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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We work on a lot of contests and receive many Canadian contest (or for our U.S. friends “sweepstakes”) law questions from all over Canada and the U.S. I thought it would be interesting to list the top ten contest questions we regularly receive, with a bit of legal information for each. The following are the second five – six actually now that I’ve had a chance to mull this over a bit more.
What do you need to do to legally
run a contest in Canada?
The basic moving parts to legally operating a contest in Canada are the following: “short rules” (basic contest rules and mandatory statutory disclosure for all “point-of-purchase” or other first point of contact marketing materials); “long rules” (i.e., full terms and conditions setting out the rules for a contest and key details – e.g., eligibility, entry requirements, prizes, odds of winning, skill-testing question, winner selection, etc.); winner release and/or guest release forms (particularly important for contests with significant prize values or where potential risk for promoters is higher, such as with trip prizes); a skill-testing question for contests involving chance; and a no-purchase required entry option in many cases (again for contests involving chance – pure skill contests can be an exception). Given that the misleading advertising sections of the Competition Act also apply to contests in Canada, it’s generally a good idea to review creative materials for advertising law compliance as well as ensuring that good rules and forms are prepared. As I mentioned in Part I, other laws can also apply to contests depending on the concept. These can include intellectual property laws (e.g., where third party images, logos or trade-marks are involved, such as in relation to prizes); privacy laws (particularly where the collection of personal information is key to a promotion, a contest involves a survey, etc.); and social media sites’ terms of use (e.g., Facebook, Google Plus, Twitter, etc.).
Are there any filing requirements
or fees to operate a contest in Canada?
Generally speaking, there are two sets of laws governing contests in Canada – “common law Canada” (i.e., provinces and territories excluding Quebec) and Quebec. There are no filing requirements or filing fees in common law Canada (i.e., no filings, fees or “bonding” requirements). If a contest will be open to residents of Quebec, there are some filing requirements and fees. These include a filing in advance of contest launch (with a set of the rules and creative copy); filing fee (which varies according to where the contest is run – i.e., Canada-wide or only in Quebec, etc.); a filing at the close of the contest (with information regarding the award of prizes); and bilingual rules (i.e., rules in English and French).
Can a contest be operated globally
(i.e., outside Canada) with one set of rules?
In the world of contests, one size does not fit all. What rules are required for a contest largely turns on where a contest will be operated in terms of country/jurisdiction (e.g., common law Canada, Quebec, the United States, other countries, etc.) and where a contest will be promoted in terms of marketing channel (e.g., print, online, social media, other media such as radio or television). When I prepare contest rules I often begin with a set of rules for Canada (excluding Quebec), add Quebec language and comply with other requirements (if open to Quebec residents) and then have U.S. counsel review the rules if running in the U.S. (e.g., for North America wide contests). Outside these common jurisdictions for Canada-related contests, promoters should get local counsel in the countries that will be key to a planned promotion. In sum, one set of rules, unless reviewed for the various different jurisdictions’ requirements, will not work for a North America wide or global contest.
What’s the difference between a contest and a lottery?
This is a bit of a big question and has been the subject of a lot of writing and debate over the past century. In short, at common law an illegal lottery was essentially a promotion that involved three things – a purchase (or other consideration or something of value provided by entrants); chance; and a prize. These elements have, more or less, now been codified in section 206 of the Criminal Code. While slightly difficult sledding, and with a number of uncertainties remaining in interpretation, section 206 includes several illegal lottery offences that need to be avoided by contest promoters. These include games of pure chance where prizes are awarded (“property” in some sections); and games of pure chance or mixed skill and chance, where a purchase or other consideration (i.e., something of value) is required and prizes are awarded (“goods, wares or merchandise” in this section). Based on the thinking that the three historic common law elements of consideration, chance and prizes are included in these Code offences (or intended to be, despite the inconsistent and rather obtuse legislative language of section 206), contest promoters often elect to remove two of the three elements – i.e., a purchase requirement / consideration (through a no-purchase required entry option) and at least some chance (through a skill-testing question requirement). Braver promoters sometimes seek to require purchases by attempting to remove other elements in these offences, such as making a promotion one of pure skill (on the theory that most of the offences address only games of chance or mixed skill and chance) or awarding prizes that are not listed in these sections (e.g., intangible prizes such as trips, cash, etc., which may not fall into the terms “property” or “goods, wares or merchandise” used in section 206).
What’s that disclaimer looking language
that I see in many Canadian contests?
I sometimes also get asked what that “disclaimer” is in contest marketing materials (i.e., the commonly used 1-2 paragraph summary of basic contest rules). In short, those are “short rules” that are commonly included in “point-of-purchase” and other first point of consumer/entrant contact materials for several reasons. First, section 74.06 of the Competition Act requires that certain contest details be “adequately and fairly disclosed” (number of prizes, approximate value of prizes, any regional allocation of prizes and odds of winning). Second, the Competition Bureau, which enforces the Competition Act, has taken the position over the years in its various guidelines governing promotional contests that “adequate and fair disclosure” of the basic contest rules means that they should be made available to consumers/potential entrants before they are “inconvenienced”, such as by purchasing a product, visiting a retail outlet or otherwise committing themselves to a contest. The Bureau’s view has in practice led to many contest promoters including a set of “short rules” in all first point of contact materials seen by consumers/potential entrants, such as in the footers of print advertising, footers of web or Facebook pages, etc. The Bureau’s current position on what “adequate and proper disclosure” means and what it likes to see in contest “short rules” is discussed in its 2009 Promotional Contests Enforcement Guidelines. Third, because, as mentioned, the general misleading advertising sections of the Competition Act also apply to contests, which prohibit false or misleading claims to promote a product or business interest, it is a good practice to clearly and conspicuously include the essential details of a contest in marketing materials (and make full rules available to contestants).
What happens if we get it wrong
(i.e., penalties, fines, etc.)?
The potential penalties for violating the Competition Act or Criminal Code in relation to a contest (the two key pieces of Canadian legislation that govern Canadian contests) can be rather annoying and include unlimited fines (i.e., in the discretion of the court), imprisonment or “administrative monetary penalties” or “AMPs” of up to $750,000 (for individuals) or $15 million (for corporations). While the upper end of these penalties may practically be uncommon or rare, small and medium sized companies have on occasion paid unpleasant penalties of as much as $150,000 for getting a contest wrong (not to mention the potential negative PR and time and expense of dealing with a regulator or claim).
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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
