Top 10 Canadian Contest (Sweepstake) Law Questions – Part I

I work on a lot of contests and get a lot of Canadian contest (or for our U.S. friends “sweepstakes”) law questions.  I thought it would be interesting to list the top 10 I regularly receive, with some general legal information around each.  The following are the first five:

Is a skill-testing question required?

Skill-testing questions are a sort of Canadian thing.  The short answer is that skill-testing questions are usually, but not always, required to operate a contest in Canada.  They are commonly required and administered to potential winners before being declared a winner as one way to avoid the illegal lottery offences of the Canadian federal Criminal Code.  In general, the Code prohibits games of chance (or mixed chance and skill) where contestants pay money or other consideration (i.e., something of value) to win a prize.  Including a skill-testing question is one way to remove a contest from many of the lottery offences that include pure chance as an element of the offence (i.e., a way to remove some chance via the skill of a reasonably difficult question, typically a two-digit four-step math question).  As such, including a skill-testing question makes a promotion one of “mixed chance and skill” so that if consideration is then also removed running a contest becomes low risk and a common strategy used by contest promoters to avoid the Code’s illegal lottery offences.  To come back to the point that they are not always required, promoters sometimes operate “pure skill” contests (which are generally not addressed by the relevant lottery sections of the Code) or award prizes that are not listed in the relevant Code sections as one way to require a purchase as a condition of participation.  The existing Canadian case law under the Code’s lottery sections (section 206) is, however, generally old and often inconsistent so determining whether a contest is one of “pure skill” and whether a purchase or other consideration can be required can be complex and uncertain.  As such, cautious contest promoters generally remove two of the three elements of an illegal lottery to be safe (i.e., remove consideration through a “no purchase” entry option and include a “skill-testing question” to remove part of the chance element).

Can a purchase be required to enter?

Many promoters elect to include a “no purchase required” entry option for Canadian contests.  This is because, as discussed in the above question, the illegal lottery offences of the Criminal Code generally prohibit games of chance (or mixed chance and skill) where contestants pay money or other consideration (i.e., something of value) to win a prize.  That is, an “illegal lottery” generally speaking consists of three things: purchase/consideration, chance / mixed chance and skill, and a prize.  Eliminating a purchase requirement (commonly together with including a skill-testing question) is a common strategy for avoiding these illegal lottery Code offences.  Having said that, some promoters operate “pure skill” contests (which are generally not addressed in these illegal lottery offences) and/or award prizes that are not listed in the relevant section of the Code (section 206), such as cash or intangibles such as trips, as one strategy to require a purchase as a condition of entry.  It is also worth noting that even if a purchase requirement is not included, requiring contestants to do something that may be seen as having value (i.e., consideration) can raise “consideration” issues for a contest.  While the cost of a stamp to mail in an entry or navigating a website may be unlikely in reality to raise any serious consideration issues under the Code, more intensive contestant requirements when tied to a random draw may be more likely to do so (e.g., completing significant questionnaires, providing significant information or other onerous steps in order to participate in a promotion, etc.).

What are the main types of contests?

Generally speaking, there are two types of contests: “skill contests” or “consumer generated content contests” (i.e., where entrants/contestants are required to do something that requires skill in order to compete) and those where prizes are awarded randomly.  Some of the types of “skill contests” include judged essay or art competitions, sporting events, sales competitions, etc.  Some common types of random draw or selection contests include contests where winners are selected at random through a draw held by the promoter, instant win type winner selections, “prize vaults” where entrants are given numbers or codes to enter, seeded games (i.e., where a certain number of prizes are “seeded” in products), scratch-and-win type promotions where entrants see whether they have won a prize, etc.  Sometimes promoters prefer random draw contests, which are generally relatively easy to prepare and run.  Other promoters like to have contestants more engaged and producing more content (which can have a stronger promotional impact depending on the type of promotion).  In any event, a wide variety of promotions can be run in Canada and are really only limited by promoters’ ingenuity and creativity assuming the basic Canadian legal requirements are met.

What laws apply to contests?

The basic legal requirements for contests in “common law Canada” (i.e., provinces and territories excluding Quebec) are to ensure that: promotional materials are not false or misleading (to comply with the misleading advertising sections of the Competition Act); short and long rules setting out the terms and conditions for the contest (to comply with mandatory statutory disclosure set out in the Competition Act and to have agreements with entrants); to avoid the Criminal Code’s illegal lottery offences (e.g., through “no purchase required” entry options and skill-testing questions as discussed above); and to take basic precautions to comply with Canadian privacy laws (e.g., consent for the collection of any personal information, disclosure of what the information will be used for, etc.).  In some cases other rules or laws can be relevant, such as social media sites’ terms of use (e.g., Facebook’s promotions rules) or intellectual property laws (e.g., for contestants are generating original material as part of the contest, where third party images, trade-marks or logos are being reproduced, etc.).  Also, Quebec has some specific requirements that must be met if a contest will be open to Quebec residents.

Are contests illegal in Quebec?  Why do contests commonly exclude Quebec?

I also often get asked whether contests are illegal in Quebec, why so many promotions exclude Quebec and what is required to run a contest in Quebec.  First of all, contests are not illegal in Quebec – there are just a few additional requirements that need to be met in addition to those required for the rest of Canada.  These include: filing the rules and creative copy 30 days before contest launch (though late filings are possible and fairly common); translating contest rules; paying a duty to the Regie in Quebec (which depends on where the contest is open, but if Canada-wide is 3% of prize value); and a filing on the completion of the contest with a notice of prize awards, winners, etc.  There is also some specific language that needs to be included in contest rules for contests open in Quebec and it can also be prudent to run a contest concept by Quebec counsel before launching a promotion to check any other specific requirements in Quebec.

In part II I’ll chat about some other common Canadian contest questions I get: what do you need to legally run a contest in Canada?; are there any filing requirements or fees to operate a contest in Canada?; can a contest be operated globally (i.e., outside Canada) with one set of rules?; what is the difference between a contest and a lottery?; and what happens if we get it wrong (i.e., penalties, fines, etc.)?

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CANADIAN CONTEST RULES & FORMS

Need contest rules and forms for a Canadian Contest? I offer a selection of Canadian contest rules and forms for common types of Canadian contests. For more information see: Contest Forms.

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I offer a full range of Canadian contest legal services for compliance with the Competition Act, Criminal Code and other relevant laws.  My services include: preparing contests to comply with relevant federal laws, drafting short and long contest rules and statutory disclosure, reviewing promotional contest marketing and advertising materials for Canadian advertising law compliance and winner releases.

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