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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FREQUENTLY ASKED QUESTIONS ABOUT
CANADIAN CONTEST/SWEEPSTAKES LAW

What laws govern promotional contests (i.e., sweepstakes) in Canada?

Promotional contests in Canada (commonly referred to as “sweepstakes” in the United States) are primarily governed by the federal Competition Act, section 206 of the federal Criminal Code and contract law.

Other laws and rules that can apply, depending on the nature of the contest/sweepstakes, include privacy law (e.g., governing the collection and use of entrant information), Canadian anti-spam law (CASL) (see: Anti-spam Law (CASL), Anti-Spam Compliance, Anti-Spam FAQs, Anti-Spam Law Errors and Anti-Spam Law (CASL) Precedents), intellectual property law (e.g., if using third party marks, names, logos or other content) and social media platforms’ terms of use (e.g., if a contest will be promoted on Facebook, Twitter, Instagram, YouTube or TikTok).

What are the potential penalties for non-compliance?

Given that the improper operation of a promotional contest can lead to civil and/or criminal liability under the Competition Act, the Criminal Code, based on a contractual (i.e., common law) challenge or failure to comply with Quebec’s regulatory requirements, among other laws and rules, it is important to review contests for legal compliance.

For example, penalties for violating the misleading advertising provisions of the Competition Act can also be severe, including administrative monetary penalties: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit obtained from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.

Other penalties include court orders to cease the conduct, publish corrective notices or compensate (i.e., make monetary restitution to) consumers.

An increasingly relevant risk is violating CASL (Canada’s anti-spam legislation) where promotions gather entrant e-mails for later marketing without complying with CASL’s consent, identification and unsubscribe requirements.  While it is increasingly common for contest/sweepstakes sponsors to want to use a contest to build a marketing list (which in general is perfectly legitimate), it is very important that the key requirements of CASL be complied with when doing so.

Other potential penalties and risks of running a contest/sweepstakes without complying with the relevant laws and rules include intellectual property law challenges (e.g., where a sponsor uses 3^rd party marks, names, images or other content without consent) or social media platform take-downs where platform terms of use for running contests are not met.  In this respect, the major social media platforms (e.g., Facebook, Instagram and Twitter) have specific terms of use for running contests and other promotions.

What provisions of the Competition Act apply to contests?

The 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 …”

Some of the key requirements include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate (i.e., any so-called “regional allocation” of prizes) 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.

Importantly, in addition to specific disclosure requirements set out in section 74.06 of the Competition Act, the general civil and criminal misleading advertising provisions of the Act also apply to contests/sweepstakes.  As such, it is important to review contest/sweepstakes creative materials before the launch of a promotion to ensure that no false or misleading claims are being made (e.g., relating to prizes, value of prizes, odds of winning, entry terms, etc.).

What are “short rules” or “mini rules”?
Are they mandatory?

Based on the disclosure requirements set out in the Competition Act, most contest/sweepstakes sponsors provide short rules / mini-rules in marketing materials.  Full contest/sweepstakes rules (i.e., the long rules) are commonly linked to the short rules or, for in-person promotions, made available to entrants.

Point-of-purchase disclosure typically includes the number and approximate value of prizes, any regional allocation, skill testing question requirement, odds of winning and closing date for the contest.  What should be disclosed in short rules, however, varies according to the type of contest/sweepstakes and what may be material to potential entrants.

While short, and usually straightforward, it is important that the required statutory disclosure be drafted precisely and correctly.  It is also important that the timing for the launch of a contest and promotional materials ensure that the necessary disclosure be included in all public marketing materials (e.g., print advertising, websites, social media pages, etc.).

Are there any other Competition Act
sections that apply to contests/sweepstakes?

Yes.  In addition to specific rules relating to promotional contests under section 74.06, the “general misleading advertising” provisions of the Competition Act also apply to the operation of contests/sweepstakes in Canada.

The Competition Act also contains several other specific provisions regulating contests operated in the context of telemarketing (section 52.1) and prize notices (section 53).

In this regard, section 52.1 of the Act prohibits telemarketers from conducting contests where: (a) the delivery of a prize (or other benefit) is or is represented to be conditional on prior payment or (b) adequate and fair disclosure is not made of the number and approximate value of prizes, the area or areas to which they relate and the odds of winning.

Section 53 of the Act prohibits prize notices sent by electronic or regular mail that give the general impression that a recipient has won (or will win) a prize and requires a payment (or incurring another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are satisfied by the sender.

