CANADIAN 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 to run common types of contests in Canada). These include 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. Also available are individual Canadian contest/sweepstakes precedents, including short rules (“mini-rules”), long rules, winner releases and a Canadian contest law checklist. For more information or to order, see: Canadian Contest Law Forms/Precedents. If you would like to discuss legal advice in relation to your contest or other promotion, contact us: Contact.
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I am in the habit of doing a daily media sweep for Canadian regulatory law developments. Yesterday, a few contests being run by Canadian companies caught my eye, one, involving social media related follows and blog comments by entrants for a chance to win a prize, unfortunately for lacking many of the key elements for a Canadian contest.
The marketing for this contest states: “Win a …” with brief rules setting out the entry deadline, maximum number of entries per entrant, brief eligibility (open to Canadian and U.S. residents), number of potential winners and when the draw will be made.
Missing were several of the Competition Act’s required disclosure elements (including the approximate value of the prizes and odds of winning), elements to avoid the illegal lottery offences of the Criminal Code (i.e., no-purchase option and skill testing question) or any indication of compliance with U.S. or Quebec contest requirements. The marketing also boldly states “win”, as opposed to “chance to win”, which can also be problematic and lacked any long rules, which reminded me of an interesting case I had also read last week (see below) and that contests are contracts.
In this regard, in addition to the mandatory disclosure requirements of the Competition Act and structuring contests to avoid the illegal lottery offences of the Criminal Code, contests have also been held to be contracts. In particular, offers made by promoters, when fulfilled by contestants, can form legally binding contracts (i.e., unilateral contracts where an offer is met with performance).
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). As such, in addition to ensuring compliance with applicable statutory requirements, it is important that contest terms and conditions are carefully and precisely drafted.
This includes a 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 errors that I often see in contests include terms that are not relevant to the promotion, U.S. or international rules used for Canadian promotions, contests that purport to apply across Canada and the U.S. (when it is unclear that rules have been vetted for U.S. or Quebec specific requirements) and contests operated without rules.
Contests operated with no rules at all can lead to a variety of problems, including an inability for an organizer to alter contest terms or take steps in the event of unforeseen circumstances (contest rules are commonly drafted to give organizers the “sole discretion” to make decisions in the event issues arise).
In the case I was reading last week, Thierman v. Western Canada Lottery Corp., clear contest rules saved the promoter, the operators of the 6/49 lottery, significant liability (the payout of a $623,000 prize). While a lottery case, the Court held that prize-winning contests are contracts, which can bind promoters to perform promises made (or allow promoters to escape liability where the conditions for entry and winning are not met).
In this interesting case, the plaintiff was a subscriber to the 6/49 lottery, whose subscription expired. On receiving a renewal form a month before his subscription ended, the plaintiff delayed returning the form, which was not entered into the lottery’s computer system until after the next draw (in which the plaintiff’s numbers were drawn). The terms of the lottery provided that subscribers should allow four weeks for processing and that renewal forms were deemed to be received on the date of the next draw after being entered into the lottery’s computer system.
The plaintiff argued that the lottery breached its contract with him. The Court disagreed. The Court did find that the general law of contracts applies to lotteries (and promotional contests) and that a contract is formed by a promoter’s offer and a contestant’s performance of the acts required by the offer:
“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.’”
In this case, however, the Court found that the necessary conditions to enter and win had not been satisfied because the plaintiff’s renewal form had not been entered into the lottery’s computer system in time and the terms included a provision that the lottery could not ensure the first draw date. Interestingly, the Court also upheld a limitation of liability provision in the lottery’s terms restricting the lottery’s liability to the amount wagered.
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KEY LEGAL TIPS FOR RUNNING
A PROMOTIONAL CONTEST IN CANADA
The following are some key legal tips for operating a successful and legal contest 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 prizes).
SHORT RULES (MINI RULES)
Include short rules / 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 Law Forms/Precedents.
LONG RULES (OFFICIAL 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 terms of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and value of prizes, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors.
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 Law Forms/Precedents.
WINNER RELEASE FORMS
Consider using winner release forms for contest winners.
While not required by law in Canada, winner release forms 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 awarding a prize.
Winner release forms 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 winner releases for both winners and any travel companions (and guardian releases for any minor companions).
For more information, see: Canadian Contest Law Forms/Precedents.
FALSE OR MISLEADING ADVERTISING
Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general civil and criminal misleading advertising sections of the Competition Act, under sections 74.01 and 52).
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 materials also match the contest rules and that all material 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 in the short rules, long rules and marketing materials.
CANADIAN FEDERAL ANTI-SPAM LAW (CASL)
Comply with Canada’s federal anti-spam legislation (CASL).
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 are either required or incentivized (e.g., through additional entries) to “share” the contest with friends or family.
Given the potentially severe penalties for violating CASL, which include AMPs of up to CDN $10 million, it is very important for contest sponsors to ensure that they comply with CASL for any electronic marketing related to promotional contests open to Canadians.
For more information about contests and CASL, see: Contests and CASL and CASL Compliance Errors.
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CASL Compliance Checklists and Precedents: For information about the CASL compliance checklists and precedents we offer, see: CASL Compliance Checklists and Precedents.
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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.
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.
For more information, see: Guidelines for Consumer Generated Content Contests.
U.S. LEGAL ADVICE IF OPEN IN THE U.S.
Obtain U.S. legal advice if the contest will be open to U.S. residents or limit the contest to only Canadian residents.
SOCIAL MEDIA PLATFORM 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 LAW
AND ADVERTISING LAW RULES
Consider whether other competition or advertising law rules may apply to a contest. For example, in addition to the stand-alone contest provision (section 74.06), the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising (sections 52 and 74.01) and telemarketing that involves prizes.
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SERVICES AND CONTACT
We are a Toronto based Canadian competition law and advertising law firm who helps clients in Toronto, across Canada and the United States practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
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.
For more information about our services, see: services
To contact us about a potential legal matter, see: contact
For more information about our firm, visit our website: Competitionlawyer.ca
