A trade promotion is a free-to-enter competition carried out by a business to promote goods and services. Running a trade promotion is a tactic employed by marketers. The promotion can help raise brand awareness, encourage customer engagement with your goods or services, and (hopefully!) drive sales. 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 competition that helps to promote goods or services supplied by a business. Trade promotions are free to enter. However, you can require entrants to buy your goods or services at the market rate as a gateway to enter into the promotion.
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) or Australian Company Number (ACN).
Companies often use trade promotions when launching a new product or when their services significantly change.
For example, you are a camera company that has just come out with a new DSLR camera. You can increase sales by running a trade promotion that gives customers the chance to win a prize, such as a trip overseas.
2. Game of Chance or Game of Skill?
The main difference between a game of chance and a game of skill is how you decide a winner.
Game of Chance
A game of chance gives all entrants an equal chance of winning and does not consider any skill when determining winners. Instead, the winner is selected at random. Often, a game of chance might be called a ‘game of luck’.
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.
As the competition promoter, you will elect a panel of judges or publish a poll to choose the winner(s) based on judging criteria predetermined by the trade promotion terms and conditions.
Continue reading this article below the form3. Do I Need an Authority?
You will need an authority to run a game of chance in NSW if the prize pool value exceeds $10,000. You will not need an authority in NSW if you are running a game of skill. However, you may need to comply with other laws and regulatory requirements from NSW Fair Trading. You can apply for a one, three, or five-year authority. You will need to pay the relevant fee, depending on the length of time you will hold that authority to run trade promotions.
Once you are an authority holder, you must also submit trade promotion terms and conditions with NSW Fair Trading for each separate competition where the prize is valued over $10,000. You must submit each set of terms and conditions 10 business days before the promotion commences.
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 include in your terms and conditions are listed below:
- the method of entry into the promotion and any eligibility criteria;
- the draw and unclaimed prize draw dates;
- promotion start and end dates;
- what is specifically included in the prize and its recommended retail value;
- the method of determining the prize winners;
- winner notification;
- winner publication;
- how winners can obtain their prize;
- the promoter’s name, address and telephone number; and
- a description of how the promoter will handle any disputes.
Suppose you plan to conduct a trade promotion online using a social media platform (such as Facebook, Twitter or YouTube). In that case, 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 cover consumers 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. However, you should be truthful and accurate in how you advertise your competition and clearly set out the prize that you are offering. You must also ensure your terms and conditions are easily understood and readily available to consumers.
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.
Key Takeaways
Trade promotions can be an effective marketing tool to promote new products your business is selling. Make sure the terms and conditions for your promotions are clear and comply with the NSW legislation. Remember to get an authority if you are running a game of chance in NSW valued at over $10,000. If you have any questions or need help with running a trade promotion in NSW or applying for an authority, get in touch with LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
If your game judges contestants against set criteria, e.g. a writing competition, it is likely a game of skill. If a winner is selected entirely randomly, it is likely a game of chance.
If your trade promotion is a game of chance with a prize exceeding $10,000, you will need an authority.
We appreciate your feedback – your submission has been successfully received.
