February 15, 2023
A promotional contest law question we commonly receive is whether Canadian contest/sweepstakes laws apply if a contest is only open to a company’s or other organization’s employees or personnel. These types of contests/sweepstakes are sometimes called “closed loop” contests or promotions because they are not open to the general public and only internal personal of a company or other type of organization can enter and participate.
Under Canadian federal law, the two main pieces of legislation that must be complied with are section 74.06 of the Competition Act (which requires that certain disclosures be made to entrants when running a contest) and section 206(1) of the Criminal Code (the offences under which must be avoided in order to not violate its prohibitions on illegal lotteries).
Neither the Competition Act nor the Criminal Code, however, distinguish between public and private contests or other games of chance or skill. For example, section 74.06 of the Competition Act merely provides that certain disclosure requirements be made to potential entrants in a contest where a person “conducts any contest, lottery, game of chance or skill, or mixed chance and skill”.
Similarly, the illegal lottery offences under section 206(1) of the Criminal Code do not distinguish between public and private games of chance, skill or mixed chance and skill. For example, section 206(1)(f) of the Criminal Code, which is one of the main offences that must be avoided when running a contest in Canada, merely makes it an offence to “dispose of any goods, wares or merchandise by any game of chance or any game of mixed chance and skill in which the contestant or competitor pays money or other valuable consideration”.
While section 74.06 of the Competition Act does apply to contests that are run for “the purpose of promoting … the supply or use of a product … or any business interest”, it might be argued that if there was no business interest whatsoever associated with a contest then the disclosure requirements set out in this section should not apply. However, the phrase “business interest” has been very broadly interpreted by Canadian courts under the general misleading advertising provisions of the Competition Act (sections 52 and 74.01) given the consumer protection nature of the legislation.
Given the broad scope of the main Competition Act and Criminal Code provisions applying to Canadian promotional contests, contest sponsors are well advised to include the usual legal requirements when running a closed loop contest in Canada (i.e., short and long contest rules, no-purchase entry requirement and skill-testing question for potential winners).
Also, in our experience, other Canadian laws can also apply to internal or so-called “closed loop” contests only open to employees or other personnel. These can include Canadian federal anti-spam legislation (CASL) – for example, where an internal company contest includes a call to action for personnel to share the promotion with friends and family to promote a company’s products/services.
If any contest, whether public or internal, involves electronic marketing not related to the administration of the contest, it is prudent for sponsors to ensure that they comply with CASL given the potential severe penalties of up to $10 million. For more information, see: Contests and CASL.
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CONTEST FORMS/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 Forms/Precedents.
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SERVICES AND CONTACT
We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
Our experience includes advising clients in Toronto, Canada and the United States on the application of Canadian competition and regulatory laws and we 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 and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.
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For more information about our firm, visit our website: Competitionlawyer.ca
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
