Many business’ conduct promotional competitions and giveaways as a way of promoting their business. There are a few legal requirements which a business must abide by before they hold a promotional competition. The aim of this guide is to give you a quick overview of the common types of promotions and there requirements when you run a competition.
A competition conducted for the purpose of promoting a business in which there is no skill component is called a trade promotion. Trade promotions are free to enter, and the winner is drawn by chance from the pool of entrants. A common example is where you are given the chance to enter the lottery and possibly win a prize if you purchase a particular product. Another common example is where you fill out an entry form for the chance to win a promotional prize, much like those you might see at a shopping centre or trade show. Even if there is a component of skill, for example you need to answer a question to enter the draw, if the winner is chosen at random from the pool of correctly answered entries, this is still a game of chance.
Trade Promotion: Terms and Conditions
Before you hold a trade promotion, you will need to have some terms and conditions (rules). This is to ensure that the competition is run fairly. The rules have to be followed by both you and the entrants, and must cover:
- The entry conditions e.g. you need to buy a product;
- When entry into the competition will close;
- A description of the prize and its value. You can have multiple prizes e.g. 2nd and 3rd place;
- When and where you will draw the winner;
- How the prizes will be awarded;
- How the winners can claim the prize i.e. will you send it to them or do they have to be present at the draw;
- How will you notify the winner;
- Where you will publish the winners if the prize is more than $500. This can be done on a company website;
- Your name, address and contact number; and
- Any unique or onerous terms such as restrictions on who can enter.
You will need to make the rules available from the time the trade promotion starts. They can be placed on your website, or available at the place customers enter the draw. You don’t need to include them on advertising promoting the competition but you will need to specify where they can be found, for example on a website, or on the back of the entry form.
When designing your trade promotion, there are a few special conditions you need to be aware of, such as where alcohol is concerned either as a prize or part of the entry. There are restrictions on how much alcohol you can award as a prize, conducting draws at a registered club or hotels, or requiring consumption of alcohol as part of the entry. Some types of prizes are prohibited, such as tobacco products, surgery, weapons or anything else whose acquisition is restricted. There are also rules around entering a competition via phone or SMS.
Trade Promotion Requirements
Trade promotions are regulated in NSW by the Office of Liquor, Gaming and Racing, and a permit is required. These permits can take up to 20 working days for approval, so make sure you get your permit for in early. In other states such as Queensland and Victoria (from 20 June 2015) you do not require a license to conduct a trade promotion.
Summary of trade promotion requirements:
- You must be a business with an ABN number.
- It must be free to enter.
- It must be a game of chance.
- You must have terms and conditions.
- There is no limit on the value of the prize but there are special rules for some type of prizes.
- You will need a permit in some states.
There are similar rules in all states and territories. For more information in NSW see:
NSW Office of Liquor, Gaming and Racing http://www.olgr.nsw.gov.au/
If you need assistance getting your trade promotion off the ground, get in touch with our consumer law specialists today. It would be our pleasure to help guide you through the steps, and make sure you have minimised the liability of your business in conducting the competition.
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