CANADIAN CONTEST RULES/PRECEDENTS
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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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Contests in Canada are largely governed by the Competition Act, Criminal Code and common law of contract. In addition, Quebec has a separate regulatory regime governing contests (with some additional requirements) and several other areas of law and rules can apply, depending on the type of promotion including: privacy law, intellectual property law, Canada’s anti-spam legislation (CASL) and social media sites’ terms of use.
Given that the improper operation of a promotional contest can lead to civil or criminal liability, it is important to review proposed promotional contests for compliance with key federal and provincial laws and get some legal advice for your promotion.
Operating contests in Canada typically includes the preparation of “short rules” (for point-of-purchase materials), “long rules” (or “official rules” as they are sometimes referred to), a winner release, a skill-testing question. It is also important to review draft creative materials before launch for misleading advertising compliance.
The following discusses these key aspects and some other considerations that can arise in connection with the operation of contests in Canada.
COMPETITION ACT
Short Rules
The Competition Act largely requires that certain disclosure be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …”
Key Competition Act requirements include: (i) disclosing the number and approximate value of prizes; (ii) disclosing the area (or areas) to which they relate; and (iii) any fact that may materially affect the odds of winning. The Act also prohibits contest organizers from “unduly delaying” the award of prizes.
Based on these requirements, contest sponsors typically provide a short version of a contest’s terms (frequently referred to as “short rules”) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with a full version of the contest rules available on request and commonly posted on the sponsor’s website. Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosure and other key contest elements.
While short, and usually straightforward, it is important that the mandatory statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and accompanying promotional materials ensure that the necessary disclosure is included in point-of-purchase and similar marketing materials where entrants first see a contest promoted – e.g., on the contest landing page, in point-of-purchase marketing and on social media promotional pages.
General Misleading Advertising Provisions
In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to contests, as with any other advertising or marketing in Canada.
In this respect, sections 52 and 74.01 of the Competition Act prohibit materially false or misleading representations to the public for the purpose of promoting products or any business interest.
The potential penalties for contravening these provisions can be severe and include civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and court orders to cease the conduct, publish corrective notices or compensate consumers.
As such, it is important that draft creative materials be reviewed before launch for misleading advertising compliance before a contest is launched.
Other Competition Act Rules
In addition to the standalone promotional contest provision, the Competition Act also contains several other specific provisions regulating contests operated in the context of (a) telemarketing (section 52.1) and (b) prize notices (section 53).
Section 52.1 of the Competition Act prohibits telemarketers from conducting contests where (a) the delivery of a prize (or other benefit) is or is represented to be conditional on prior payment or (b) adequate and fair disclosure is not made of the number and approximate value of prizes, the area or areas to which they relate and the odds of winning.
Section 53 of the Competition Act prohibits prize notices sent by electronic or regular mail that give the general impression that a recipient has won (or will win) a prize and requires a payment (or incurring another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are satisfied by the sender.
These include adequate and fair disclosure of the number and approximate value of prizes, regional allocation of prizes and any fact within the sender’s knowledge that materially affects the chances of winning (i.e., odds of winning). In addition, the distribution of prizes cannot be unreasonably delayed and there are requirements for the selection of participants and distribution of prizes.
Persons that violate section 53 are liable to fines, on summary conviction, of up to $200,000 and/or imprisonment for up to one year and, on indictment, to fines in the discretion of the court and/or imprisonment for up to 14 years. Several due diligence defences are, however, available under this offence.
CRIMINAL CODE
In addition to the promotional contest provisions in the Competition Act, the federal Criminal Code also governs the operation of contests in Canada. Section 206 contains certain lottery related offences. Generally, the Criminal Code makes it a criminal offence to operate illegal lotteries, as defined and set out by the offences under section 206.
At common law, illegal lotteries had been defined as consisting of: (i) a prize; (ii) chance; and (iii) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation). These core elements of illegal lotteries are now codified (although inconsistently and not altogether clearly) in section 206 of the Criminal Code.
Based on these illegal lottery offences, it is necessary for contest organizers to structure their contests in Canada to avoid violating the Criminal Code. As such, contest sponsors commonly remove either the consideration element (e.g., providing a “no purchase necessary” entry option), the chance element (e.g., including a multiple-step mathematical question as a condition of winning) or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Criminal Code.
It is important to note, however, that the illegal lottery offences under the Criminal Code are more complex than described above. As such, if planning to run a contest that deviates from commonly run types of contests (e.g., random draw contests, with a no-purchase entry option and skill-testing question), it is prudent to get legal advice as to whether any possible criminal law issues may arise.
CONTRACT LAW
In addition to the requirements of the Competition Act and Criminal Code, contests have also been held to be contracts. In particular, offers made by promoters have been held, when fulfilled by contestants, to be legally binding contracts.
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, depending on a particular contest’s terms).
