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June 10, 2013

In an interesting recent contest / sweepstakes case, A&P has reportedly agreed to settle charges alleging that it violated New York State sweepstakes laws by failing to adequately inform consumers that no purchase was required to enter its “A&P Frozen Food Month 2013” sweepstakes (for reports see: here and here).

According to reports, A&P has agreed to hire a compliance officer to monitor future promotions and pay a $102,000 fine.  New York State’s Attorney General, Eric Schneiderman, said:

“Under New York State law, companies that conduct sweepstakes must play by the rules by providing a level playing field for consumers, including those who do not make a purchase.” … “Today’s settlement ensures that A&P, which has previously ignored the law in this area, will provide an alternate method of entry which does not require a purchase and to fully inform consumers that no purchase is necessary to enter and win a sweepstakes. Because of the repeat violations, we are requiring that A&P hire a compliance officer and put strict safeguards in place.”

While consumers in this A&P promotion could enter without a purchase, the company was reported as not making that information clear, which implied that a purchase was necessary.

In Canada, contest promoters commonly include no purchase required entry options and skill-testing questions to avoid the illegal lottery offences of the federal Criminal Code.  In addition to the necessity of taking steps to avoid these offences when structuring contests in Canada, the Competition Act and Competition Bureau require that certain mandatory disclosure be made relating to the essential elements of contests (so called “short rules” available at point-of-purchase).

This information includes the number and approximate value of prizes, any regional allocation of prizes, skill testing question requirement, odds of winning and contest closing date.  From a disclosure / misleading advertising point of view, my practice has been to also disclose the fact that no purchase is required, who is eligible to enter (and whether the promotion is open in Quebec or the U.S., assuming the contest has been vetted for Quebec/U.S. compliance), how and where to enter and where to obtain full contest rules.

The Competition Bureau also specifically refers to the importance of prominently disclosing a no purchase requirement in its Promotional Contests Enforcement Guidelines:

“Where no purchase is required, this fact should also be prominently disclosed in situations where failing to do so could lead those wishing to participate to make a purchase (due to a mistaken belief that a purchase is necessary in order to participate) or, alternatively, in situations where they might be discouraged from entering, thus materially affecting participants’ chances of winning.”

It is also worth pointing out that “no purchase entry” options should be disclosed and also treated with “equal dignity” with purchase entries (i.e., not have no purchase entry options be mere shams and treated equally with entries received from purchasing customers).

Some common errors that I see in promotions in Canada, particularly online contests, include contest terms that are not relevant to a particular promotion, U.S. or international rules applied to Canadian promotions, contests that purport to apply across Canada and the U.S. (where it is unclear that rules have been vetted for U.S. or Quebec requirements) and contests operated with no (or few) rules and inadequate disclosure, including failing to include the statutory disclosure required by the Competition Act.

For more about Canadian contest laws see: here and here.

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