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Many businesses carry out promotional competitions and giveaways as a marketing tool, to drive engagement and sales within their business. Although this can be a great way to boost awareness of your business, you need to understand the various state and territory regulations that apply these sorts of competitions. This guide provides you with an overview of games of skill and the legal obligations you need to follow when launching a game of skill promotion.

Game of Skill or Game of Chance

Your trade promotion will fall under the category of either a:

  • game of skill (whereby you will not require a permit); or
  • game of chance (whereby you will require a permit in certain states and territories).

A game of skill is where the promoter (i.e. you and your business) will individually judge and assess an entry to the game against a set of specific criteria, to determine the winner purely based on merit. 

On the other hand, a game of chance is where it incorporates an element of luck, such as when a winner is selected completely at random. Even if there is a component of skill involved in the competition, such as when you need to answer a question to enter the draw, it will still be a game of chance if the winner is chosen at random from the pool of entries.

Terms and Conditions of the Game

The terms and conditions act as a contract between your business and the entrants of the competition. It should set out each parties’ obligations and limitations in order to help protect your business and minimise the chance of disputes arising at a later stage.

To give effect to such terms and conditions, you will need to ensure, among other things, that the entrants are aware:

  • of the terms and conditions;
  • that when they enter the game of skill, they are accepting your terms and conditions; and
  • of the separate terms and conditions set out by the online platform that you may be using to run the game.

You will also need to consider having terms and conditions that clearly set out how entries to the game are accepted and the judging criteria. This requires you to decide:

  • whether entrants need to be of a certain age;
  • what methods entrants must use to enter the competition (such as via email, SMS etc.);
  • what ‘skill’ the entrants must demonstrate in their entry (for example: “Tell us in 25 words or less why you deserve this holiday of a lifetime); and
  • who the judges will be.

The terms and conditions of the promotion must set out how: 

  • you and your business will judge and assess the entries; and 
  • the entrants will win the prize(s). 

Usually, it is the most creative or skilful entry which decides the winner.

The terms and conditions of the promotion should also comply with state regulations and the Australian Consumer Law. You would need to think about whether or not any of your terms and conditions are misleading or deceptive. 

If entries involve a skill factor, but if any of the elements in the game has an element of chance, your promotion is likely to be considered by some states and territories to be a game of chance. Depending on the prize pool, permits are required by the relevant permit offices if your promotion is a game of chance.

Intellectual Property

If your game of skill requires entrants to submit photos, videos or any creative work, you will want to ensure that the terms and conditions:

  • require entrants to grant you a license to use their intellectual property associated with the creative work; and
  • give you the right to use the creative work for advertising and promotional purposes.

If you are using an online third-party platform to run the promotion, you should also make entrants aware that they are uploading their creative work online on a third-party platform with its own terms and conditions.

Judging Process

You will need to consider: 

  • who will be the judge(s); 
  • the number of judges; and 
  • the judging criteria.

You do not need to provide reasons to an entrant as to why he or she did or did not win. However, it is good practice to record your judging process as to how you selected the winning entries. This will help assure people that you chose the winners fairly and ethically, so that your decisions can withstand scrutiny.

Prizes

When offering prizes for your game of skill, you should ensure that you comply with all applicable regulations. You need to make sure that the prizes are suitable for your entrants.

For example, you should not offer alcohol as a prize if most of your entrants are likely to be under the age of 18. 

There may also be state regulations as to what you can and cannot offer as a prize. You must be aware of these requirements to ensure that you do not incidentally break the law.

For example, it is unlikely that you could offer weapons and other dangerous items as a prize.

If any of your prizes involve travel, you should consider how a minor can redeem the prize (i.e. with a legal guardian). You should also consider if a winner needs to have their own insurance. It is a good idea to include such details in your terms and conditions.

You must also ensure that your prizes are available for collection or delivery at the conclusion of your promotion. If a prize is not available for any reason, you should ensure that there is a reasonable replacement prize of equal value available for collection or delivery. 

Your business may be liable for misleading and deceptive conduct under the Australian Consumer Law if you advertised that there is a particular prize and you: 

  • do not make that prize available; or 
  • provide a significantly different prize.

Key Takeaways

If you are planning on running a game of skill promotion to market your business, you must be aware of your legal obligations. It is a good idea to establish clear terms and conditions, so that you and your entrants understand how the promotion will operate. You should also consider how your promotion will deal with the:

  • intellectual property submitted by entrants;
  • judging process you intend to use, including how to ensure your decisions can withstand scrutiny; and
  • prizes that you are going to offer and how the winner can redeem them.

If you would like help running a promotion and understanding your related obligations, contact LegalVision’s marketing compliance lawyers on 1300 544 755 or fill out the form on this page.

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