CANADIAN CONTEST RULES/PRECEDENTS
Do you need contest rules and forms for a Canadian contest/sweepstakes?
We offer a selection of Canadian contest rules and forms for random draw, skill and other common types of Canadian contests (i.e., contest precedents and forms).
For more information see Canadian Contest Forms/Precedents.
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Promotional contests can be a fun, entertaining and commercially effective way to market an existing or new product. They are also common and straightforward right? Well, not quite.
One recent online contest that we saw looked great at first blush, but on closer review revealed a number of key legal defects. While in this case the contest rules were literally less than a half page in length, there were a number of issues that could result in the organizers facing competition, contract or regulatory law liability.
The following are ten things we saw in the contest that were either unlawful or could have been improved to reduce potential liability for the contest organizers.
Number of Prizes
The Competition Act sets out certain required disclosure for promotional contests. This includes “adequate and fair disclosure” of the number and approximate value of the prizes. The online contest we recently saw disclosed neither.
Odds of Winning
The Competition Act also requires the disclosure of “any fact within the knowledge of the person that affects materially the chance of winning” (i.e., requires that the odds of winning be disclosed). The online contest didn’t disclose any odds of winning and, in fact, was unclear as to how exactly an entrant could win the contest (which also raises misleading advertising issues).
Canadian Anti-spam Law (CASL)
Canada’s federal anti-spam legislation (CASL) is often relevant when running contests or other types of promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are encouraged or required to “share” information about the promotion with friends or family. Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is important for those running contests or other promotions in Canada to ensure that they comply with CASL for electronic marketing related to a promotion.
For more information about contests and CASL, see: Contests and CASL and CASL Compliance Errors. For CASL checklists and precedents that we offer for sale, see: Anti-Spam Law (CASL) Precedents.
Open to Quebec Residents?
Another important element for contest organizers to consider is whether a contest is to be open to all of Canada or Canada excluding Quebec. The reason this is important is because Quebec has distinct and standalone regulatory requirements for promotional contests that can, if adequately complied with raise the cost of designing a contest and, if not complied with, potentially lead to liability. The online contest we recently saw was unclear whether Quebec contest requirements had been complied with (despite the fact that the contest stated that it was open to residents of “Canada” and the United States). As a practical matter, contest organizers that wish to avoid the additional regulatory expense of complying with Quebec’s requirements typically exclude Quebec (e.g., “Contest is open to Canadian residents excluding Quebec”).
Open to minors?
The online contest we recently saw also did not address minors. Contest organizers will often specify that a contest is only open to contestants that are of age of majority. This is because, as contests have been held to be contracts, minors cannot contract (and may have the right, depending on the jurisdiction, to avoid a contract if entered). While in some cases it may not matter much whether a legally binding contract is achieved with a contestant, in others ensuring that there is an enforceable contract may be very important (e.g., in the case of a significant prize or a contest that could lead to significant liability for the organizer if the contest goes wrong – a water drinking contest where a contestant died comes to mind).
Intellectual Property Law Issues
It is also sometimes important to give some consideration to intellectual property issues (i.e., copyright and trade-mark issues), particularly if another company’s trade-marks, images or products may be mentioned or awarded as prizes. In the contest we recently saw online, Apple iPads were to be given away as prizes and images of iPads were included in the promotional materials (though it was not clear if, for example, the Apple product images were being reproduced with permission or if consent from Apple had been obtained).
Delay Awarding Prizes
The online contest we recently saw also stated that prizes would be awarded within 60 days. While this may not necessarily be a problem, the Competition Act requires that distribution of prizes in a promotional contest not be “unduly delayed”. As such, it is prudent for contest organizers to ensure that prizes are awarded according to the contest’s rules and awarded promptly. In this regard, the 60 day time-frame for award of prizes made us a little uneasy.
Open to U.S. Residents?
The online contest also stated that it was “open to residents of Canada and the United States”. This is a risky proposition, unless the contest has been vetted in the various U.S. states. While in Canada, the regulation of contests is generally at the federal level (governed for the most part, though not exclusively, by the Competition Act and Criminal Code), both in Canada and the U.S. other local laws apply. As such, prudent contest organizers will frequently either have a contest vetted in all the jurisdictions in which it is open, or exclude those in which it has not (e.g., “Contest is only open to residents of Canada, excluding Quebec”).
