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Trade promotions are free competitions run by businesses to promote their goods or services and attract more customers. Running a trade promotion can be a cost-effective way of gaining brand exposure and interest in your products. Trade promotions are heavily regulated by laws in each state and territory. However, regardless of where you run your business, there are some areas of risk and potential liability that you should be aware of. This article will run through three key considerations when running a trade promotion and some of the rules that you need to comply with.

1. Australian Consumer Law

The Australian Consumer Law (ACL) is the national body of law for fair trading and consumer protection in Australia. It applies to all states and territories. The ACL is designed to help protect consumers against practices that are anti-competitive. It provides consumers with the benefit of guarantees and remedies. The law will generally consider people who enter trade promotions to be consumers for the purposes of the ACL. When conducting a trade promotion, you must comply with both the ACL and with relevant trade promotions laws in your state.

You also need to ensure you are not engaging in false, misleading or deceptive behaviour. There are various aspects of trade promotions which can open your business up to potential claims under the ACL.

For example, if you are running a trade promotion and the prize is a trip to South America, you will need to be careful how you promote it. For example, you may want to advertise the prize as all-inclusive. However, if the prize doesn’t include accommodation at the destination or the winner needs to spend any other related costs, this may be considered misleading or deceptive conduct. To avoid this, it is important to advertise prizes accurately and provide people entering with as much information regarding the prize as possible.

2. Social Media Rules

These days it is common for businesses to run trade promotions on social media. Using Facebook or other social media platforms can significantly increase the exposure of your competition as you may state that entrants can share the promotion to increase their entries in the competition.

However, if you choose to run your trade promotion on Facebook or another social media site, you will need to ensure you comply with the relevant host site’s requirements. Sites such as Facebook, Twitter and YouTube usually have promotion guidelines which apply in addition to the relevant state and territory trade promotion laws.

Facebook

These guidelines will often contain specific requirements on how you can conduct your competition. For example, Facebook has a number of guidelines that you need to follow when running a trade promotion lottery or other game of chance using its website. You must:

  • only run a trade promotion lottery that is lawful;
  • release Facebook from any potential liability that an entrant brings;
  • provide an acknowledgement that Facebook does not sponsor, endorse or administer the trade promotion; and
  • inform entrants that by participating in the trade promotion, they are disclosing information to your business and not to Facebook.

Facebook’s guidelines also provide that you must not:

  • require entrants to do anything other than liking a page, checking in, or connecting to the app.  For example, you can’t require an entrant to post a photo on your business’ wall to enter the trade promotion;
  • use Facebook’s features or functionality as a registration or entry mechanism. For example, you cannot use connecting to the Facebook App as a way of automatically entering the trade promotion. You will have to create your own way of entering the trade promotion; and
  • use Facebook’s intellectual property when running the trade promotion.

You must comply with these requirements otherwise the social media provider may take action against your account.

3. Limiting and Excluding Liability

It is also crucial to have extensive provisions in the terms and conditions for your trade promotion that exclude and limit your liability, where possible. For example, it is necessary to exclude liability for consequential loss that an entrant may suffer by entering the competition. Consequential loss can include loss of:

  • opportunity;
  • revenue;
  • business; and
  • savings.

Using the trip to South America example above, the winning entrant may have their wallet stolen and fraudulent transactions made on their credit card during their trip. Even though this loss is not a direct consequence of the trade promotion, it could be considered a consequential loss. You would want to be able to rely on an exclusion of consequential loss provision in your terms and conditions.

Further, it is important to limit your liability under the terms and conditions for your trade promotion. You should word this limitation in a way that limits your liability as much as the law allows. This will limit the claims that an entrant can bring against you.

Key Takeaways

When running a trade promotion, it is crucial to remember that:

  1. entrants have rights under the ACL so it is important not to engage in any misleading, deceptive or anti-competitive behaviour;
  2. if you are using a social media platform to run the promotion, you will need to comply with its guidelines; and
  3. you will need to limit your liability to the maximum extent that the law allows and exclude consequential loss.

If you need help preparing trade promotion terms and conditions or submitting applications for licences in NSW, ACT and SA, you can contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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