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.

********************

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 – A-C, Contest Law Terms – D-H, Contest Law Terms – N-S and Contest Law Terms – T-Z.

********************

The following are key Canadian contest/sweepstakes law related terms (I-M):

Illegal lottery.

In addition to the standalone promotional contest provision in the federal Competition Act (section 74.06), criminal illegal lottery provisions of the federal Criminal Code also apply to contests in Canada (sections 206 and 207).  These provisions prohibit certain types of gaming activities unless an exemption is available or one or more elements of the relevant offence is removed.  While the relevant provisions of the Code are complex and somewhat archaic, they generally codify, although inconsistently, the former common law elements for illegal lotteries: (i) a prize, (ii) chance and (iii) consideration.

Re: Earth Future Lottery: “… Parliament does not happily abide gaming activities of any sort in Canada.  The little it tolerates, it does so grudgingly.  Section 206 [of the Criminal Code] is prohibitive in nature, not regulatory.  The purpose of Parliament in enacting it was generally to outlaw gaming and lotteries, not just to ensure they would be run honestly.  Subsection 206(1) creates a number of indictable offences proscribing a comprehensive range of gaming and gaming-related activities.  Subsection 206(4) makes it a summary conviction offence to buy, take or receive a lot, ticket, other device mentioned in 206(1).  Although s. 207 allows some tightly circumscribed exceptions to s. 206, it too contains a broad prohibition.  Subsection 207(3) makes it an offence to do anything for the purpose of the conduct, management, operation of, or participation in a lottery scheme unless the doing of it is authorized by or pursuant to some provision of 207.  Thus, even permitted lotteries must strictly adhere to the limits imposed by the terms and conditions of s. 207.”

Canadian Better Business Bureau, BBB Code of Advertising: “No contest, drawing or other game of chance that involves the three elements of prize, chance and consideration should be conducted since it constitutes a lottery [under the federal Criminal Code] and is in violation of provincial statutes.”

Indemnification / co-sponsor 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.

Instant win contest.

A type of contest in which entrants are immediately notified whether they have won (as opposed to, for example, waiting for notification by e-mail, phone or mail).

Insured contest.

An “insured contest” is a contest in which a contest promoter has obtained insurance to cover the, usually remote, possibility that a winner wins a significant prize where the odds of winning are significant (i.e., in which it is unlikely that any entrant will win).

“Long rules” / “official contest rules”.

Canadian promotional contests/sweepstakes commonly provide entrants with “long rules” or “official contest rules” when a contest is launched. It is important that long contest rules be drafted to protect the contest sponsor in the event issues arise. In this regard, it has been held that contests are contracts with an offer to enter the contest met with performance by contest entrants (i.e., entering and participating in the contest). As such, contest sponsors should ensure that precise long rules  (i.e., “official contest rules”) are included that reflect the details of the contest, anticipate potential contingencies (e.g., technical problems) and set out the details of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and values, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors. Long rules are typically posted on a contest entry landing page via a link from the short rules / mini rules.

Lottery. 

In addition to the standalone promotional contest provision in the federal Competition Act (under section 74.06), criminal illegal lottery offences in Canada’s federal Criminal Code also apply to contests in Canada (sections 206 and 207). These provisions make it criminal offences to, among other things, run certain games of pure chance or mixed chance and skill where consideration (i.e., payment of money or provision of something else of value) is provided in order to enter and participate in the game. While the relevant provisions of the Code are complex and somewhat archaic, they generally codify, although inconsistently, the former three common law elements for illegal lotteries: (i) a prize, (ii) chance and (iii) consideration. In order to avoid these illegal lottery offences, Canadian contest sponsors typically remove the consideration element (by offering a no purchase required entry option) and some chance (by requiring a skill-testing question).

Re: Earth Future Lottery: “… Parliament does not happily abide gaming activities of any sort in Canada. The little it tolerates, it does so grudgingly.  Section 206 [of the Criminal Code] is prohibitive in nature, not regulatory. The purpose of Parliament in enacting it was generally to outlaw gaming and lotteries, not just to ensure they would be run honestly.  Subsection 206(1) creates a number of indictable offences proscribing a comprehensive range of gaming and gaming-related activities.  Subsection 206(4) makes it a summary conviction offence to buy, take or receive a lot, ticket, other device mentioned in 206(1).  Although s. 207 allows some tightly circumscribed exceptions to s. 206, it too contains a broad prohibition. Subsection 207(3) makes it an offence to do anything for the purpose of the conduct, management, operation of, or participation in a lottery scheme unless the doing of it is authorized by or pursuant to some provision of 207. Thus, even permitted lotteries must strictly adhere to the limits imposed by the terms and conditions of s. 207.”

