Canadian COMPETITION LAW

CANADIAN 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 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.  If you would like to discuss legal advice in relation to your contest or other promotion, contact us: Contact.

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On April 26, 2012, the U.S. Federal Trade Commission (FTC) announced that it negotiated a settlement of about $15.5 million with operators of an allegedly deceptive prize promotion scheme.

In making the announcement, the FTC said:

“The Federal Trade Commission put a stop to an operation that allegedly conned hundreds of thousands of consumers into paying $20 apiece by posing as government agencies and luring them with fake sweepstakes prizes. Under settlements reached as part of the FTC’s ongoing crackdown on schemes that prey on financially strapped consumers, the defendants are banned from the prize promotion business.

According to the FTC’s amended complaint, operators of the scheme sent consumers personalized mailers, some with fictitious government agency names and official-looking seals, with misleading statements such as, “Your identification as recipient for reported cash award entitlements totaling over $2,500,000.00 has been confirmed!” What the mailers did not tell consumers is that they had not actually won any prize. The defendants operated through a network of companies, used multiple business names, and sent dozens of versions of their mailers, according to the FTC’s complaint.”

As in the U.S., contests in Canada are fairly highly regulated.  Contests must comply with the federal Competition Act (which sets out certain mandatory disclosure requirements), the Criminal Code (which contains illegal lottery offences), privacy legislation and the common law of contract (see: promotional contest law in Canada).

In addition, the “general misleading advertising” and deceptive prize notice provisions of the Competition Act also apply to contests.

The general misleading advertising provisions prohibit materially false or misleading representations to the public for the purpose of promoting products (or business interests more generally).  The potential penalties can be severe and include civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and court orders to cease the conduct, publish corrective notices or compensate consumers (restitution).

The deceptive prize notice provisions of the Competition Act prohibit 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 a prize and certain required disclosure is made (including the number and approximate value of prizes, regional allocation of prizes and odds of winning).

Based on these various requirements, it is important for contest organizers to review their rules and advertising materials for compliance with the Competition Act and Criminal Code and take steps to draft enforceable rules that anticipate potential issues and contingencies.

In some cases, it is also prudent to consider intellectual property or other issues – for example, where third party logos or trade-marks are to be used for prize illustrations (which may require consent) or entrants’ materials are to be used or reproduced (e.g., in skill contests).

For the FTC’s news release see: FTC Settlement Bans Swindlers from Prize Promotion Business.

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CANADIAN CONTEST LAW TIPS

The following are some key legal tips for operating a successful and legal contest 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 prizes).

SHORT RULES (MINI 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 (OFFICIAL 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 terms of the contest as clearly as possible – for example, eligibility requirements, how to enter, prize descriptions, number and value of prizes, draws and award of prizes, odds of winning and indemnifying and releasing the contest sponsor and any co-sponsors or prize sponsors.

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 release forms 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 awarding a prize.

Winner release forms 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 winner releases for both winners and any travel companions (and guardian releases for any minor companions).

For more information, see: Canadian Contest Forms & Precedents.

FALSE OR MISLEADING ADVERTISING

Ensure that advertising and marketing materials are not false or misleading (i.e., comply with the general civil and criminal misleading advertising sections of the Competition Act, under sections 74.01 and 52).

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 materials also matches the contest rules and that all material 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 in the short rules, long rules and marketing materials.

CANADIAN FEDERAL 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 are either required or incentivized (e.g., through additional entries) to “share” the contest with friends or family.

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

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

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CASL Compliance Checklists and Precedents: For information about the CASL compliance checklists and precedents we offer, see: CASL Compliance Checklists and Precedents.

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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.

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.

For more information, see: Guidelines For Consumer Generated Content Contests.

U.S. LEGAL ADVICE IF OPEN IN THE U.S.

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 PLATFORM 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 LAW
AND ADVERTISING LAWS

Consider whether other competition or advertising law rules may apply to a contest. For example, in addition to the stand-alone contest provision (section 74.06), the Competition Act also contains provisions governing deceptive prize notices, general misleading advertising (sections 52 and 74.01) and telemarketing that involves prizes.

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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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