Trade promotions are free-entry competitions that businesses run to promote their products and services. If your creative agency wants to assist your clients in running a trade promotion in the state of New South Wales (NSW), there are several legal obligations you must consider. This may help your clients to showcase new product lines and increase consumer engagement with their goods. However, if you run the promotion on behalf of your client, your creative agency will be responsible for: 

  • securing the relevant authority to run a promoting; and 
  • complying with the rules of the permit. 

This article explains what a trade promotion is and how your creative agency can help a client to run one.

1. Is It a Valid Trade Promotion?

A valid trade promotion must be:

  • free to enter, but can require an entrant to buy your client’s product;
  • a genuine promotion of goods or services; and
  • run by a business with an Australian Business Number (ABN) or Australian Company Number (ACN).

2. Types of Trade Promotions

There are two types of trade promotions:

Type of Trade Promotion Choosing a Winner
Game of chance All entrants have an equal chance of winning. A random number generator chooses the winner.
Games of skill You will judge entrants against a set of criteria, where the best candidate wins.

3. Required NSW Authorities

You should advise your client about the costs associated with running games of chance versus games of skill. In NSW, the law establishes a clear regulatory framework associated with trade promotions. You will require an ‘authority’ for any game of chance competition conducted in NSW where the prize pool exceeds $10,000. Games of skill are not regulated but must still comply with the Australian Consumer Law (ACL).

Type of Trade Promotion Authority Required Costs Involved 
Games of chance Yes, if the prize pool for a single competition is greater than $10,000. Application fees for the authority. Fees vary depending on the length of the time which the authority covers. For more information on authority fees visit the NSW Fair Trading website.
Games of skill No Receiving and judging entries.

4. Competition Terms and Conditions

You must run your trade promotion in compliance with properly drafted terms and conditions. The terms and conditions must set out:

  • conditions of entry and eligibility requirements;
  • the promotional period;
  • the closing date and time for entries;
  • how you will notify the winner and publicise the win; 
  • the procedure for circumstances where a winner fails to claim their prize;
  • details of the prize (e.g. the value of the prize);
  • whether winners can transfer prizes or redeem them for cash; and 
  • the method your client will use to handle any disputes connected to the trade promotion.

Terms and conditions also provide an opportunity for you or your client to limit your liability for certain types of prizes.

For example, if the prize involves a risky or dangerous activity like bungee jumping, you could mandate that entrants will engage in the activity at their own risk.

Your clients should require all participants to ‘accept’ the terms and conditions before entering the competition. The terms should also be readily available (e.g. online).

5. Australian Consumer Law

The ACL contains strict rules about how businesses interact with consumers. It is important to inform your clients about the liability they may face under the ACL, particularly in respect of statements that are either:

  • misleading or deceptive (i.e. incorrect); or
  • likely to mislead or deceive (i.e. make a false impression).

Your clients can limit their liability by clearly establishing how they will run the competition in their terms and conditions. The penalty for breaching the misleading and deceptive provisions of the ACL may be more than $1 million for companies.

6. Additional Rules

When assisting your clients to run a trade promotion, remember there are types of goods that businesses cannot offer as prizes. 

For example, your prize cannot include:

  • tobacco;
  • vaping products;
  • firearms;
  • ammunition;
  • weapons;
  • dangerous items;
  • cosmetic surgery;
  • some liquor prizes; and
  • any illegal goods or services.

There are also specific rules about who cannot enter a trade promotion, namely:

  • directors;
  • management;
  • employees, unless it is an internal competition specifically for employees;
  • employees’ immediate family members;
  • suppliers;
  • retailers; and
  • associated companies and agencies of your client.

You should encourage your client to specify how and when you will: 

  • notify winners; and 
  • publish their names.

Be careful not to make a mistake in the printing of game tickets or cards. Operators of trade promotions must honour prize claims even where a mistake is made in the carrying out of a trade promotion. Even if the prize pool or marketing funds are exhausted, your client must cover the cost of the prize and deliver it to mistaken winners.

All advertising material connected to the trade promotion should display the authority number. 

It is no longer obligatory to keep records relating to your client’s trade competitions. However, it is highly recommended by Fair Trading NSW because keeping good records will help your client run a good, compliant trade promotion.

7. Social Media

If your client intends to use social media platforms (e.g. Facebook, Twitter or Instagram) to run a trade promotion, they must check the platform’s terms of use. 

For instance, Facebook: 

  • only allows business pages to run trade promotions; and 
  • requires that the ‘promoter’ (i.e. your client) does not ask participants to promote or ‘share’ competition information on their timelines.

Key Takeaways

Trade promotions can be an effective marketing tool and can provide a unique platform for creative advertising. When creating a promotional strategy for your clients, ensure that they are familiar with their legal requirements. Notably, you must determine whether you need an authority to operate your trade promotion in NSW. Further, it is a good idea to draft clear terms and conditions to clarify the rules of the competition. If you need assistance applying for an authority or drafting your client’s competition terms and conditions, please contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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