In an interesting recent contest / sweepstakes case, A&P has reportedly agreed to settle charges alleging that it violated New York State sweepstakes laws by failing to adequately inform consumers that no purchase was required to enter its “A&P Frozen Food Month 2013” sweepstakes (for reports see: here and here).
According to reports, A&P has agreed to hire a compliance officer to monitor future promotions and pay a $102,000 fine. New York State’s Attorney General, Eric Schneiderman, said:
“Under New York State law, companies that conduct sweepstakes must play by the rules by providing a level playing field for consumers, including those who do not make a purchase.” … “Today’s settlement ensures that A&P, which has previously ignored the law in this area, will provide an alternate method of entry which does not require a purchase and to fully inform consumers that no purchase is necessary to enter and win a sweepstakes. Because of the repeat violations, we are requiring that A&P hire a compliance officer and put strict safeguards in place.”
While consumers in this A&P promotion could enter without a purchase, the company was reported as not making that information clear, which implied that a purchase was necessary.
In Canada, contest promoters commonly include no purchase required entry options and skill-testing questions to avoid the illegal lottery offences of the federal Criminal Code. In addition to the necessity of taking steps to avoid these offences when structuring contests in Canada, the Competition Act and Competition Bureau require that certain mandatory disclosure be made relating to the essential elements of contests (so called “short rules” available at point-of-purchase).
This information includes the number and approximate value of prizes, any regional allocation of prizes, skill testing question requirement, odds of winning and contest closing date. From a disclosure / misleading advertising point of view, my practice has been to also disclose the fact that no purchase is required, who is eligible to enter (and whether the promotion is open in Quebec or the U.S., assuming the contest has been vetted for Quebec/U.S. compliance), how and where to enter and where to obtain full contest rules.
The Competition Bureau also specifically refers to the importance of prominently disclosing a no purchase requirement in its Promotional Contests Enforcement Guidelines:
“Where no purchase is required, this fact should also be prominently disclosed in situations where failing to do so could lead those wishing to participate to make a purchase (due to a mistaken belief that a purchase is necessary in order to participate) or, alternatively, in situations where they might be discouraged from entering, thus materially affecting participants’ chances of winning.”
It is also worth pointing out that “no purchase entry” options should be disclosed and given “equal dignity” (i.e., not have no purchase entry options be mere shams and treated equally with entries from purchasing customers).
Some common errors that I see in promotions in Canada, particularly online contests, include contest terms that are not relevant to a particular promotion, U.S. or international rules applied to Canadian promotions, contests that purport to apply across Canada and the U.S. (where it is unclear that rules have been vetted for U.S. or Quebec requirements) and contests operated with no (or few) rules and inadequate disclosure, including failing to include the statutory disclosure required by the Competition Act.
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Legal Tips For Running
Contests/Sweepstakes in Canada
The following are some key legal tips for running contests/sweepstakes in Canada:
Criminal Code. Avoid the illegal lottery offences of the Criminal Code (e.g., include a bona fide “no purchase necessary” entry option and skill element, such as a time-limited, multiple-step mathematical question for potential winners as a condition of awarding a prize).
Short Rules. Include short rules (i.e., mini-rules) with 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 and radio spots, etc.). For more information, see: Canadian Contest Forms and Precedents.
Long Rules. Ensure that precise long rules (i.e., the “official contest rules”) are included that reflect the details of the contest, anticipate potential contingencies (e.g., technical problems) and set out the details of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and values, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors. Standard precedents, or rules downloaded from the web rarely accurately reflect a particular promotion. In this regard, contests are contracts, and so they should be as accurate, clear and precise as possible in the event issues arise. For more information, see: Canadian Contest Forms and Precedents.
Winner Release Forms. Consider using winner release forms for contest winners. While not required by law in Canada, winner releases are almost always used by contest sponsors to have winners confirm that they have complied with all contest rules and release the sponsor from legal liability. Signing and returning winner releases is also commonly included in contest rules as a condition of prize award. Winner releases are particularly important for contests in which there may be higher risk (e.g., where the contest involves high value prizes or a trip prize). For trip contests, sponsors are generally advised to use releases for both winners and any travel companions (and guardian releases for minors). For more information, see: Canadian Contest Forms and Precedents.
Misleading Advertising. Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general misleading advertising sections of the Competition Act). In this regard, contests in Canada must comply not only with stand-alone contest provisions of the Competition Act (under section 74.06), but also with the general misleading advertising sections of the Competition Act. It is particularly important to ensure that the marketing collateral matches the contest rules and that key aspects of the contest (e.g., number and type of prizes, prize values, how to enter and win and any conditions/limitations) are accurately described.
Canadian Anti-spam Law (CASL). Comply with Canada’s federal anti-spam legislation (CASL). CASL is often relevant when running contests and promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are asked or incentivized (e.g., with bonus contest entries) to “share” the contest/promotion with friends or family. Given the potentially severe penalties for violating CASL, which include administrative penalties of up to CDN $10 million, it is important to ensure that CASL is complied with for electronic marketing related to contests or other promotions open to Canadians. For more information about contests and CASL, see: Contests and CASL and CASL Compliance Errors. For CASL checklists and precedents that we offer for sale to comply with CASL, see: CASL Checklists and Precedents.
Quebec Contest Law. Ensure that Quebec legal requirements are met for contests run in Quebec (or take care to make sure that eligibility is limited to Canadian residents, excluding Quebec). In general, opening contests to Quebec residents requires regulatory filings with the Regie in Quebec, the payment of a duty or tax (which depends on the value of prizes), translation of contest rules and advertising and in some cases posting a bond/security.
Intellectual Property Consents. Consider whether consents are needed (and if necessary obtained) to reproduce third-party intellectual property – for example, trade-marks, logos, etc. – or to transfer ownership in contest materials – for example, where contestants create original material as part of the contest or promotion. Contest rules in Canada commonly include rights (e.g., a licence) for the sponsor to use information and content contributed by entrants and if entrants will be contributing original content (e.g., photographs, essays, etc.) it is also a good practice for sponsors to include guidelines relating to their rights to use (or reject) any entrant contributed content. See: Guidelines For Canadian Consumer Generated Content Contests.
U.S. Advice. Seek U.S. legal advice if the contest will be open to U.S. residents or limit the contest to only Canadian residents.
Social Media Site Rules. Comply with social media sites’ terms of use if using social media to promote or host a contest (e.g., Facebook’s Promotions Rules). Also ensure that appropriate disclosures are made in all social media marketing (i.e., include short rules). For more information, see: Contests and Social Media.
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.
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SERVICES AND CONTACT
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Our Canadian advertising/marketing law services include advice in relation to anti-spam legislation (CASL), Competition Bureau complaints, the general misleading advertising provisions of the federal Competition Act, Internet, new media and social media advertising and marketing, promotional contests (sweepstakes) and sales and promotions. We also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
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