Trade promotions are a common and popular way to promote your business and services. There are two types of trade promotions: games of skill and games of chance. This article will discuss how you can regulate a game of skill and the critical legal considerations to keep in mind when operating a trade promotion.
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Games of Skill vs Game of Chance
When planning a trade promotion, the first question is how you will determine the winner. To do this, you must understand the difference between a game of skill and a game of chance. Furthermore, you must understand the legal implications of each.
A game of skill requires entrants to complete a skills-based activity to enter the competition. In turn, you will assess the entrants’ performance of the activity per a set of judging criteria. The promoter or their chosen panel of judges will consider each entry and determine the winner based on their merit and the judging criteria. Some examples of these types of competitions include:
- ‘describe in 15 words or less why you like using our product’; or
- ‘send us your funniest photo using our product’.
Some examples of skills can include, but are not limited to:
- technical expertise of a subject matter;
- physical coordination or strength; or
- written ability.
These types of competitions do not involve any element of chance in the selection of the winner. Furthermore, in most cases, they will not require a trade promotion permit. A game of chance will give all entrants an equal opportunity to win. Usually, these competitions will randomly draw a winner from a pool of entrants.
State Regulation
Each state and territory regulates trade promotions individually. The state regulators’ focus is to regulate games of chance as opposed to games of skill. Ordinarily, games of chance fall under the area of gambling. However, trade promotions are permitted if you provide free entry and it is a genuine promotion of your business’ goods and services. However, they must meet the other regulatory requirements to avoid legal penalties. In some states, this will include a trade promotion permit.
If your trade promotion contains some elements of skill and chance, it will likely be considered a game of chance (in addition to a game of skill).
Continue reading this article below the formOther Legal Considerations
To operate a game of skill to promote your business, you will need to consider the following.
Competition Term and Conditions
Your competition terms and conditions should clearly set out the obligations between you and entrants. For instance, you should outline:
- the methods of entry to the competition;
- the skill entrants must demonstrate;
- how you will assess the skill; and
- what entrants will win if successful.
These are the critical points to consider when planning your competition. However, your terms and conditions should also contain other protective measures.
Misleading and Deceptive Conduct
In addition to the terms and conditions, you must also comply with your obligations under the Australian Consumer Law (ACL).
So, you will need to consider whether any terms and conditions are misleading or deceptive. This obligation will also extend to cover any promotion advertising.
Key Takeaways
Running a trade promotion can be an impressive way to generate interest in your brand, engage new customers, or drive sales. First, however, you must be transparent and fair in how you run your promotion and comply with any relevant regulations.
Furthermore, games of skill are less regulated than games of chance. For instance, you do not need to hold a permit or authority for a game of skill. However, if you are considering creating a game of chance or skill to promote your business, you should seek professional legal advice.
If you need assistance in understanding the rules around trade promotions and games of chance, our experienced regulatory and compliance lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1800 534 315 or visit our membership page.
Frequently Asked Questions
A game of skill requires entrants to complete a skills-based activity to enter the competition. A game of chance will give all entrants an equal opportunity to win. Usually, these competitions will randomly draw a winner from a pool of entrants.
Trade promotions are permitted if you provide free entry and are a genuine promotion of your businesses’ goods and services. However, they must meet the other regulatory requirements to avoid legal penalties. In some states, this will include a trade promotion permit.
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