Many businesses carry out promotional competitions and giveaways as a marketing tool, to drive engagement and sales within their business. These competitions are known as a ‘trade promotion lottery’. When conducting a trade promotion you must comply with relevant state or territory regulations. This guide provides you with an overview of trade promotions and the legal obligations you need to follow.

What Is a Trade Promotion Lottery?

A competition conducted to promote a business in which there is no skill component is called a trade promotion. These competitions are free to enter and you will draw the winner by chance from the pool of entrants. 

A common example is where you give participants a chance to enter the lottery and possibly win a prize if they purchase a particular product. Another common example is where they 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, such as when participants need to answer a question to enter the draw, it will still be a game of chance if you choose the winner at random.

What Should I Include in my Trade Promotion Terms and Conditions?

Before you hold a trade promotion, you will need to prepare a set of rules to guide the competition. You can set out this information in the promotion terms and conditions, to ensure that you conduct the promotion clearly and fairly. The rules have to be followed by you and the entrants. 

Your terms and conditions must cover:

  • the entry conditions and eligibility requirements;
  • the competition start and closing dates;
  • details of any major or minor prizes and their value;
  • when and where you will draw the winner;
  • method of determining the prize winner;
  • 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;
  • winner notification;
  • winner publication;
  • any re-draw arrangements;
  • your name, address and contact number; and
  • how you plan to resolve disputes arising from the promotion.

If you are awarding certain types of prizes, you may need to include additional terms, conditions, or warnings. 

For example, if you give away a holiday, you should clearly outline: 

  • who can attend the holiday; and 
  • exactly what the trip does and does not include. 

If the prize is a dangerous activity, you should ask the winner to acknowledge that they will participate in the activity at his or her own risk and possibly sign a liability waiver form. Further terms may be needed where alcohol:

  • is connected to the method of entry; or 
  • forms part of the prize. 

Each state or territory’s regulations determine the volume of alcohol which you can award as a prize. There are also several items which you cannot award as a prize in a trade promotion lottery, including:

  • tobacco and vaping products; 
  • cosmetic surgery; 
  • weapons; 
  • illicit substances; or 
  • other illegal items.

You will need to make the rules available to the public from the beginning of the trade promotion. Terms and conditions can be: 

  • advertised on your website; or 
  • available at the place customers enter the draw. 

Do I Need to Apply for an Authority?

Each state and territory vary in their governance of trade promotion lotteries. You may require an authority in NSW or a permit in ACT, SA, and NT

For example, in NSW you will need to apply for an authority through NSW Fair Trading if the value of your prize exceeds $10,000.

Key Takeaways

If you do not conduct a compliant trade promotion lottery, you may risk facing heavy penalties for you and your business. You should draft a clear set of terms and conditions so that your promotion participants clearly understand the rules. It is also a good idea to be aware of the specific legal requirements relating to your specific promotion or prize. If you need assistance meeting your legal obligations when running a trade promotion, please contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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