R. v. World Media Brokers Inc. et al., (1998) 132 C.C.C. (3d) (Ont. Ct.): “It seems to me to be implicit in the whole legislative scheme of Part VII of the Criminal Code that lotteries were considered by Parliament to be one form of ‘gaming and betting’. Although the word ‘lottery’ is not itself used in s. 206(1) [of the Criminal Code], the provisions refer in general language to ‘any proposal, scheme or plan for … disposing of any property by … any mode of chance’. Section 206(7) states that the section applies to certain activities in relation to a ‘foreign lottery’ and ‘any ticket chance or share in any such lottery’. Section 207(1) commences with the words ‘Notwithstanding the provisions of this Part relating to gaming and betting …’ (emphasis added) and goes on to provide that certain kinds of ‘lottery schemes” are lawful. Unless lotteries already came within the general ‘gaming and betting’ exemptions for particular kinds of lottery activities. Moreover, s. 207(4) states that for purposes of that section, ‘lottery scheme’ means a game or any … scheme … described in any of paragraphs 206(1)(a) to (g), whether or not it involves betting …’”

R. v. World Media Brokers Inc. et al., (1998) 132 C.C.C. (3d) (Ont. Ct.): “A lottery is a ‘game” because it is played according to rules and it has winners or losers determined on the basis of luck or chance.”

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.”

G.A.S.P. Inc. v. Manitoba (Lotteries Licensing Board), [1980] 6 W.W.R. 367 (Man. C.A.), at para 4: “The classic elements of a lottery, consideration, prize and chance are all present.”

Exhibition Advertising Enterprises, etc. v. Victoria Exhibition (1962), 36 D.L.R. (2d) 232 (B.C.S.C.): “But in drafting s. 179(1) of the Criminal Code [now section 206(1) of the Criminal Code] the legislators clearly contemplated a distinction between ‘lottery’ and ‘game of chance’. Thus under s-s. (1)(a) to (d), skill and mixed skill and chance are defences to a charge. See Roe v. The Queen, 94 C.C.C. 273, [1949] 2 D.L.R. 785, [1949] S.C.R. 652, and see in our own Court of Appeal the judgment of Mr. Justice Coady (as he then was) in R. v. Young (1957), 119 C.C.C. 389 and particularly at p. 392 as follows: ‘The question then is did skill enter into this competition? The law is clear that unless the competition is one that depends entirely upon chance, it is not a lottery.”

R. v. Young (1957), 119 C.C.C. 389 (B.C.C.A.), per Coady J.A.: “The question then is did skill enter into this competition? The law is clear that unless the competition is one that depends entirely on chance, it is not a lottery: Hall v. Cox, [1899] 1 Q.B. 198; Scott v. Director of Public Prosecutions, [1914] 2 K.B. 868; R. v. Regina Agricultural & Industrial Exhibition Ass’n Ltd., [1932] 2 W.W.R. 131; Brown v. Bonnycastle, 65 Can C.C. 57, [1936] 1 D.L.R. 295, 43 Man. R. 476.”

R. v. Wallace (1954), 109 C.C.C. 351 (Alta. S.C.), per Ford J.A.: “In addition to the above, cases counsel for the Crown cited the following: R. v. Marshall, [1930] 2 D.L.R. 855, 53 Can. C.C. 118, 65 O.L.R. 279; R. v. Irwin, [1928] 4 D.L.R. 625, 50 Can. C.C. 159, 23 A.L.R. 506; Bailey v. The King, [1938], 3 D.L.R. 670, S.C.R. 427, 70 Can. C.C. 197; R. v. Walker (1953), 106 Can. C.C. 154, 32 M.P.R. 5. Among these, R. v. Irwin and R. v. Long, our Court, Harvey C.J.A. writing the judgments, held that guessing contests of the kind there under consideration are lotteries. The first was a guess as to the number of passengers the Edmonton St. Railway would carry on a future date; the second as to the number of grains of a certain grade of a certain kind of wheat displayed in a glass jar. In the Bailey case, which decided that a ‘Skill Puzzle Board’ that exhibited questions capable of being answered correctly by investigation and search of literary references, was, nevertheless, a means or contrivance for playing a game of chance, or at any rate of mixed chance and skill. Kerwin J., now C.J.C., pointed out that people entering the drug store would be inveigled to pay ten cents for the opportunity of punching a hole and the chance of winning a prize.”

R. v. Bonnycastle, 1935 CarswellMan 80, [1935] 3 W.W.R. 536, 43 Man. R. 476, 65 C.C.C. 57, [1936] 1 D.L.R. 295, per Trueman, J.A., Prendergast, C.J.M.: “The accepted definition of a lottery, other than that within sec. 236(d), is stated in the subsection in question, viz., 236(3). It must be a distribution of prizes determined entirely by chance. If the exercise of any judgment or skill on the part of a competitor can and does contribute to his success the scheme is not a lottery: Barclay v. Pearson, [1893] 2 Ch. 154, 62 L.J. Ch. 636; Scott v. Director of Public Prosecutions, [1914] 2 K.B. 868, 83 L.J.K.B. 1025.”

