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).
Regional allocation of prizes
Where there is a regional allocation of prizes (e.g., one prize per province, etc.), this must also be disclosed. While the online contest we saw said that the contest was open to residents of Canada and the United States, it was not clear whether or not there was any regional allocation of prizes.
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 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.
PROMOTIONAL CONTEST SERVICES
I offer a full range of promotional contest legal services for compliance with the Competition Act, Criminal Code and other relevant laws. My services include: preparing contests to comply with relevant federal laws, drafting short and long contest rules and statutory disclosure, reviewing promotional contest marketing and advertising materials, preparing winner release documentation, and vetting contest materials for Canadian misleading advertising law compliance.
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