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 in Canada are largely governed by the Competition Act, the Criminal Code, privacy legislation and the common law of contract. In addition, Quebec has a separate regulatory regime governing contests and contest authority (the Régie des alcools, des courses et des jeux).
Canadian federal anti-spam legislation (CASL) is also now commonly very relevant to many contests and promotions run in Canada (see below).
As such, 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 federal and provincial laws.
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 …”
Some 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, most contest organizers 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 often provided on the organizer’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 required 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 all public marketing materials.
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.
These provisions (sections 52 and 74.01) 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 promotional contest rules and marketing materials be reviewed for compliance with the misleading advertising provisions of the Competition Act as well as the standalone contest provision (section 74.06).
Other Competition Act Rules
In addition to the standalone promotional contest provision, the 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 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 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 a prize and certain required disclosure is made (including the number and approximate value of prizes, regional allocation of prizes and odds of winning).
Internet Contests & Promotions
The Competition Bureau also takes the position that the promotional contest provisions of the Competition Act, as well as the general misleading advertising provisions, apply to Internet marketing and advertising (see Competition Bureau, Enforcement Guidelines, Application of the Competition Act to Representations on the Internet).
In this regard, the Bureau’s view is that special considerations may apply in the online environment to ensure that the required statutory disclosure for promotional contests is met:
“Pursuant to section 74.06 of the Act, in contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chances of winning. … The Bureau takes the position that all required disclosures must be displayed in such a way that they are likely to be read. In the context of representations made on-line, what is considered adequately displayed will depend on the format and design of the Web site. For example, a notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call, in order to obtain the required information. The Bureau does not consider clicking on a clearly labelled hyperlink as being an ‘active step.’”
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 (sections 206 and 207). In particular, the Criminal Code makes it a criminal offence to operate illegal lotteries.
While the relevant Criminal Code provisions are complex and somewhat archaic, in general an illegal lottery consists of: (a) a prize, (b) chance and (c) consideration (something of value provided by contestants as a condition for eligibility or participation).
Based on the Criminal Code requirements, promotional contest organizers commonly remove either the consideration element (e.g., providing a “no purchase necessary” entry option), the chance element (e.g., adding a skill-testing question) or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Criminal Code.
It is worth noting, however, that the determination of what constitutes “consideration” and “chance” can be challenging and complex in some cases and few modern cases have considered key issues in relation to the operation of contests. Most contest organizers include a multiple-step mathematical skill testing question in an effort to remove the chance element.
CASL (CANADIAN ANTI-SPAM LAW)
Canada’s federal anti-spam legislation (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.
CONTRACT LAW
In addition to the regulatory requirements of the federal Competition Act and Criminal Code, promotional contests have also been held to be contracts. For this reason, in addition to statutory requirements, contests are also governed by the common law of contract.
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 precise, enforceable and to reduce the likelihood of a credible contractual challenge.
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 typically giving contest organizers broad and unilateral discretion to make decisions.
PRIVACY LEGISLATION
Canadian privacy legislation also applies to promotional contests. In this regard, contest organizers should be cognizant of federal privacy legislative requirements under PIPEDA, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest.
These may include advising contestants of how their personal information will be used, as well as the contest organizer’s practices and policies in relation to the security (and destruction) of contestants’ personal information once a contest has closed.
INTELLECTUAL PROPERTY & OTHER LEGAL CONSIDERATIONS
In addition, intellectual property issues can sometimes arise in the operation of contests. For example, care must be taken that consents are obtained in some cases when the trade-marks or logos of another company are used (e.g., in relation to prizes) and that the contest includes rules for the transfer of rights if, for example, the contest involves the creation of original artistic works.
Another commonly encountered issue that can arise in connection with the operation of contests is the eligibility of minors, based on provincial laws restricting the right of minors to contract.
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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
