Canadian COMPETITION LAW

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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For more Canadian competition/antitrust, advertising/marketing, CASL (anti-spam) and contest law terms and phrases, see: Competition Law Terms, Advertising Law Terms, CASL Law Terms – A-M, CASL Law Terms – N-Z, Contest Law Terms – D-H, Contest Law Terms – I-M, Contest Law Terms – N-S and Contest Law Terms – T-Z.

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The following are key Canadian contest/sweepstakes law related terms (A-C):

“Adequate and fair disclosure”.

Section 74.06 of Canada’s federal Competition Act (Promotional Contests) requires that “adequate and fair disclosure” be made of certain statutorily required disclosures when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …” Key Competition Act requirements include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning. The Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes. Based on these requirements, most contest organizers provide short rules / mini rules in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with long rules (i.e., official contest rules) available on request and commonly posted on the sponsor’s website. Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosures and other material contest terms. While short, and usually straightforward, it is important that the mandatory statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and accompanying promotional materials ensure that the necessary disclosures, as well as full long rules, are included in point-of-purchase and similar marketing materials where entrants first see a contest promoted.

Advisory opinion.

Under section 124.1 of the Competition Act, any person may apply to the Commissioner of Competition, together with supporting information, for a binding written opinion regarding the application of any provision of the Act.  Written opinions can be a practical way for businesses and individuals to reduce potential competition law liability for proposed conduct.  A written opinion is binding on the Commissioner if all material facts relating to the proposed conduct have been submitted.  If issued, written opinions remain binding for as long as the material facts on which they are based remain substantially unchanged and the conduct is carried out substantially as proposed.  Binding written opinions are available, subject to the Commissioner’s discretion to issue them, for proposed conduct only.  In other words, the Bureau will not issue advisory opinions for existing business conduct.

Written opinions are available under the following provisions of the Act, among others: resale price maintenance (section 76), exclusive dealing / tied selling / market restriction (77), abuse of dominance (79), civil agreements provision (90.1), conspiracy (45), misleading advertising and deceptive marketing practices (52, 55.1, 74.01, 74.06), deceptive telemarketing (52.1), deceptive prize notices (53), multi-level marketing and pyramid selling (55 and 55.1), performance claims (74.01(1)(b)) and promotional contests (74.06).

See Competition Act section 124.1; Competition Bureau, website, Legal Actions and Opinions section; Competition Bureau, Bulletin, Competition Bureau Fee and Service Standards Handbook for Written Opinions; definition of “written opinion”.

“Age of majority” / minors.

In many jurisdictions, minors (i.e., individuals under the age of majority in the relevant jurisdiction) cannot enter into legally binding contracts. As such, contest/sweepstakes sponsors commonly require that any winners of a contest that are minors have a parent or legal guardian agree to the contest terms on their behalf and enter into the contest winner release form. In trip/destination contests, contest sponsors commonly require that any travel companions of the winner also enter into a winner release form and have their parent or legal guardian complete a parent/guardian release form if the companion is a minor.

“AMOE” (alternative means of entry) / “no purchase required entry option”.

Based on the Canadian federal Criminal Code‘s prohibitions of illegal lotteries under section 206, contest/sweepstakes sponsors in Canada commonly remove either the consideration element by offering a “no purchase necessary” or “alternative means of entry” (AMOE) entry option, chance element (e.g., by adding a skill element, for example making the contest a pure skill skill contest or including a skill-testing question requirement). This is because under many of the illegal lottery offences under section 206 of the Criminal Code, it is a criminal offence to run pure chance games where a purchase or other consideration (i.e., something of value) is required as a condition of entry by contest entrants. Determining what constitutes “consideration” and “chance” can, however, be complex in some case. As such, sponsors who want to require a purchase as a condition of entry into a contest in Canada or not include a skill component should obtain legal advice.

“Car or cash pitch”.

A form of deceptive telemarketing.

Rachel Larable-Lesieur, Deputy Director of Investigation and Research, Marketing Practices Branch, Bureau of Competition Policy, “Modern Communications and Global Markets”, speech to the Canadian Institute Conference on Misleading Advertising (1995): “… victims are led to believe that they have won either a vehicle or money but to get their prize, they must release money up front to cover phony taxes, insurance or handling charges.”

