading advertising compliance before a contest is launched.

Other Competition Act Rules

In addition to the standalone promotional contest and general misleading advertising sections, the Competition Act contains several other specific provisions prohibiting certain activities in the context of telemarketing and the sending of prize notices.

Section 52.1 prohibits telemarketers from conducting contests where (i) a payment is a condition for a prize or other benefit or (ii) adequate and fair disclosure is not made of the number and approximate value of prizes, regional allocation (if any) and odds of winning.

Section 53 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 to incur another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are met.

INTERNET CONTESTS & PROMOTIONS

The Competition Bureau also 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. In this regard, the Bureau’s view is that special considerations may apply online to ensure that the required statutory disclosure for 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 labelled hyperlink as being an ‘active step.’”

CRIMINAL CODE

In addition to the promotional contest provisions in the Competition Act, the federal Criminal Code also governs the operation of contests in Canada. Section 206 contains certain lottery related offences. Generally, the Criminal Code makes it a criminal offence to operate illegal lotteries, as defined and set out by the offences under section 206.

At common law, illegal lotteries had been defined as consisting of: (i) a prize, (ii) chance and (iii) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation). These core elements of illegal lotteries are now codified (although inconsistently) in section 206 of the Code.

Based on these illegal lottery offences, it is necessary for contest organizers to structure their contests in Canada to avoid violating the Criminal Code. As such, contest organizers commonly remove either the consideration element (e.g., providing a “no purchase necessary” entry option), the chance element (e.g., including a multiple-step mathematical question as a condition of winning) or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Criminal Code.

It is important to note, however, that the illegal lottery offences under the Criminal Code are more complex than described above. As such, if planning to run a contest that deviates from commonly run types of contests, it is prudent to get some advice as to whether any possible criminal law issues may arise.

CONTRACT LAW

“The private rights and remedies growing out of prize winning contests are discussed in an annotation in (1963), 87 A.L.R. (2d) 649 et seq.  Several cases are cited in which the principle is accepted that a contract comes into existence by the promoter’s offer and the contestant’s performance of the act required in the offer.  At p. 661, the following statement is made: ‘The general rule of the law of contracts that where an offer or promise for an act is made, the only acceptance of the offer that is necessary is the performance of the act, applies to prize-winning contests.  The promoter of such a contest, by making public the conditions and rules of the contest, makes an offer, and if before the offer is withdrawn another person acts upon it, the promoter is bound to perform his promise.’”

(Group Against Smokers’ Pollution Inc. v. Manitoba (Lotteries Licensing Board), [1980] 6 W.W.R. 367, citing U.S. annotation: (1963), 87 A.L.R. (2d) 649)

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In addition to the requirements of the Competition Act and Criminal Code, contests have also been held to be contracts.  In particular, offers made by promoters have been held, when fulfilled by contestants, to be legally binding contracts.

This means that contests are governed by the common law of contract and that contests can establish contractual relations between promoters and contestants, which, if breached or unfulfilled, can lead to liability for breach of contract (or allow promoters to avoid liability, depending on a particular contest’s terms).

As such, in addition to ensuring compliance with applicable statutory requirements, it is important that contest terms and conditions are carefully and precisely drafted to reduce potential contractual liability.

This includes a careful review of short rules, long rules and winner release documentation to ensure that the terms are relevant to the promotion, precise and enforceable.

Potential technical problems and other contingencies should also be addressed in contest rules, including in relation to the unavailability of prizes as disclosed, technical problems arising from the operation of the contest (e.g., computer, Internet or server issues) and other unforeseen events.

Some common contest rule related errors I see include: terms that are not relevant to a particular promotion; U.S. or international rules used for Canadian contests; contests that purport to apply to many jurisdictions where it is not clear that rules have been vetted for the laws of other countries or Quebec; and contests run with no rules at all (or rules that do not comply with Canadian requirements).

SOCIAL MEDIA TERMS OF USE

Social media is increasingly important for effective marketing and promotion, including the operation of contests. Contest promoters should be aware, however, that most leading social media sites (including Facebook, Twitter, Google+, YouTube, Pinterest and LinkedIn) have specific, and different rules relating to contests operated or promoted on their sites. As such, it is important to take a look at the terms of use for social media sites on which you want to run or promote your contest.

PRIVACY LAW

Canadian privacy legislation also applies to promotional contests.  In this regard, contest promoters should take basic commonsense privacy law steps when collecting personal entrant information, including informed consent (e.g., a clear statement in the call to action regarding what is to be collected and what it will be used for) and the promoter’s privacy policy generally for the collection, use and protection of personal information.

INTELLECTUAL PROPERTY LAW

In addition to the above, intellectual property issues can sometimes arise in the operation of contests.  Some of the potential intellectual property (i.e., copyright, trade-mark, etc.) related issues that may need to be considered when running a contest include: whether a promoter owns the title for a contest; whether consents have been obtained for 3rd party marks, logos, photographs, etc. planned to be used for a promotion; including promoter copyright statements in contest rules; including language in rules granting a promoter the right to use original materials submitted by entrants (e.g., entry forms, photos, essays or other “consumer generated” content created and submitted by entrants, such as in skill based promotions); and representation and indemnification provisions protecting the sponsor where participants may not have rights to materials submitted for a promotion.

It is also important to note that some companies, such as Apple, have specific and in some cases quite restrictive policies regarding the use of products for prizing, use of images, marks or logos, etc.

CASL (ANTI-SPAM LEGISLATION)

Finally, with the coming into force of Canada’s new federal anti-spam law, contest promoters may need to consider the application and compliance with CASL (for an overview of CASL see: CASL).

CASL may apply where, for example, entrants are to be invited by e-mail to participate in a contest, for the follow up with entrants by e-mail or subsequent e-mail marketing (e.g., where a contest includes the right of the promoter to engage in subsequent marketing to entrants). As such, it is strongly recommended that contest promoters get some CASL advice prior to using e-mail or other electronic communications in contests and for electronic marketing more generally.

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SERVICES

Contest Law

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.

Advertising Law

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.

Competition Law

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.

To contact me about a potential legal matter: contact.