No Long Rules
Finally, the online contest we recently saw indicated that the “short rules” on the bottom of the promotional materials were the rules, the whole rules and nothing but the rules. This is also a potential source of risk, given that contest organizers commonly include short rules (for marketing and point-of-purchase materials), long rules (to attempt to cover off as many potential liability and contractual issues as possible) and winner release forms. In this particular case, shorter is not necessarily better.
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Legal Tips For Running
Contests/Sweepstakes in Canada
The following are key tips for operating legal contest/sweepstakes in Canada:
Criminal Code. Avoid the illegal lottery offences of the Criminal Code (e.g., include a bona fide “no purchase necessary” entry option and skill element, such as a time-limited, multiple-step mathematical question for potential winners as a condition of awarding a prize).
Short Rules. Include short rules / mini-rules with all of the required Competition Act disclosure requirements for point-of-purchase materials (e.g., print and in-store marketing, social media and Internet sites, packaging and labeling, television and radio spots, etc.). For more information, see: Canadian Contest Forms & Precedents.
Long Rules. Ensure that precise long rules (i.e., the official contest rules) are included that reflect the details of the contest, anticipate potential contingencies (e.g., technical problems) and set out the details of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and values, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors. Standard precedents, or rules downloaded from the web rarely accurately reflect a particular promotion. In this regard, contests are contracts, and so they should be as accurate, clear and precise as possible in the event issues arise. For more information, see: Canadian Contest Forms & Precedents.
Winner Release Forms. Consider using winner release forms for contest winners. While not required by law in Canada, winner releases are almost always used by contest sponsors to have winners confirm that they have complied with all contest rules and release the sponsor from legal liability. Signing and returning winner releases is also commonly included in contest rules as a condition of prize award. Winner releases are particularly important for contests in which there may be higher risk (e.g., where the contest involves high value prizes or a trip prize). For trip contests, sponsors are generally advised to use releases for both winners and any travel companions (and guardian releases for minors). For more information, see: Canadian Contest Forms & Precedents.
Misleading Advertising. Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general misleading advertising sections of the Competition Act). In this regard, contests in Canada must comply not only with stand-alone contest provisions of the Competition Act (under section 74.06), but also with the general misleading advertising sections of the Competition Act. It is particularly important to ensure that the marketing collateral matches the contest rules and that key aspects of the contest (e.g., number and type of prizes, prize values, how to enter and win and any conditions/limitations) are accurately described.
Canadian Anti-spam Law (CASL). Comply with Canada’s federal anti-spam legislation (CASL). CASL is often relevant when running contests or other types of promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are encouraged or required to “share” information about the promotion with friends or family. Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is important for those running contests or other promotions in Canada to ensure that they comply with CASL for electronic marketing related to a promotion. For more information about contests and CASL, see: Contests and CASL and CASL Compliance Errors. For CASL checklists and precedents that we offer for sale, see: Anti-Spam Law (CASL) Precedents.
Quebec Contest Law. Ensure that Quebec legal requirements are met for contests run in Quebec (or take care to make sure that eligibility is limited to Canadian residents, excluding Quebec). In general, opening contests to Quebec residents requires regulatory filings with the Regie in Quebec, the payment of a duty or tax (which depends on the value of prizes), translation of contest rules and advertising and in some cases posting a bond/security.
Intellectual Property Consents. Consider whether consents are needed (and if necessary obtained) to reproduce third-party intellectual property – for example, trade-marks, logos, etc. – or to transfer ownership in contest materials – for example, where contestants create original material as part of the contest or promotion. Contest rules in Canada commonly include rights (e.g., a licence) for the sponsor to use information and content contributed by entrants and if entrants will be contributing original content (e.g., photographs, essays, etc.) it is also a good practice for sponsors to include guidelines relating to their rights to use (or reject) any entrant contributed content. See: Guidelines For Consumer Generated Content Contests.
U.S. Advice. Seek U.S. legal advice if the contest will be open to U.S. residents or limit the contest to only Canadian residents.
Social Media Site Rules. Comply with social media sites’ terms of use if using social media to promote or host a contest (e.g., Facebook’s Promotions Rules). Also ensure that appropriate disclosures are made in all social media marketing (i.e., include short rules). For more information, see: Contests and Social Media.
Other Competition & Advertising Rules. Consider whether other competition or advertising law rules may apply. For example, in addition to a stand-alone contest provision, the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising and telemarketing that involves prizes.
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SERVICES AND CONTACT
We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.
To contact us about a potential legal matter, see: contact
For more information about our firm, visit our website: Competitionlawyer.ca
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
