CONTEST RULES/PRECEDENTS
Do you need contest rules/precedents
for a Canadian contest?
We offer many types of Canadian contest/sweepstakes law precedents and forms (i.e., Canadian contest/sweepstakes law precedents for running common types of contests in Canada). These include legal precedents for random draw contests (i.e., where winners are chosen by random draw), skill contests (e.g., essay, photo or other types of contests where entrants submit content that is judged to enter the contest or for additional entries), trip contests and more.
We also offer specific types of Canadian contest/sweepstakes precedents, including short rules (“mini-rules”), long rules, winner releases and a Canadian contest law checklist.
For more information and to order see: Canadian Contest Law Forms/Precedents.
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OVERVIEW OF CANADIAN CONTEST LAWS
Contests in Canada are largely governed by the Competition Act, Criminal Code and common law of contract. In addition, several other areas of law and rules can apply, depending on the type of promotion including privacy law, intellectual property law, Canada’s federal 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, or what can be equally bad for brands negative publicity, 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, footers of webpages, footers of social media pages, etc.), long rules (or “official contest rules” as they are sometimes referred to), winner release forms, a skill-testing question and reviewing draft creative/marketing 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 Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes.
Based on these requirements, most contest sponsors provide a short version of a contest’s terms (commonly 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 hosted online on a subpage. Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosures under section 74.06 of the Competition Act and other material contest terms.
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 they do for 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 (i.e., administrative monetary penalties): (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit obtained from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues. Other penalties include court orders to cease the conduct, publish corrective notices or compensate (i.e., make monetary restitution to) consumers.
As such, it is important that draft creative/marketing 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 of the Competition Act 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 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 to incur another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are met.
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(1) contains a number of illegal 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(1).
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 and in some offences not clearly) in section 206(1) of the Code.
Based on these illegal lottery offences, it is necessary for contest organizers to structure 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 pure chance element (e.g., including a multiple-step mathematical question as a condition of winning a prize) 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 can be complex to apply for some types of promotions. As such, if planning to run a contest that deviates from commonly run types of contests with a typical no purchase required entry option and skill-testing question, it is prudent to get legal advice as to whether any possible criminal law issues may arise.
CASL (FEDERAL ANTI-SPAM LEGISLATION)
Canada’s federal anti-spam legislation (CASL) is often relevant when running contests in Canada, including if electronic distribution lists will be used to market the contest, the contest will include the collection of e-mails for marketing unrelated to administration of the contest, if entrants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or entrants can “share” the contest with friends or family for additional entries.
Given the potentially severe penalties for violating CASL, which include administrative penalties of up to CDN $10 million, it is important for contest sponsors to ensure that they comply with CASL for electronic marketing related to promotional contests open to Canadians.
For more information about contests and CASL, see: Contest Law and CASL and CASL Compliance Errors. For CASL checklists and precedents that we offer for sale, see: CASL Checklists and Precedents.
SOCIAL MEDIA TERMS OF USE
Social media is increasingly important for effective marketing and promotion, including running Canadian contests. Social media can be used to market contests, have entrants help market promotions, be used to incentivize entrants to market a contest for bonus entries and be used as integral parts of a contest structure (e.g., in photo, essay and other skill-based types of contests).
Contest promoters should be aware, however, that most leading social media sites (including Facebook, Twitter, YouTube and LinkedIn) have specific and different rules relating to contests operated or promoted on their sites. As such, it is important to review 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
Intellectual property law issues can also sometimes arise in connection with running contests in Canada.
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 sponsor copyright statements in contest rules, including language in contest rules granting the sponsor 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 have specific and in some cases quite restrictive policies regarding the use of their products for prizing, use of their images, marks or logos.
QUEBEC
On October 27, 2023, the province of Quebec made significant changes to its rules relating to publicity contests open to Quebec residents. In this regard, it repealed the provisions of the Act respecting lotteries, publicity contests, and amusement machines relating to publicity contests and repealed its former rules regarding publicity contests.
As such, sponsors of contests open to Quebec residents no longer must formally file their contests with the Régie des alcools, des courses et des jeux (Régie) or pay duty (essentially a fee) to the Régie based on the value of contest prizes, file a winners report at the end of a contest or post security in Quebec, which was formerly required in some cases. Other requirements applying to publicity contests run in Quebec were also eliminated, including the necessity to include specific Quebec-related disclosure language in contest rules and seek permission for contest modifications after contest launch.
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CANADIAN CONTEST & ADVERTISING LAW SERVICES
We are a Toronto based competition and advertising law firm that offers business and individual clients efficient and strategic advice in relation to Canadian competition and advertising laws, including contests/sweepstakes and other types of promotions. Our experience includes advising Canadian and U.S. clients in relation to Canadian contest/sweepstakes, advertising/marketing and competition/antitrust laws.
For more about our contest/advertising law services see: here
To contact us for Canadian contest or advertising law advice see: here
For more information about our firm, visit our website: Competitionlawyer.ca