CASL (Canadian federal anti-spam legislation).

On July 1, 2014, Canada’s federal anti-spam law (CASL) came into force. CASL is one of the strictest anti-spam laws in the world. In general, CASL requires express or implied consent to send Canadians commercial electronic messages (CEMs) as defined in the legislation. CASL also imposes sender identification and opt-out (i.e., unsubscribe) requirements for CEMs. CASL is relevant for individuals, companies and other organizations that engage in electronic marketing, including e-mail, text messaging, instant messaging and some types of social media marketing (e.g., where messages are sent to electronic addresses, such as via some social media platforms’ messaging services).

CASL also often applies when running promotional contests or other types of promotions in Canada, including in the following situations: (i) if electronic distribution/marketing lists will be used to market the contest/promotion, (ii) the contest/promotion will include the collection of e-mails for marketing unrelated to the administration of the contest/promotion, (iii) if participants’ e-mail addresses will be shared with third parties (e.g., related entities, affiliate marketers, lists will be sold, etc.) or (iv) participants are encouraged or required to “share” information about the contest/promotion with others (e.g., “friends and family” type promotions).

The potential penalties for violating CASL include civil administrative montetary penalties (essentially civil fines) of up to CDN $1 million (for individuals) and CDN $10 million (for corporations).

For more information about CASL, see: CASL, CASL Compliance , CASL Compliance Tips, CASL FAQs, CASL Compliance Errors and Contests and CASL.

For CASL compliance checklists and precedents that we offer for sale, see: Anti-Spam Law (CASL) Precedents.

Chance.

Roe v. The King, [1949] S.C.R. 652, 94 C.C.C. 273, [1949] 2 D.L.R. 785 (S.C.C.), at para 13: “In Rex v. Regina Agricultural etc. Assn., [1932] 2 W.W.R. 131, 13 Can. Abr. 294, Mr. Justice Martin said at p. 135: ‘Under sec. 236(a) [of the Criminal Code] and under similar provisions contained in early statutes in Canada dealing with similar matters, and under the lottery Acts of England, it has been held that ‘a mode of chance’ involves the absence of any skill; in other words, if it is found that skill enters into the estimates or guesses, there cannot be a conviction under the section.’”

“Cheap gift pitch”

A form of deceptive telemarketing.

Rachel Larable-Lesieur, Deputy Director of Investigation and Research, Marketing Practices Branch, Bureau of Competition Policy, “Modern Communications and Global Markets”, speech to the Canadian Institute Conference on Misleading Advertising (1995): “… victims are told they are winners of one of several prizes but in order to qualify for the prize, they need to purchase a cheap product at an inflated price.”

Closed loop contest/sweepstakes.

A “closed loop” contest refers to a promotional contest that is only open to a company’s or other organization’s employees or personnel (i.e., not open to the general public). 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.

Based on the above, in general, sponsors of closed loop contests should comply with Canadian contest laws, including including short and long contest rules, ensuring that the statutory disclosures under section 74.06 of the Competition Act are met and any promotional materials are not false or misleading.

Contest.

Promotional contests in Canada are largely governed by the federal Competition Act (statutory disclosure and misleading advertising rules), federal Criminal Code (provisions governing “illegal lotteries” that must be avoided), federal and provincial privacy legislation (relating to the collection of entrant personal information), the common law of contract (contests have been held to be contracts) and intellectual property laws (e.g., relating to the transfer of original artistic materials, for example in skill contests, or reproduction of 3^rd party logos, trade-marks or other intellectual property not owned by a contest organizer).  In addition, Quebec has a separate regime governing contests, regulated by the Régie des alcools, des courses et des jeux.

With respect to the Competition Act, subsection 74.06 makes it a reviewable (i.e., civil) matter, subject to civil penalties, to operate a contest without certain required disclosure, to unduly delay the award of prizes and also governs the selection of participants and distribution of prizes:

“A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product, or for the purpose of promoting, directly or indirectly, any business interest, conducts any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit by any mode of chance, skill or mixed chance and skill whatever, where: (a) adequate and fair disclosure is not made of the number and approximate value of the prizes, of the area or areas to which they relate and of any fact within the knowledge of the person that affects materially the chances of winning; (b) distribution of the prizes is unduly delayed; or (c) selection of participants or distribution of prizes is not made on the basis of skill or on a random basis in any area to which prizes have been allocated.”

