A trade promotion is a free-to-enter competition carried out by a business (with an ABN or ACN) to promote goods and/or services. Running a trade promotion helps engage customers with your brand, goods and/or services. This article will answer the five most frequently asked questions about running a trade promotion in New South Wales (NSW).
1. What is a Trade Promotion?
A trade promotion is a free-entry competition that helps to promote goods or services supplied by a business.
To qualify as a valid trade promotion, you:
- cannot sell entry tickets or require entrants to provide anything of ‘intrinsic value’ to enter the promotion, such as reward or loyalty points;
- must use the promotion to genuinely promote your business’ goods or services; and
- have a business with an Australian Business Number (ABN) and/or Australian Company Number (ACN).
However, you can require entrants to buy your goods or services at the market rate as a precondition to entry into the promotion. Companies often use trade promotions when launching a new product.
2. Game of Chance or Game of Skill?
Game of Chance
A game of chance:
- gives all entrants an equal chance of winning; and
- does not take into account any skill when determining winners.
Game of Skill
A game of skill:
- allows entrants to perform skill-based activities to enter the trade promotion;
- does not involve chance; and
- chooses the winner against set criteria.
3. Do I Need a Permit?
You will need a permit in NSW if you are running a game of chance. You will not need a permit in NSW if you’re running a game of skill. However, you may need to comply with other laws and regulatory requirements from NSW Fair Trading. If you need a permit you, will need to pay the relevant fee, which will depend on the total prize value of the trade promotion.
Regardless of whether you are running a game of skill or game of chance, your terms and conditions for the trade promotion should comply with any relevant laws, such as the Australian Consumer Law (ACL).
If you are running a trade promotion in other states and territories besides NSW, you will need to check their respective trade promotion requirements. The rules in NSW may be different to other states or territories.
4. What Should My Terms and Conditions Cover?
Some of the key points that you should have in your terms and conditions include:
- the method of entry into the promotion;
- the relevant draw and re-draw dates for the promotion;
- when the promotion will run;
- the prize content and value;
- how you determine winners;
- whether you need scrutineers for the draw;
- where you will publish the names of winners;
- how winners can obtain their prize; and
- the promoter’s name, address and telephone number.
If you run a game of chance you must:
- conduct the draw within 12 months of the permit being issued;
- publish the name of winners within 48 hours of the draw. You must make a public statement via print or online if the prize is $500 or more; and
- ensure the winner claims their prize within three months after the draw date.
If you plan to conduct a trade promotion online using a social media platform (such as Facebook, Twitter or YouTube), you should check each social platform’s promotion guidelines for any additional requirements.
5. What Are My ACL Obligations?
You will also need to ensure the terms and conditions, as well as how you run the trade promotion, comply with the ACL. The ACL protections do cover people who enter trade promotions. One major protection is that you cannot engage in ‘misleading and deceptive conduct‘, such as falsely misleading your customers about the nature of your trade promotion.
Therefore, you should be clear and upfront about the terms and conditions of your trade promotion, including the type of prizes you will offer.
If you do mislead entrants, they will be able to sue you under the ACL, with penalties such as financial compensation. Also, your business’ reputation will suffer. Therefore, it is in your best interests to ensure you are as transparent as possible when advertising trade promotions.
Trade promotions can be an effective marketing tool to promote new products your business is selling. However, you need to ensure your terms and conditions comply with the law and that you get a permit if you are running a game of skill in NSW. If you have any questions or need help with your trade promotion, get in touch with LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.
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