You could be a winner: tips to consider when running a trade promotion
Trade promotions are a popular means of drumming up business or collecting information for marketing purposes. Raffles, competitions and events are common across businesses, however they often come under regulations that differ across different States and Territories. When running these promotions, it is important to be aware of how regulations may affect you, how you can advertise your promotion and how to draft the dreaded terms and conditions.
Know what rules apply to you
Depending on where your promotion is to be run there may be certain regulations that apply. These are often part of the same legislation that govern gambling (for instance, the Gambling Regulation Act 2003) and as a result the penalties for contravening these regulations can often seem quite harsh for what might be a relatively small competition. In Victoria, for instance, breaching the requirements for trade promotions can net a penalty of $9,514 for a first offence and $15,857 for subsequent offences.
Whether or not the regulations apply will often depend on the distinction between Games of Chance and Games of Skill. Regardless of the requirements of the promotion, if there is a random element involved in selecting a winner the competition will generally be deemed a game of chance. By way of example, a competition in which two final contestants are chosen based upon skill alone will still be a game of chance if the ultimate winner of those two is chosen at random. Sports tipping competitions too are generally classified as a game of chance.
Given the penalties that might apply for getting it wrong, it is always a good idea to get proper advice as to what rules apply for your particular promotion. In some States and Territories you will need to apply for a permit to run a trade promotion (such as trade promotions in NSW or “Major Trade Lotteries” in NT).
Know how your promotion will work
In order to get the attention of the public, trade promotions are steadily getting more and more complex. While this might make for a fun competition, always make sure that you can adequately explain how it works beyond the “vibe”. Trade promotion regulations generally require both the terms and conditions and any associated advertising to explain the method as to how winners are selected.
Pick your prize wisely
There are some prohibitions on certain prizes depending on where the promotion is held. Many of these are unsurprising, such as in NSW where tobacco product, firearms, weapons and cosmetic surgery cannot be awarded, as well as certain amounts of alcohol. Outside of legal restrictions, it’s still a good idea to put some thought into prizes. “Risky” prizes can create liability concerns that are not necessarily avoided with a contestant waiver. Prizes that are not appropriate for the targeted audience can also result in bad publicity which negates the purpose of running the promotion in the first place.
Gift cards remain one of the most popular prizes and it is easy to understand why. They are easily quantified, don’t require much in the way of storage and they get the winner involved in your business (or that of a friendly business). However, when using gift cards as a prize it is always a good idea to point out where the relevant terms and conditions for the card can be found in your promotion’s fine print.
Keep privacy and spam regulations in mind
Trade promotions are often used as a means of collecting data, whether for market research purposes or for sending promotional material. The Australian Privacy Principles will apply to the information you collect and it is important that your operation and policy complies with these requirements where you collect personal information. Where collected information is used in a particular way or given to a third-party, it is a good idea to notify participants of your intentions and get them to acknowledge this fact (for instance, through the use of the “I Agree…” checkbox).
The Spam Act 2003 (Commonwealth) prohibits the sending of unsolicited material and includes some very hefty penalties. Where promotion entrants will later receive promotional material, it is imperative that this is acknowledged by the entrants. The operation of the Spam Act means that any competition in which entrants submit their friends’ details is unlawful.
Both privacy and spam regulations can have significant implications for you and your organisation if not dealt with properly, again highlighting the need for proper advice.
Alex Collie, Lawyer
Paul Carroll, Partner