R. v. Sears Canada Inc. (1989), 28 C.P.R. (3d) 248 (Ont. Dist. Ct.), at para 45: “In my view the Mini-Casino promotion was not a contest, since it lacks the element of competition between contestants. Nor was it a lottery, which is an arrangement for the distribution of prizes by drawing lots (usually from a wheel or drum) to be matched with tickets held by the lottery players.”

Contract.

It has been held in a number of cases that contests and lotteries are contracts between a promoter and entrants. For example, in Thierman v. Western Canada Lottery Corp., [1995] 9 W.W.R. 253 (Sask. Q.B.), at para 19, the court defined “contract” for the purposes of contests and lotteries as follows: “In Group Against Smokers’ Pollution Inc. v. Manitoba Lotteries Licensing Board, [1980] 6 W.W.R. 367, a decision of the Manitoba Court of Appeal, Matas J.A. considered the law of contracts with specific reference to lotteries. Beginning at p. 371, he said: ‘The private rights and remedies growing out of prize-winning contests are discussed in an annotation in (1963), 87 A.L.R. (2d) 649 et seq. Several cases are citied in which the principle is accepted that a contract comes into existence by the promoter’s offer and the contestant’s performance of the act required in the offer. At p. 661, the following statement is made: ‘The general rule of the law of contracts that were an offer or promise for an act is made, the only acceptance of the offer that is necessary is the performance of the act, applies to prize-winning contests. The promoter of such a contest, by making public the conditions and rules of the contest, makes an offer, and if before the offer is withdrawn another person acts upon it, the promoter is bound to perform his promise.’ In Walters v. Nat. Beverages Inc. (1967), 422 P. (2d) 524 (Utah S.C.), Tuckett J. said (for the court) at p. 525: We are in accordance with the general rule that in prize-winning contests, such as we are dealing with in this case, where an offer or promise is made in exchange for an act to be performed on the part of the contestant, the performance of that act is an acceptance of the offer and results in a binding contract.”

Co-sponsor / indemnification agreements.

In some contests/promotions, a contest sponsor or other party may want to participate in a promotion with a third party (e.g., a contest administrator, influencer or marketing partner) being responsible for the majority of the marketing and administration of the contest/promotion. Some examples include franchisors with franchisees conducting the majority of a contest/promotion, major brands that partner with influencers and brands that partner with other co-sponsors or prize sponsors.

In many cases, one party, whether it is a franchisor, major brand or a co-sponsor, is interested in being involved with a contest or promotion (e.g., contributing some prizes or intellectual property assets, such as their name or marks), but wants another party (or parties) to conduct the majority of the marketing and administration for the contest/promotion. Given, however, the potential risk of partnering in promotions with third parties (particularly, smaller companies or potentially less sophisticated individuals, such as influencers), it can make sense to enter into an indemnification or co-sponsor agreement with third parties involved in a promotion.

While the substance of a particular agreement will depend on the parties, type of contest/promotion and what each party involved is responsible for in the promotion, there are often several types of common provisions in each agreement. These include covenants setting out the obligations of the parties (i.e., responsibilities in the contest/promotion including marketing, administration and contribution of prizes), description of the promotion (including how it will be marketed, marketing channels and timetable), use of names, marks and other intellectual property, covenants to comply with relevant laws (e.g., Canadian anti-spam law (CASL), misleading advertising laws endorsements/testimonials laws including disclosure of material connections), indemnification provisions to shift risk in the event issues arise and often rights to review advertising and draft creative before being published or posted.

Such agreements can help parties shift risk where they are co-sponsors or partners in a promotion. These types of agreements are also a practical way for parties to engage in a contest or other type of promotion with relatively limited involvement (e.g., only contributing a prize(s) or the use of their name, marks or other intellectual property), while still achieving marketing value for their brand.

For information, see: Influencer Agreements and the Contest Indemnification Agreement that we offer as part of our Canadian contest compliance checklists and precedents.

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

For information about the Canadian contest/sweepstakes precedents (template rules) and checklists that we offer for sale, 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, across 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