“Material” (Canadian misleading advertising law).

To violate the criminal or civil misleading advertising provisions under the Competition Act (sections 52 and 74.01) a representation must be made to the public that is “false or misleading in a material respect”.  In this regard, “materiality” does not depend on the value of a transaction, but rather has been held by Canadian courts to mean that a representation or claim could lead an average consumer to purchase a product (or otherwise alter their conduct).

Competition Bureau, Enforcement Guidelines, Application of the Competition Act to Representations on the Internet (2009): “To contravene certain provisions of the Act, a representation must be “false or misleading in a material respect”. This phrase has been interpreted to mean that the representation could lead a person to a course of conduct that, on the basis of the representation, he or she believes to be advantageous. It is important to note that omitting relevant information could also be viewed as material.”

R. v. Kenitex Can. Ltd. et al. (1980), 51 C.P.R. (2d) 103:  “[A] representation will be false or misleading in a material respect if, in the context in which it is made, it readily conveys an impression to the ordinary citizen which is, in fact, false or misleading and if that ordinary citizen would likely be influenced by that impression in deciding whether or not he would purchase the product being offered”.

Commissioner of Competition v. Yellow Pages Marketing, 2012 ONSC 927 (Ont. Sup. Ct.), citing Canada (Commissioner of Competition) v. Sears Canada, [2005] CCTD No. 1 (Comp.Trib.): “A representation is ‘misleading in a material respect’ where an ‘ordinary citizen would likely be influenced by that impression in deciding whether or not he would purchase the product being offered.’  A misleading representation is material where it is of ‘much consequence of [is] important or pertinent or germane or essential to the matter.’”

Commissioner of Competition v. Chatr Wireless Inc. and Rogers Communications Inc., Notice of Application (November 19, 2010): “… the Representations made by the Respondent are false and misleading in a material respect.  Network reliability, including dropped call rates, is a material aspect of wireless telecommunication services and is a component of a consumer’s decision to purchase a particular wireless telecommunication service.  The Representations are material because prospective customers would likely be influenced by the Representations in deciding whether to purchase wireless service from Chatr or a new entrant.  The Representations mislead consumers to believe there is a meaningful difference in dropped call rates, when that is in fact not the case.”

R. v. Sears Canada Inc. (1989), 28 C.P.R. (3d) 248 (Ont. Dist. Ct.): “I am satisfied that the construction of the advertisement, as to whether it is false or misleading in material particular, is a question of law alone and, in construing the advertisement, the proper test to be applied is the meaning that would be discerned by the average person to whom the representation are directed: R. v. International Vacations Ltd. (1980), 56 C.P.R. (2d) 251, 124 D.L.R. (3d) 319, 59 C.C.C. (2d) 557 (C.A.). Moreover, if the ‘ads’ give rise to any ambiguity of construction or alternative interpretation that was not in contravention of s. 36(1)(a) of the Combines Investigation Act, R.S.C. 1970, c. C-23, that this would result in an acquittal: R. v. R.M. Lowe Real Estate Ltd. (1978), 39 C.P.R. (2d) 266 at p. 267, 40 C.C.C. (2d) 529 (Ont. C.A.).”

R. v. Simpsons Ltd. (1988), 25 C.P.R. (3d) 34 (Ont. Dist. Ct.), at para 16: “In R. v. Patton’s Place Ltd. Magistrate Carson, at page 16 says “… I think the word ‘material’ used here must be its normal meaning and that is, it is a representation which is calculate to, and in effect does, lead a person to a certain course of conduct because he believes the information put before him indicates that this would be advantageous to himself.’ I respectfully agree with that opinion.”

“Mini rules” / “short rules”. 

Canada’s federal Competition Act requires that certain disclosures be made 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 disclosure and other key contest elements. 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 disclosure is included in point-of-purchase and similar marketing materials where entrants first see a contest promoted.

Minors / age of majority. 

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 they are a minor.

Misleading.

R. v. Stucky, 2006 CanLII 41523 (Ont. S.C.), at para 71: “What is clear from the cases is that whether or not a representation is misleading [for the purposes of section 52 of the Competition Act] will be determined from a consideration of the representation in context and from the perspective of the average person to whom it was directed. In this respect, it is not accurate to say that the target of the promotion would simply be the ‘… ignorant, unthinking and credulous; nor … the skeptical who have learned by bitter experience to beware …’ Put otherwise, the facts of each case, which includes a consideration of the intended audience, must govern and the representation is to be considered from both a literal and general impression point of view.”

Misleading advertising.

