Trade promotions are free-entry competitions that businesses run to promote their products and services. Below, we focus on how a creative agency can assist its clients to run a trade promotion in the state of New South Wales (NSW). Creative agencies can help their clients to run trade promotions to showcase new product lines and increase consumer engagement with their goods. Before doing so, they should confirm their competition complies with any state laws.
1. Is It a Valid Trade Promotion?
A valid trade promotion must be:
- free to enter and cannot require participants to provide anything of intrinsic value as a precondition to entering the competition;
- a genuine promotion of goods and/or services; and
- run by a business which has an Australian Business Number (ABN) or Australian Company Number (ACN).
You can, however, require entrant’s to purchase your client’s products or services as a precondition to entering.
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 pick generator chooses the winner.|
|Games of Skill||Entrants are judged against a set of criteria, and the best candidate wins.|
You should advise your client about the costs associated with running games of chance versus games of skill. In NSW, the Lotteries and Art Union Act 1901 (NSW) and the Lotteries and Art Union Regulations 2014 (NSW) governs games of chance. Games of skill are not regulated but must still comply with the Australian Consumer Law (ACL).
|Type of Trade Promotion||Permit Required||Costs Involved|
|Games of Chance||Yes – permits are valid for 12 months from the date of issue.||Application fees for the permit. Fees vary depending on the total value of prizes.|
|Games of Skill||No||Receiving and judging entries.|
4. Competition Terms and Conditions
It’s important that you 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;
- promotional period;
- closing date and time for entries;
- the procedure for circumstances where a winner fails to claim their prize;
- details of the prize (e.g. the value of the prize);
- how you will notify the winner and publicise the win; and
- whether winners can transfer prizes or redeem them for cash.
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’s 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 setting out clearly 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:
- dangerous items;
- cosmetic surgery;
- some liquor prizes; and
- any goods or services which cannot be legally sold.
There are also specific rules about who can and cannot enter a trade promotion, namely:
- employee’s immediate family members,
- retailers, and
- associated companies and agencies of your client.
Games of chance are also subject to certain notification and publication requirements. For instance, your client must notify winners of their win within 48 hours where the prize value is greater than $500. In such circumstances, your clients must also publicise the win through either print or online.
7. Social Media
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. If you have any questions or need assistance drafting your competition’s terms and conditions, get in touch with our contract lawyers on 1300 544 755.
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