These include adequate and fair disclosure of the number and approximate value of prizes, regional allocation of prizes and any fact within the sender’s knowledge that materially affects the chances of winning (i.e., odds of winning).  In addition, the distribution of prizes cannot be unreasonably delayed and there are requirements for the selection of participants and distribution of prizes.

Persons that violate section 53 are liable to fines, on summary conviction, of up to $200,000 and/or imprisonment for up to one year and, on indictment, to fines in the discretion of the court and/or imprisonment for up to 14 years.  Several due diligence defences are, however, available under this offence.

What is the scope of the Competition Act’s
misleading advertising provisions?

The criminal and civil misleading advertising provisions of the Competition Act (sections 52 and 74.01) prohibit representations to the public, for the purpose of promoting a product or any business interest, that are false or misleading in a material respect.

The potential penalties for misleading advertising can also be severe and include administrative monetary penalties: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit obtained from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.

As such, contest sponsors should ensure that, in addition to having compliant short and long rules for a contest/sweepstakes, that their marketing materials are not false or misleading (e.g., relating to the number or value of prizes, odds of winning, entry criteria or other key aspects of the promotion).

Does Canadian competition law apply
to online contests/sweepstakes?

Yes.  The Competition Bureau’s position is that the promotional contest provisions of the Competition Act, as well as the general misleading advertising provisions, apply to Internet marketing and advertising.  In other words, the medium doesn’t matter if a false or misleading claim is made in relation to a product or service.

In this regard, the Bureau states that special considerations may apply in the online environment to ensure that the required statutory disclosure for promotional contests is met:

“Pursuant to section 74.06 of the Act, in contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chances of winning. … The Bureau takes the position that all required disclosures must be displayed in such a way that they are likely to be read.  In the context of representations made on-line, what is considered adequately displayed will depend on the format and design of the Web site.  For example, a notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call, in order to obtain the required information.  The Bureau does not consider clicking on a clearly labelled hyperlink as being an ‘active step.’”

What Criminal Code provisions apply to contests?

In addition to the promotional contest provisions in the Competition Act, the Criminal Code also governs contests in Canada (sections 206 and 207).  In particular, the Criminal Code makes it a criminal offence to operate illegal lotteries.

What is an “illegal lottery”?

While the relevant provisions of the Criminal Code are complex and somewhat archaic, in general an illegal lottery consists of: (a) a prize, (b) chance and (c) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest).

Based on the potential risk under section 206 of the Criminal Code, in order to avoid running an illegal lottery contest/sweepstakes sponsors in Canada commonly offer a no-purchase-required entry option (also sometimes referred to an “alternative method of entry” or “AMOE”) and require potential winners to answer a mathematical skill-testing question.  These requirements are, in general, intended to remove some of the chance from pure skill contests and to remove the consideration element, both of which can violate Canada’s federal Criminal Code.

Why is a “no purchase necessary” option typically included in contests?
Why is a skill-testing question requirement also typically included?

Based on the Criminal Code prohibitions of illegal lotteries under section 206, contest/sweepstakes sponsors in Canada often remove either the consideration element (e.g., offering a “no purchase necessary” or “AMOE” entry option), chance element (e.g., by adding a skill element, for example making the contest a skill contest or including a skill-testing question requirement).

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 or not include a skill component should obtain legal advice.

What Are Some CASL (Canadian anti-spam law)
Issues That Can Arise in a Contest/Sweepstakes?

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.

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.

Are contests contracts?
What are the legal requirements?

In addition to the regulatory requirements of the Competition Act and Criminal Code, promotional contests have also been held to be contracts.  As such, contests are also governed by the common law of contract in Canada.  A good set of rules can, therefore, save a contest/sweepstakes sponsor grief in the event of a challenge.

As such, in addition to ensuring compliance with the statutory requirements of the Competition Act, Criminal Code, privacy law and Quebec legislation (if applicable), it is also important that the terms and conditions of a promotional contest be prepared to reduce potential contractual liability.  Contest/sweepstakes sponsors have significant latitude in determining the rules for their contests/sweepstakes, but should prepare good long rules for all promotions.

This includes a careful review of short rules, long rules and winner release documentation to ensure that the terms are precise, enforceable and reduce the likelihood of a credible contractual challenge.  Potential technical problems and other contingencies should also be addressed, including in relation to unavailability of prizes and technical problems arising from the operation of the contest (e.g., computer, Internet or server issues).

Does Canadian privacy law apply to contests?

Yes.  Contest organizers should be aware of Canadian privacy law requirements, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest/sweepstakes.

This typically includes, for example, advising contestants as to how their personal information will be used (e.g., language in short rules that entrant information may be used for marketing) and the contest’s/sweepstakes’ sponsor’s practices and policies in relation to the security (and destruction) of contestants’ personal information once a contest has closed (e.g., by linking to the sponsor’s privacy policy in contest rules).

