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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Promotional contests can be a highly effective marketing tool for companies and great for consumers. Why? – companies get something – marketing exposure, web traffic, consumer preferences, “buzz”, etc. – and consumers get something – the chance to win a prize.
Contests are, however, quite highly regulated in Canada and so contest operators need to be aware of the basic rules that apply to the design and operation of contests.
That is not to say that contests are always top of mind for Canadian enforcement officials. Having said that, when a contest goes wrong, which they do from time-to-time, it can mean not only legal exposure for the operator but typically also something equally as bad or for some operators worse – really bad publicity. Of course, in this increasingly new media world, it is also now trite (though unfortunately true) to say that such negative publicity can go “viral” very quickly.
So, with these lawyerly cautions aside, I thought I would post a series of short notes on the basic rules for running contests in Canada, as well as some industry perspectives.
I’ll also be inviting a few bright colleagues across Canada to guest post on some of the more interesting and specialized contest law related topics – for example, Quebec considerations, intellectual property (IP) issues, privacy law aspects, the distinctions between contests and lotteries (and some of the key aspects for operating lotteries in Canada), marketing industry perspectives and compliance with social media site rules.
The series will conclude with some best practices to operate contests effectively in Canada, reduce risk and avoid any major pitfalls.
To kick things off, the following is brief overview of some of the laws governing contests in Canada and some of the basic requirements under the Competition Act.
Overview of Canadian Contest Law
In Canada, promotional contests are largely governed by the federal Competition Act and Criminal Code, federal and provincial privacy legislation, the common law of contract (contests have been held to be contracts) and intellectual property laws.
In addition, Quebec has a separate regime governing contests, regulated by the Régie des alcools, des courses et des jeux (colloquially referred to as “the Regie”), which can be and often is something of a mystery to lawyers from the common law jurisdictions (decode: if thinking about operating a contest in Quebec, talk to an expert).
To give a few brief examples of the types of legal issues that can arise (or need to be considered) in operating a contest in Canada, these can include competition law (ensuring that ad copy is not misleading and required statutory disclosure is made), contract law (taking reasonable care that contest rules are both enforceable and perhaps more importantly don’t backfire on organizers), privacy law (e.g., ensuring that appropriate disclosure is made and consents obtained for entrants’ personal information) and intellectual property law issues (e.g., consents where original material is transferred to an organizer or trade-marks, logos or other 3rd party intellectual property is reproduced).
There is also the dreaded Criminal Code – i.e., ensuring that basic steps are taken to ensure that a contest is structured to avoid Canada’s somewhat ancient laws governing “illegal lotteries”.
To this rather varied mix of laws, are a variety of emerging Internet, new media and social media related aspects that can be relevant, depending on the type of contest and how it is operated. These can include, for example, complying with social media websites’ terms of use, making the required Competition Act disclosure in the new media and social media environment and controlling technical and fraud related issues that can be more likely to arise online.
With respect to the Competition Act, the rules are not extensive but it is prudent for contest organizers, as well as agencies working with them, to be versed in the basics.
Competition Act
The Competition Act requirements for contests can be largely summed up as two-fold: first, disclosure; and second, compliance with the Act’s misleading advertising rules.
With respect to disclosure, the Competition Act 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 disclosure requirements include: (i) the number and approximate value of prizes, (ii) the area (or areas) to which prizes relate (relevant in contests with regional allocation of prizes) and (iii) odds of winning information (“any fact that may materially affect the odds of winning”). The Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes.
Based on these requirements, most contest organizers provide a short version of a contest’s terms (commonly 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 and often hyperlinked on an organizer’s website, social media page, etc.
While typically short, and usually straightforward, it is important that the required statutory disclosure be drafted precisely and correctly (and include all required disclosure elements). Some firms, including mine, use checklists in the preparation of contest rules and statutory disclosure to cover off all requirements. 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 all public marketing materials.
In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to contests. Generally speaking, these provisions (sections 52 and 74.01 of the Act) prohibit materially false or misleading representations to the public for the purpose of promoting products or business interests.
As such, in addition to complying with the statutory disclosure requirements in the “standalone” contest provision of the Competition Act (section 74.06) discussed above, it is also prudent to vet related advertising and marketing materials (e.g., website and social media pages, rules, point-of-purchase materials, Twitter and social media communications, etc.) for compliance with the Act’s general advertising provisions.
While typically not extensive, such a review is intended to pick up literally false statements overlooked in the preparation of marketing materials – for example, errors in prize disclosure – as well as more nuanced representations that may equally be problematic – for example, statements that create a false impression that an entrant has won a prize, as opposed to being able to enter for a chance to win a prize – an obvious but important distinction (and one recently brought into sharp relief by the Supreme Court).
CASL (Canadian Anti-spam Law)
Canada’s federal anti-spam legislation (CASL) is now also often relevant when running contests and promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are asked or incentivized (e.g., with bonus contest entries) to “share” the contest/promotion with friends or family.
Given the potentially severe penalties for violating CASL, which include administrative penalties of up to CDN $10 million, it is important to ensure that CASL is complied with for electronic marketing related to contests or other promotions 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 to comply with CASL, see: CASL Checklists and Precedents.
For more information about Canadian contest law, see: Contests, Contests and CASL and Contest/Sweepstakes FAQs.
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Legal Tips For Running
Contests/Sweepstakes in Canada
The following are some key legal tips for running contests/sweepstakes 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 a prize).
Short Rules. Include short rules (i.e., 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 Forms and Precedents.
Long 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 details of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and values, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors. Standard precedents, or rules downloaded from the web rarely accurately reflect a particular promotion. In this regard, 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 Forms and Precedents.
Winner Release Forms. Consider using winner release forms for contest winners. While not required by law in Canada, winner releases 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 prize award. Winner releases 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 releases for both winners and any travel companions (and guardian releases for minors). For more information, see: Canadian Contest Forms and Precedents.
Misleading Advertising. Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general misleading advertising sections of the Competition Act). 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 collateral matches the contest rules and that key 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.
Canadian Anti-spam Law (CASL). Comply with Canada’s federal anti-spam legislation (CASL). CASL is often relevant when running contests and promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are asked or incentivized (e.g., with bonus contest entries) to “share” the contest/promotion with friends or family. Given the potentially severe penalties for violating CASL, which include administrative penalties of up to CDN $10 million, it is important to ensure that CASL is complied with for electronic marketing related to contests or other promotions 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 to comply with CASL, see: CASL Checklists and Precedents.
Quebec Contest Law. Ensure that Quebec legal requirements are met for contests run in Quebec (or take care to make sure that eligibility is limited to Canadian residents, excluding Quebec). In general, opening contests to Quebec residents requires regulatory filings with the Regie in Quebec, the payment of a duty or tax (which depends on the value of prizes), translation of contest rules and advertising and in some cases posting a bond/security.
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 or promotion. 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. See: Guidelines For Canadian Consumer Generated Content Contests.
U.S. Advice. Seek U.S. legal advice if the contest will be open to U.S. residents or limit the contest to only Canadian residents.
Social Media Site 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 & Advertising Rules. Consider whether other competition or advertising law rules may apply. For example, in addition to a stand-alone contest provision, the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising 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
