Running an online competition can help customers engage with your brand or new product. A trade promotion is a free-to-enter competition that a business runs for the purpose of promoting their goods and/or services. For instance, if your company sells white goods, and you are trying to increase sales for a new washing machine, a trade promotion can help boost product visibility. If you are a business owner and intend to run a trade promotion in NSW, you should first ensure that your competition complies with state laws and the Australian Consumer Law (ACL).
1. What is a Trade Promotion?
A trade promotion must satisfy the following three requirements:
- The competition must be free to enter. You cannot require entrants to buy tickets or provide anything of intrinsic value. However, you can require entrants to purchase goods and/or services at their regular retail price as a precondition to entry.
- The competition must genuinely promote one of your products/services or your business; and
- Your business must have an Australian Business Number (ABN) or an Australian Company Number (ACN).
If your competition doesn’t fulfil these requirements, it may not be a valid trade promotion.
2. What are the Different Types of Trade Promotion?
A business can run a trade promotion as either a:
- game of luck where all entrants have an equal chance of winning; or
- game of skill where the winner is chosen against set criteria, such as their answer to a pre-determined question.
You should choose the option which will best promote your product and suit your businesses’ needs and capabilities.
3. What Permits Do I Need?
When deciding what type of trade promotion to run, you may consider whether you have sufficient finances to pay for a permit.
Games of luck, unlike games of skill, require the promoter to obtain a permit to run the competition. In NSW, the Lotteries and Art Union Act 1901 (NSW) and the Lotteries and Art Union Regulations 2014 (NSW) governs games of luck. If you choose to run a game of luck, you must complete a permit application form, pay a prescribed fee and draft a ‘draw procedure’ report for auditing purposes. The fee will depend on the value of your prize.
Although it may be more time consuming to judge the entries participants submit for a game of skill, it will save you the cost of applying for a permit.
4. What Should My Terms and Conditions Cover?
Competition terms and conditions that comply with the ACL must accompany your trade promotion. Your terms and conditions act as a contract between your business and any person who enters the competition.
|Key Provisions in Terms and Conditions|
In NSW, if you run a game of luck you must also follow certain timeframes:
- draw dates must be within 12 months of the permit being issued;
- publication of winners must occur within 48 hours of the draw, and if the prize has a value of $500 or more, you will also be required to make a public statement via print or online; and
- the winner must be able to claim their prize for three months from the draw date.
If you make any false or misleading statements regarding your trade promotion, you may fall foul of the ACL. You should also ensure that all entrants must ‘accept’ your terms and conditions before they can enter the competition.
5. What are My Privacy Law Obligations?
You will likely need to collect the entrants’ personal information.
|What is Personal Information?|
|Personal information is information that identifies, or has the reasonable capacity to identify, the individual who the information is about. For instance, a person’s name, contact details or their residential address.|
- what personal information your business will collect;
- what you will use the information for; and
- how you will store the information.
Trade promotions can be an effective marketing tool to promote new products your business is selling. When organising a trade promotion, take care to ensure that you comply with any state-based legislation, the ACL and the APPs. If you have any questions or need assistance drafting your business’ terms and conditions, get in touch with our specialist contract lawyers on 1300 544 755.
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