Canadian COMPETITION LAW

December 7, 2021

Destination contests/sweepstakes (i.e., trip contests) are popular seasonal marketing tools used by many clients and businesses to increase sales during the holidays and winter season. They often include ski, spa, beach and other snow-bird travel packages to popular Canadian and international destinations.

While trip contests may seem counterintuitive given the current circumstances, trip contests often allow sponsors to select flexible periods in which entrants can redeem prizes and allow sponsors to unilaterally substitute prizes. Considering this, it is not surprising that we have advised many local and international governments, travel and tourism entities and marketing agencies on the key aspects of running trip contests in Canada.

The following is a short overview with some key Canadian legal considerations for contest sponsors, co-sponsors and agencies regarding trip-related contests and other similar promotions.

When launching a contest in Canada, it is important that sponsors (as well as any co-sponsors or marketing partners) comply with key Canadian contest rules, including the federal Criminal Code, Competition Act and CASL (Canadian anti-spam law).

TRIP PRIZES

The main difference between trip contests, compared with other types of contests, is the type of prize. In trip contests, sponsors award a trip or vacation, typically as a grand prize, which may be (and often is) combined with other types of secondary prizes.

Given that contest rules are contracts, sponsors can broadly determine how many and what kind of prizes are awarded. Nevertheless, in Canada, certain statutory disclosure requirements must be met, including clear disclosure of the number and approximate retail value of each prize.

In addition, it is important that all contest creative materials be accurate. For example, contest sponsors must avoid false or misleading representations under the federal Competition Act (e.g., that suggest certain prizes are available when they are not or that fail to disclose important conditions or limitations associated with redeeming a contest prize).

TRIP PRIZE DESCRIPTIONS

Another key difference between trip contests and other types of contests is the description of prizes.

Considering the commonly increased value and complexity of trip contest prizes, additional care should be used when describing the prizes and any material conditions or restrictions associated with, for example, redeeming the prize.

This commonly includes describing the trip prize in reasonably significant detail, its approximate retail value, whether it is being awarded as a trip arranged by the sponsor and/or agency in their sole discretion (or awarded in some other way, such as cash or a gift certificate), any key restrictions (e.g., blackout periods) and who chooses the details of the trip, whether the prize includes a companion, limitations on additional expenses, describing an alternative prize in the event the trip prize cannot be awarded and a deadline to redeem the prize.

WINNER SELECTION

In general, trip contests are similar to other types of promotional contests in selecting winners.

Whether not a contest involves a trip prize, in Canada, sponsors still have significant latitude to determine how to enter and win, including through entry ballots, random draw selection, skill, consumer generated entry (e.g., through competing photo, video or essay submissions) or a combination of different types of entry and winner selection (e.g., skill-based entries that are judged, shortlisted and finally selected through a draw).

Regardless, it is important for sponsors to ensure that they comply with (i.e., avoid) the illegal lottery provisions of Canada’s Criminal Code (under section 206) (e.g., have a bona fide no purchase entry alternative if winners will be chosen by random draw and any prizes are included that are “goods, wares or merchandise”).

SPONSOR LIABILITY AND RISK

While not required by law, contest sponsors often require entrants to agree to complete and sign winner release forms as a condition of winning a prize.

For trip contests, however, which typically involve more risk and higher value prizes, it is particularly important that release language in contest rules and winner releases themselves be fulsome to address potential risks for the sponsor, co-sponsors, partners and others involved in the organization and promotion of the contest.

For cross-border contests, it is also prudent to ensure that winner release forms are enforceable in the relevant jurisdiction(s) in which they are open (e.g., local counsel and Quebec counsel commonly comment on not only contest rules but winner release language as well).

In addition, if a trip prize will include companions (i.e., in trips for two or more people), contest rules should require winners to return completed and signed companion winner release forms.

MINOR COMPANIONS

In trip contests where the prize also includes a trip for a companion, the rules should also require the winner to return not only a completed and signed and completed companion release form, but also a guardian release if the companion is a minor.

This is because in many jurisdictions, minors cannot contract. As such, contest sponsors commonly require that a parent or guardian complete and sign a guardian release on behalf of any minor companions who will accompany the winner on the trip.

Also, trip contests aside, one of the reasons that many promotions are restricted to entrants who are age of majority where they reside is that because contest rules are contracts and minors may not be able to contract (i.e., there is a risk that if minors win prizes, and any issues arise, the contest rules may not in fact be enforceable against the minor).

CO-SPONSOR AGREEMENTS

Trip contests often involve multiple parties who participate and have an interest in or are participating in the promotion. This may include the destination itself (e.g., destination country), prize partners, co-sponsors, influencers/marketers or other partners.

As such, a key consideration for sponsors of trip contests is the potential liability that may arise by partnering with third parties. In this regard, we are increasingly seeing our clients implement co-sponsor, contest indemnity or influencer agreements to limit risk in larger contests/promotions or in contests with a higher level of potential risk.

We have recently helped a number of different types of clients draft and implement these kinds of agreements where, for example, a major brand is partnering with less experienced partners or influencers and franchisors that participate in significant promotions with networks of franchisees in regional or nation-wide promotions.

ELECTRONIC MARKETING AND CASL
(CANADIAN ANTI-SPAM LEGISLATION)

Canada’s federal anti-spam legislation (CASL) is often relevant when running contests in Canada, including if electronic distribution lists will be used to market the contest, the contest will include the collection of e-mails for marketing unrelated to administration of the contest, if entrants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or entrants can “share” the contest with friends or family for additional entries.

Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is important for contest sponsors to ensure that they comply with CASL for electronic marketing related to promotional contests open to Canadians including trip/destination contests.

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.

OTHER TRIP CONTEST LEGAL CONSIDERATIONS

In addition to the above, contest sponsors should, as with Canadian contests generally, ensure that short rules and full contest terms and conditions are made easily available to potential entrants (e.g., on contest landing pages, social media pages and other marketing) and that draft marketing materials are reviewed before the contest is launched to ensure that they are not false or misleading.

Contest sponsors should also consider any applicable laws relating to jurisdictional requirements (e.g., when operating a contest in Quebec) and intellectual property considerations (e.g., to ensure that the sponsor has wide control over the acceptance and use of any entrant content submitted as part of entering and participating in the contest, such as photographs, videos or essays).

For more information about Canadian contest/sweepstakes laws see: Contests, Contests & CASL, Contest FAQs, Contest Tips and Contests/Social Media.

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CONTEST RULES/PRECEDENTS

Do you need contest rules/precedents
for a Canadian contest?

We offer many types of Canadian contest/sweepstakes law precedents and forms (i.e., Canadian contest/sweepstakes law precedents to run common types of contests in Canada).  These include legal precedents for random draw contests (i.e., where winners are chosen by random draw), skill contests (e.g., essay, photo or other types of contests where entrants submit content that is judged to enter the contest or for additional entries), trip contests and more.

Also available are individual Canadian contest/sweepstakes precedents, including short rules (“mini-rules”), long rules, winner releases and a Canadian contest law checklist.

For more information or to order see: Canadian Contest Law Forms/Precedents.

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SERVICES AND CONTACT

I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law.  I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

My experience includes advising clients in Toronto, Canada and the US on the application of Canadian competition and regulatory laws and I 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, pricing and distribution, Investment Canada Act and merger matters. For more information about my competition and advertising law services see: competition law services.

To contact me about a potential legal matter, see: contact

For more regulatory law updates follow me on Twitter: @CanadaAttorney

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