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March 29, 2013

Want to win a house for $100? That’s exactly what one Ontario couple offered recently as a prize through a contest they came up with after watching the movie Spitfire Grill, where the main character holds a contest to give away her diner (see: Aylmer Couple Holds Essay Contest to Sell Country Home for $100).

Apparently according to media reports, Diana and Calvin Brydges weren’t having much luck selling their country home in Aylmer (just outside of London, Ontario), so they decided to take another route — to run an essay contest where contestants explain how winning the house will benefit them and a $100 entry fee.

This doesn’t mean the couple is giving away their home — which comes complete with a swimming pool in the backyard — for a mere $100.  Instead, they’re hoping to get 3,000 essays, which will translate to $300,000, which is enough to allow them to relocate to Barrie. (At the time of writing they’d received about 150 essays.)

Is this actually legal? The couple says they spent nine months researching real estate, civil and criminal law before running the contest. They have a third party receiving the entries and removing any identifying characteristics to level the playing field. And, if they don’t get enough entries, they’ll send everyone’s money back.

Then there’s the annual topless ice-fishing contest that takes place in Picton, Ont., to raise money for the town’s Kiwanis Club’s Terrific Kids campaign. As part of the fourth Merland Park’s “Shirt Off Fish Off” derby, 20 male anglers agreed to ice-fish bare-chested (and one woman in a tank top) until they hooked something … or started to get frostbite (see: Topless Ice Fishing Contest Freezing Fun).  (Just for the record, on the day of the event this year, the temperature was -8 C). The winner walked away with a flat-screen TV, bragging rights and, most likely, a red, chapped torso.

These days everyone seems to be running contests, thanks to the Internet and social media. You can run contests using Twitter, Facebook, Google+ and a variety of other social and other media, whether you’re a global consumer products company, agency helping a brand that wants to try something different (using what seems like a perennially popular type of promotion) or new start-up.  Promotional contests can of course also be run using traditional marketing, which can include in-store promotions, seeded prize games (like Tim Horton’s Roll up the Rim to Win game, which seems to grow in size and popularity every year) and television and radio.

While the Brydges did their homework – according to media reports, some nine months of it – others may not know some of the basic requirements for running contests in Canada.  Also, even where promotions are run by sophisticated and established brands, like Tim Horton’s, issues can sometimes arise (or challengers to the legality of the contest emerge).  For example, in another contest related story that caught my eye, the Huffington Post set out to test Tim’s promotion and, in particular, whether entrants were more likely to win a prize by buying a larger coffee (see: Tim Hortons Roll Up The Rim Win-Loss Survey).

While Tim Horton’s spokespeople flatly denied that this was the case, and that prizes in their Roll Up the Rim to Win contest were randomly distributed across cup sizes, the HuffPost experiment found that those who purchased an extra large drink were more likely to win a prize than small coffee buyers.  Having said that, the journalists testing Tim’s promotion conceded the small sample size, quoted a mathematics expert on probability (who dismissed the findings based on small sample size) and said that their experiment was not based on empirical evidence but merely journalists that consumed some 92 beverages over the course of a week.

Now I’m not saying that any of these promotions raised issues.  But I thought they showed two things.

First, the number of ways to use a promotional contest is (nearly) only limited by a promoter’s ingenuity.  They’re flexible, popular and, well, they seem to continually generate traffic and interest.  Some popular types of contests include random draw, skill, seeded prize, collect and win and instant win contests.  I’ve seen contests run lately to promote everything from coffee and consumer goods, to the house sale described above, to non-profit fundraising projects, to tech and other start-ups.  Competition law enforcement agencies and other Government agencies even seem to be increasingly using contests to, well, spice up otherwise (might I say dull?) legal compliance.  A good promotion, and Tim’s is probably one of the best examples of this, can also keep on giving year after year as it grows in popularity.

Second – this is the “nearly” – there are alas some laws that apply to contests in Canada, like sweepstakes in the U.S. and contests run in other countries.  Knowing the basics can help you better promote your product or brand and minimize the likelihood trouble will arise.

In general, promotional contests in Canada are largely governed by the federal Competition Act and Criminal Code, privacy legislation and contract law.  In addition, Quebec has a separate regulatory regime governing contests, which means that Quebec requirements should be complied with or contest eligibility restricted to Canadian residents excluding Quebec.

Some of the common mistakes I routinely see with contests that are improperly run in Canada include contests run with no rules, rules that appear to be made up by promoters and do not correspond to the basic Competition Act, Criminal Code and privacy law requirements, rules that are not relevant to the promotion, U.S. or international rules applied to a Canadian promotion, promotions run on social media sites without complying with the sites’ terms of use (e.g., Facebook’s promotions rules), a failure to include the basic competition law disclosure requirements, and contests open to Quebec residents when it is not clear that the promotion has been reviewed or vetted for Quebec requirements.  I also see a fair number of purported “contests” that are in fact illegal lotteries under the Criminal Code.

The following are a few tips to run a promotional contest effectively in Canada, while mimimizing the risk that a contest will backfire:

1. Take care to avoid the Criminal Code provisions governing illegal lotteries (e.g., provide a “no purchase necessary” entry option and skill element, such as a multiple-step mathematical question).

2. “Short rules” should include all Competition Act disclosure requirements for point-of-purchase materials.

3. Ensure that precise “long rules” are prepared, particularly anticipating potential contingencies (e.g., technical problems, etc.).  Standard precedents, or copies of rules retrieved from the web, rarely address many of the details of a particular promotion.  Like all law, your counsel should not only understand what each provision means, but it should be relevant to your particular promotion.

4. Ensure that none of the advertising or marketing materials are generally false or misleading (i.e., comply with the “general misleading advertising” sections of the Competition Act).  In this regard, contests in Canada must comply with not only stand-alone contest provisions of the Competition Act (under section 74.06) but also with the general misleading advertising sections of the Act.

5. If contests are part of your company’s routine marketing, consider developing an internal check-list to ensure that all key legal requirements are met.  (Plus this is not a bad way to check your external counsel’s or agency’s work!).

6. Ensure that all key contest elements are as clear and precise as possible (e.g., eligibility, how to enter and descriptions of the prize and odds of winning).

7. Ensure that Quebec legal requirements are met (or take care to make sure that eligibility is limited to Canadian residents, not including Quebec).

8. Consider whether consents are needed (and if necessary obtained) to reproduce 3rd party intellectual property (e.g., trade-marks, logos, etc.) or transfer ownership in contest materials (e.g., where contestants create original material as part of the contest or promotion).

9. Obtain U.S. legal advice if the contest will be open to U.S. residents.

10. Comply with social media sites’ terms of use if using social media to promote or host a contest.

11. Consider whether other competition or advertising law rules may apply (e.g., the deceptive prize notice or telemarketing provisions of the Competition Act, both of which can also apply to contests, depending on the circumstances).

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