What Are Some of the Key Intellectual Property Law Issues
That Can Arise in a Contest/Sweepstakes?

Contest/sweepstakes sponsors in Canada should ensure that they either own or have consent to use intellectual property in a promotion.  This can include names, logos, trade-marks, photographs, graphics and contributions from content entrants themselves (e.g., essay, photo or other entries in skill-based contests).

For example, contest/sweepstakes sponsors commonly include language in their contest rules and winner release forms granting them the right to use entrant information, images, contest entries, etc. in marketing.

Key Practical Tips For Running
Contests/Sweepstakes in Canada

The following are some key tips for operating a successful and legal contest/sweepstakes in Canada:

Criminal Code. Avoid the illegal lottery offences of the Criminal Code (e.g., include a bona fide “no purchase necessary” entry option and skill element, such as a time-limited, multiple-step mathematical question for potential winners as a condition of awarding a prize).

Short Rules. Include short rules / mini-rules with all of the required Competition Act disclosure requirements for point-of-purchase materials (e.g., print and in-store marketing, social media and Internet sites, packaging and labeling, television and radio spots, etc.). For more information, see: Canadian Contest Forms & Precedents.

Long Rules. Ensure that precise long rules (i.e., the 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.  Standard precedents, or rules downloaded from the web rarely accurately reflect a particular promotion. In this regard, contests are contracts, and so they should be as accurate, clear and precise as possible in the event issues arise. For more information, see: Canadian Contest Forms & Precedents.

Winner Release Forms. Consider using winner release forms for contest winners. While not required by law in Canada, winner releases are almost always used by contest sponsors to have winners confirm that they have complied with all contest rules and release the sponsor from legal liability. Signing and returning winner releases is also commonly included in contest rules as a condition of prize award. Winner releases are particularly important for contests in which there may be higher risk (e.g., where the contest involves high value prizes or a trip prize). For trip contests, sponsors are generally advised to use releases for both winners and any travel companions (and guardian releases for minors). For more information, see: Canadian Contest Forms & Precedents.

Misleading Advertising. Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general misleading advertising sections of the Competition Act).  In this regard, contests in Canada must comply not only with stand-alone contest provisions of the Competition Act (under section 74.06), but also with the general misleading advertising sections of the Competition Act. It is particularly important to ensure that the marketing collateral matches the contest rules and that key aspects of the contest (e.g., number and type of prizes, prize values, how to enter and win and any conditions/limitations) are accurately described.

Canadian Anti-spam Law (CASL). Comply with Canada’s federal anti-spam legislation (CASL). 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. 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.

Quebec Contest Law. On October 27, 2023, the province of Quebec made significant changes to its rules relating to publicity contests open to Quebec residents. In this regard, it repealed the provisions of the Act respecting lotteries, publicity contests, and amusement machines relating to publicity contests and repealed its former rules regarding publicity contests. As such, sponsors of contests open to Quebec residents no longer must formally file their contests with the Régie des alcools, des courses et des jeux (Régie) or pay duty (essentially a fee) to the Régie based on the value of contest prizes, file a winners report at the end of a contest or post security in Quebec, where which was formerly required in some cases. Other requirements applying to publicity contests run in Quebec were also eliminated, including the necessity to include specific Quebec-related disclosure language in contest rules and seek permission for contest modifications after launch.

Intellectual Property Consents. Consider whether consents are needed (and if necessary obtained) to reproduce third-party intellectual property – for example, trade-marks, logos, etc. – or to transfer ownership in contest materials – for example, where contestants create original material as part of the contest or promotion. Contest rules in Canada commonly include rights (e.g., a licence) for the sponsor to use information and content contributed by entrants and if entrants will be contributing original content (e.g., photographs, essays, etc.) it is also a good practice for sponsors to include guidelines relating to their rights to use (or reject) any entrant contributed content. See: Guidelines For Consumer Generated Content Contests.

U.S. Advice. Seek U.S. legal advice if the contest will be open to U.S. residents or limit the contest to only Canadian residents.

Social Media Site Rules. Comply with social media sites’ terms of use if using social media to promote or host a contest (e.g., Facebook’s Promotions Rules). Also ensure that appropriate disclosures are made in all social media marketing (i.e., include short rules). For more information, see: Contests and Social Media.

Other Competition & Advertising Rules. Consider whether other competition or advertising law rules may apply. For example, in addition to a stand-alone contest provision, the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising and telemarketing that involves prizes.

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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.

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

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