As such, in addition to ensuring compliance with applicable statutory requirements, it is important that contest terms and conditions are carefully and precisely drafted to reduce potential contractual liability.
This includes a careful 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 common contest rule related errors that arise include terms that are not relevant to a particular promotion, U.S. or international rules used for Canadian contests, contests that purport to apply to many jurisdictions where it is not clear that rules have been vetted for the laws of other countries or Quebec and contests run with no rules at all (or rules that do not comply with Canadian legal requirements).
SOCIAL MEDIA TERMS OF USE
Social media is increasingly important for effective marketing and promotion, including the operation of contests. Contest promoters should be aware, however, that most major social media sites (including Facebook, Twitter, Google+, YouTube, Pinterest and LinkedIn) have specific, and different rules relating to contests operated or promoted on their sites. As such, it is important to review the terms of use for social media sites on which you want to run or promote your contest.
PRIVACY LAW
Canadian privacy legislation also applies to promotional contests. In this regard, contest promoters should take basic commonsense privacy law steps when collecting personal entrant information, including informed consent (e.g., a clear statement in the mini-rules regarding what will be collected and what it will be used for) and the promoter’s privacy policy generally for the collection, use and protection of personal information.
INTELLECTUAL PROPERTY LAW
In addition to the above, intellectual property issues can sometimes arise in the operation of contests.
Some of the potential intellectual property (i.e., copyright, trade-mark, etc.) related issues that may need to be considered when running a contest include: whether a promoter owns the title for a contest; whether consents have been obtained for 3rd party marks, logos, photographs, etc. planned to be used for a promotion; including promoter copyright statements in contest rules; including language in rules granting a promoter the right to use original materials submitted by entrants (e.g., entry forms, photos, essays or other “consumer generated” content created and submitted by entrants, such as in skill based promotions); and representation and indemnification provisions protecting the sponsor where participants may not have rights to materials submitted for a promotion.
It is also important to note that some companies have specific and in some cases quite restrictive policies regarding the use of products for prizing, use of their images, marks or logos.
CASL (ANTI-SPAM LEGISLATION)
Canada’s federal anti-spam legislation (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 can “share” the contest with friends or family for additional entries.
Given the potentially severe penalties for violating CASL, which include administrative penalties of up to CDN $10 million, it is important for contest sponsors to ensure that they comply with CASL for electronic marketing related to promotional contests 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, see: CASL Checklists and Precedents.
CANADIAN CONTEST LAW TIPS
The following is a list of some of key tips for operating a successful contest in Canada:
1. Take care to avoid the Criminal Code provisions governing illegal lotteries (e.g., provide a “no purchase necessary” entry option and skill element, such as a multiple-step mathematical question).
2. “Short rules” should include all Competition Act disclosure requirements for point-of-purchase materials.
3. Ensure that precise “long rules” are prepared, particularly anticipating potential contingencies (e.g., technical problems, etc.). Standard precedents, or copies of rules retrieved from the web, rarely address many of the details of a particular promotion. Like all law, your counsel should not only understand what each provision means, but it should be relevant to your particular promotion.
4. Ensure that none of the advertising or marketing materials are generally false or misleading (i.e., comply with the “general misleading advertising” sections of the Competition Act). In this regard, contests in Canada must comply with not only stand-alone contest provisions of the Competition Act (under section 74.06) but also with the general misleading advertising sections of the Act.
5. If contests are part of your company’s routine marketing, consider developing an internal check-list to ensure that all key legal requirements are met.
6. Ensure that all key contest elements are as clear and precise as possible (e.g., eligibility, how to enter and descriptions of the prize and odds of winning).
7. Ensure that Quebec legal requirements are met (or take care to make sure that eligibility is limited to Canadian residents, not including Quebec).
8. Consider whether consents are needed (and if necessary obtained) to reproduce third party intellectual property (e.g., trade-marks, logos, etc.) or transfer ownership in contest materials (e.g., where contestants create original material as part of the contest or promotion).
9. Obtain U.S. legal advice if the contest will be open to U.S. residents. Different states have different legal requirements and some require, for example, bonding.
10. Comply with social media sites’ terms of use if using social media to promote or host a contest.
11. Consider whether other competition or advertising law rules may apply (e.g., the deceptive prize notice or telemarketing provisions of the Competition Act, both of which can also apply to contests, depending on the circumstances).
12. If using electronic communication for a contest (e.g., e-mail follow-ups, post-contest electronic marketing, contests run in conjunction with electronic surveys, etc.) consider whether Canada’s anti-spam law applies and tailor the contest to comply with CASL’s consent, ID and unsubscribe requirements.
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SERVICES AND CONTACT
I am a Toronto competition/antitrust lawyer and advertising/marketing lawyer who helps clients in Toronto, Canada and the US 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.
My 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. I 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 my services see: services
To contact me about a potential legal matter see: contact
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