Trade promotion lotteries (or ‘competitions’) can be a powerful way to market your brand or product. Businesses like yours operate competitions as a tool to gain brand exposure, advertise a new or specific product on offer, and increase revenue.
New South Wales has regulations for trade promotions. You should make sure you understand how these rules apply to you when planning a trade promotion lottery. If you breach your competition’s terms and conditions or otherwise do not adhere to the NSW trade promotion regulations, you may receive a penalty notice from Fair Trading NSW.
This article is for businesses looking to promote their goods or services through a competition in NSW. It covers many fundamental considerations in conducting a trade promotion lottery – what you will need to do and what you cannot do.
Entry Must Be Free
Consumers must be able to enter trade promotion lotteries for free. However, your business can invite consumers to buy a product at the usual retail price to enter the competition.
Terms and Conditions
You must prepare terms and conditions before commencing a trade promotion lottery. The terms and conditions provide guidelines for your customers to follow. Your terms and conditions ensure that you operate the competition clearly and fairly. Both you and the entrants must comply with the terms and conditions.
You should include the following points in your terms and conditions:
- 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.
Your terms and conditions need to be available to the public from the beginning of the trade promotion. You may advertise terms and conditions on your website or available at the location where customers enter the draw.
Continue reading this article below the formTypes of Prizes
If you offer certain types of prizes, you may need to include additional terms, conditions, or warnings. For example, suppose the prize is a dangerous activity. In that case, you should ask the winner to acknowledge that they will participate in the activity at their own risk and possibly sign a liability waiver form. In addition, you may need to include age restrictions for certain activities.
Further terms are be needed where alcohol is involved in the method of entry or forms part of the prize. For example, if you give away alcohol in the prize, you must not exceed 20 litres of liquor with an alcohol content not exceeding 20% volume or 5 litres of liquor with an alcohol content exceeding 20% by volume. In addition, the terms and conditions should state that entry is only for those over 18 years of age.
There are also several items that 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.
Is an Authority Required?
When considering whether you require an authority to operate your competition, first determine the type of the promotion. The two main types of trade promotions are:
- games of skill; and
- games of chance.
The primary difference between a game of chance and a game of skill is how you determine the winner.
A game of chance provides all entrants with an equal chance of winning and picks a winner at random. On the other hand, when conducting a game of skill, a panel of judges will select a winner. Otherwise, the public might vote on the ‘best’ candidate to select winner(s) based on judging criteria set out in the trade promotion terms and conditions. You are not required to obtain an authority for a game of skill.
You will need to apply for an authority in NSW if the lottery promotes a trade or business and the total prize pool exceeds $10,000. Your application for an authority is made online at NSW Fair Trading. You may use one authority across multiple trade promotions. Once your business holds an authority, you will then need to lodge your 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.
Where an authority is required to run your trade promotion lottery, ensure to display the authority number clearly on all advertising materials.
Unclaimed Prizes
Businesses often find themselves with leftover prizes where the winner has failed to claim their prize (or forgotten about it). Therefore, you should make sure that you clearly state the date of the second chance (or unclaimed) prize draw in your terms and conditions. If you do not define when you will hold the second place draw, the draw must be at least three months after contacting the first prize winner.
Conducting the Lottery
Typically, your trade promotion lottery has three stages. These include:
- notifying people about the start and letting them know the rules;
- giving out the ticket and collecting entries from participants; and
- closing the competition and announcing the winners.
Make sure you give enough time for each of these stages.
Key Takeaways
There are many considerations in running a trade promotion lottery. You must comply with the requirements given by Fair Trading NSW, or you may face significant penalties. If you are trying to promote your business, it is important to get this right, or the promotional lottery may have the opposite effect on your business! For assistance, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
Games of skill will not require an authority. Games of chance require an authority if the prize value a single trade promotion is more than $10,000.
Entry to a trade promotion must be free. However, you can invite customers to purchase a product at its regular price as their entry into the promotion.
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