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February 18, 2013

Canadian contest law can, to say the least, be perplexing to some.  It’s a mix, at least usually, of competition law, the Criminal Code and contract law.  As such, key Canadian contest legal requirements include mandatory Competition Act disclosure (“short rules”), avoiding the illegal lottery offences of the Criminal Code and taking commonsense steps to make sure contest rules accurately reflect the promotion, are enforceable and give the maximum amount of latitude to promoters to deal with potential contingencies that may arise.

One of the more well-known (or puzzling) aspects of Canadian contests, depending on your perspective, are skill-testing questions.  Canadian promoters use them.  U.S. promoters don’t.  Why?

To answer that question, we have to back up into the murky history of Canadian lottery laws and the somewhat cryptic, to say the least, illegal lottery offences under section 206 of the Canadian federal Criminal Code.

In general, the requirement for a skill testing question requirement arose from the necessity to eliminate some chance from some of the illegal lottery offences under the Code.  Some of those sections (sections 206(1)(a)-(d)) make it a criminal offence to, among other things, sell or dispose property by lots, tickets or any mode of chance; or conduct or manage a scheme or operation to determine winners of property by lots, tickets, numbers or chances.  These offences prohibit certain games of pure chance (and it has been held that mixed skill and chance is not sufficient).  Any element of skill, however, must be real and not a mere sham in order to take a contest out of these sections.

In addition, another illegal lottery offence, section (206(1)(f)), makes it a criminal offence to dispose of goods, wares or merchandise by games of chance (or mixed chance and skill) in which a contestant pays money or other valuable consideration.  In short, the key here is typically to ensure that the contest is one of pure skill or remove the consideration element (thus the ubiquitous “no purchase required” element in Canadian contests).

These offences roughly, but by no means perfectly, codify the three elements of what historically have been considered to constitute an illegal lottery: namely, consideration, chance and a prize.  I say “roughly” because, for example, while one offence (section 206(1)(f)) refers to consideration, other do not.  Similarly, some section 206 offences refer to “chance”, while section 206(1)(f) only applies to games of chance or mixed chance and skill.

As such, in an effort to avoid these offences, promoters running contests in Canada commonly remove at least some chance (frequently through a skill-testing question to convert a contest into one of mixed skill and chance) and consideration.

Some key skill points worth noting for Canadian contests and promotions include:

1.  Some skill testing requirements have been upheld, while others have not.  While the cases don’t arise often, the level of skill required to avoid the chance element of the Code is not settled.  For example, in one often-cited case, R. v. Johnson, a contest was found to be one of pure chance despite a requirement to shoot a turkey at 50 yards in 5 shots.  Curiously, this was found to easily be complied with, albeit in this 1902 case when turkey shooting was apparently a more widely held skill.

2.  The case most often cited and relied upon for the skill-testing question requirement is an older Alberta lower court decision from the 1980s: R. v. The Canada Trust Company.  In that case, the Provincial Court judge upheld the following as being adequate: multiply 228 by 21; add 10,824; divide by 12; and subtract 1,121.  So it stands to reason that, at least in Alberta, this question should still pass muster.  In other provinces and territories?  Still largely unknown.  This question has in practice commonly been somewhat diluted into various four-step mathematical questions, consisting of 2-3 digits each, which some commentators have opined would likely cut the mustard.

3. Issues have arisen relating to the level of skill and the manner in which questions are administered.  For example, in R. v. Simpson, an older Saskatchewan Court of Appeal case, though a slightly frightening (if archaic) cautionary tale, a retail store was convicted for a contest that involved a question found to present no exercise of skill whatsoever based on the nature of the question and way it was administered.  In this case, a simple factual test was given based on the retailer’s flyer that had been presented to the contestant in advance.  According to the Court, the question was a mere device to cover up a scheme for disposing of property by pure chance and would, one judge colorfully noted, in reality only exclude “all blind, dumb, deaf or paralyzed people”.

While the precise degree of skill that will remove the chance element from a promotion remains unsettled, some commonsense tips to including (and administering) a skill-testing question for a Canadian promotion include:

1. Use a four-step 2-3 digit mathematical question;

2. Limit the time to answer (e.g., requiring it to be answered on presentation and not, for example, publishing it in advance or sending it in advance to a contestant);

3. Administer it in person (or phone) to reduce the likelihood of being gamed; and

4. Include the requirement as a condition to winning a prize in contest terms and release documents (i.e., the requirement to correctly answer unaided a time-limited mathematical skill-testing question chosen by the sponsor by phone as a condition to winning a prize).

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