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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What Law Governs Promotional Contests in Canada?
Promotional contests in Canada are primarily governed by the Competition Act, the Criminal Code, privacy legislation (Personal Information Protection and Electronic Documents Act, PIPEDA) and the common law of contract. In addition, Quebec has separate legislation that applies to promotional contests (the Act respecting lotteries, publicity contests and amusement machines). As such, promotional contest law in Canada is combination of federal and provincial regulatory law, criminal law and common law contract law.
What are the Potential Penalties
for Non-compliance?
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 legislative requirements, it is critical to review proposed promotional contests for legal compliance.
The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and orders to cease the conduct, publish corrective notices or make restitution to consumers.
For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
What Provisions of the Competition Act
Apply to Contests?
The Competition Act for the most part requires that certain disclosure be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit …” Some of the key requirements under the Act 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. In addition, the Act provides that the distribution of prizes cannot be unduly delayed.
What are Short Rules?
Are they Mandatory?
As a result of the disclosure requirements set out in the Act, most contest organizers provide a short version of a contest’s terms (frequently referred to as “short rules”) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with a full version of the contest rules available on request (and often on the contest organizer’s website). Point-of-purchase disclosure often includes the number and approximate value of prizes, any regional allocation, the skill testing question requirement, information relating to the odds of winning, the closing date for the contest and information relating to the odds of winning.
While short, and usually straightforward, it is critical 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.
Do Other Competition Act Provisions
Apply to Contests?
Yes. In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to the operation of promotional contests, and should not be underestimated.
What is the Scope of the Competition Act’s
Misleading Advertising Provisions?
In this regard, the criminal and civil false or misleading representation provisions of the Competition Act prohibit representations to the public, for the purpose of promoting a product or any business interest, that is false or misleading in a material respect. The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and orders to cease the conduct, publish corrective notices or make restitution to consumers.
What are the Potential Penalties
for Contravening the Competition Act?
The penalties under the Competition Act can be significant if you don’t get a contest right. For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
As such, it is important that the terms of promotional contests (i.e., short rules, long rules and any other advertising or marketing materials) not be false or misleading in a material respect (i.e., do not raise issues under the general misleading advertising provisions of the Competition Act, which means that in addition to the detailed statutory disclosure, the overall impression of contest claims must practically be considered as part of a review).
Does Canada’s Anti-spam Law (CASL) Apply?
Canada’s federal anti-spam legislation (CASL) is often relevant when running contests or other types of promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are encouraged or required to “share” information about the promotion with friends or family.
Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is important for those running contests or other promotions in Canada to ensure that they comply with CASL for electronic marketing related to a promotion.
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.
What Criminal Code Provisions Apply to Contests?
In addition to the promotional contest provisions in the Competition Act, the federal Criminal Code also governs promotional contests in Canada (sections 206 and 207 of the Code). 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: (i) a prize, (ii) chance and (iii) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest).
Why is a “No Purchase Necessary” Option Typically Included?
Why is a Skill-testing Question Requirement also typically Included?
Based on the Criminal Code provisions prohibiting illegal lotteries, promotional contest organizers often remove either the consideration element (e.g., providing that “no purchase is necessary”), the chance element (e.g., adding a skill element, for example making the contest a skill contest or including a skill-testing question), or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Criminal Code.
It is worth noting, however, that the determination of what constitutes “consideration” and “chance” can be challenging and complex in some cases, and that what little case law exists is inconsistent and old.
Are Contests Contracts?
If So, What are the Legal Requirements?
In addition to the regulatory requirements set out in the federal Competition Act and Criminal Code, promotional contests have also been held to be contracts. For this reason, promotional contests are also governed by the common law of contract in Canada.
As such, in addition to ensuring compliance with the statutory requirements of the Competition Act and Criminal Code, as well as Quebec legislation if applicable and privacy legislation, it is also important that the terms and conditions of a promotional contest be carefully structured to reduce potential contractual liability.
This includes a careful review of short rules, long rules and winner release documentation (e.g., winner release forms) to ensure that the terms are precise, enforceable and to reduce the likelihood of a credible contractual challenge. As well, potential technical problems and other contingencies should also be addressed, including in relation to unavailability of prizes as disclosed, technical problems relating to the operation of the contest (e.g., computer, Internet or server issues), as well as typically giving contest organizers broad and unilateral discretion to resolve contingencies that may arise.
Does Canadian Privacy Law Apply to Contests?
Yes. Canadian privacy legislation also applies to promotional contests. In this regard, contest organizers should be cognizant of federal privacy legislative requirements under PIPEDA, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest. Such requirements may include, for example, advising contestants of how their personal information will be used, as well as the contest organizer’s practices and policies in relation to the security (and destruction) of contestants’ personal information once a contest has closed.
What are Some of the Key Legal Points
for Promotional Contests in Canada?
As promotional contests in Canada are, generally speaking, governed by the Competition Act, Criminal Code, contract law, privacy law and Quebec regulation if operated in Quebec, it is critical that promotional contest documentation and marketing materials (e.g., point-of-purchase marketing) be prepared with care, and to ensure that the key legal requirements are met.
Some of the key practical aspects in effectively designing a promotional contest in Canada, and to avoid disasters, include attention and care in the drafting of mandatory short rules (short statutory disclosure required under the Competition Act), long rules (which raise many similar issues as drafting effective contracts), reviewing all print and electronic disclosure to ensure that the statutory disclosure requirements are met (and that no significant misleading advertising issues are raised) and that the basic, but important, requirements of the Criminal Code are met (including removing either the chance element, consideration element, or both).
In sum, while the basic law of promotional contests is Canada is not generally complex, the devil is in the details and it is critical that care be taken to ensure that all of the key legal requirements are met.
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Legal Tips For Running Contests/Sweepstakes in Canada
The following are key tips for operating 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 or other types of promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are encouraged or required to “share” information about the promotion with friends or family. Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is important for those running contests or other promotions in Canada to ensure that they comply with CASL for electronic marketing related to a promotion. 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. Ensure that Quebec legal requirements are met for contests run in Quebec (or take care to make sure that eligibility is limited to Canadian residents, excluding Quebec). In general, opening contests to Quebec residents requires regulatory filings with the Regie in Quebec, the payment of a duty or tax (which depends on the value of prizes), translation of contest rules and advertising and in some cases posting a bond/security.
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, 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
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