Competition Bureau, Ensuring Truth in Advertising, Misleading Advertising and Labelling: “The misleading advertising and labelling provisions enforced by the Competition Bureau prohibit making any deceptive representations for the purpose of promoting a product or a business interest, and encourage the provision of sufficient information to allow consumers to make informed choices.  The false or misleading representations and deceptive marketing practices provisions of the Competition Act contain a general prohibition against materially false or misleading representations. They also prohibit making performance representations which are not based on adequate and proper tests, misleading warranties and guarantees, false or misleading ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, double ticketing and the sale of a product above its advertised price. Further, the promotional contest provisions prohibit contests that do not disclose required information.  The Consumer Packaging and Labelling Act, Textile Labelling Act and Precious Metals Marking Act all contain prohibitions regarding false or misleading representations. They also require certain labelling or marking information aimed at assisting consumers in making informed purchasing decisions.

R. v. David Stucky, 2006 CanLII 41523 (Ont. S.C.): “The essential elements of the [offence of misleading advertising under section 52 of the Competition Act] pre- and post-amendment, are: (a) that representations were made; (b) for the purpose of promoting, directly or indirectly the business interest specified in the indictment; (c) to the public; (d) the representations were false or misleading; (e) in a material respect.”

Mixed skill and chance.

R. v. Balance Group International Trading Inc. (2002), 162 C.C.C. (3d) 127 (Ont. C.A.): “Notwithstanding Mr. Fenton’s very able submissions, we have not been persuaded that there is a basis for interfering with the trial judge’s conclusion that the two crane games were games of mixed chance and skill, thus, falling within the prohibition in s. 206(1)(f) of the Criminal Code. The test to be applied as set out in cases such as Bailey v. The King (1938), 70 C.C.C. 342 (S.C.C.) and Rex v. Athonas (1931), 56 C.C.C. 146 (Ont. S.C. App. Div.), is whether the game, as intended to be played by the ordinary person likely to play it, is a game of skill or mixed chance and skill.

In our view, the amount of control exercised by the ordinary player was so minimal that the game operated as one of chance or at best mixed chance and skill. The evidence established that the average player simply could not exercise sufficient skill to compensate for the other elements of the game that were wholly beyond the power of the player to influence. The ability of the player to control the crane’s lateral movement gave the appearance of an element of skill. In reality, however, as a matter of common sense the game would be played as a game of chance. The expert evidence adduced by the Crown and accepted by the trial judge demonstrated that there were too many other variables that were far more important than the positioning of the crane that would overcome what little skill the operator might bring to the game.

We agree with the appellant that simply because a game has an increased level of difficulty does not necessarily mean the game will be viewed as one of chance or mixed skill and chance. We also agree that merely because some elements of the game are out of the control of the player does not make the game one of mixed chance and skill. Where, as in this case, however, virtually all of the elements of the game are out of the control of the player, it was open to the trial judge to conclude as he did that the game is one of mixed chance and skill. As the trial judge said, as a matter of common sense the games are ‘games of mixed skill and chance with an overwhelming degree of chance and merely a dash of skill.’ This was not a case where there were some unpredictable elements that might occasionally defeat the player’s skill, but the systematic resort to chance: Ross, Banks and Dyson v. The Queen, [1969] 1 C.C.C. 1 (S.C.C.) at 17.”

R. v. Wallace (1954), 109 C.C.C. 351 (Alta. S.C.), per Ford J.A.: “In addition to the above, cases counsel for the Crown cited the following: R. v. Marshall, [1930] 2 D.L.R. 855, 53 Can. C.C. 118, 65 O.L.R. 279; R. v. Irwin, [1928] 4 D.L.R. 625, 50 Can. C.C. 159, 23 A.L.R. 506; Bailey v. The King, [1938], 3 D.L.R. 670, S.C.R. 427, 70 Can. C.C. 197; R. v. Walker (1953), 106 Can. C.C. 154, 32 M.P.R. 5. Among these, R. v. Irwin and R. v. Long, our Court, Harvey C.J.A. writing the judgments, held that guessing contests of the kind there under consideration are lotteries. The first was a guess as to the number of passengers the Edmonton St. Railway would carry on a future date; the second as to the number of grains of a certain grade of a certain kind of wheat displayed in a glass jar. In the Bailey case, which decided that a ‘Skill Puzzle Board’ that exhibited questions capable of being answered correctly by investigation and search of literary references, was, nevertheless, a means or contrivance for playing a game of chance, or at any rate of mixed chance and skill. Kerwin J., now C.J.C., pointed out that people entering the drug store would be inveigled to pay ten cents for the opportunity of punching a hole and the chance of winning a prize.”

Mode of 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.’”

********************

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.

********************

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.

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

For more information about our firm, visit our website: Competitionlawyer.ca