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 and to order see: Canadian Contest Law Forms/Precedents.

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

OVERVIEW OF CANADIAN CONTEST LAW

Contests in Canada are largely governed by the Competition Act, Criminal Code and common law of contract. In addition, several other areas of law and rules can apply, depending on the type of promotion including privacy law, intellectual property law, Canada’s federal anti-spam legislation (CASL) and social media sites’ terms of use.

Given that the improper operation of a promotional contest can lead to civil or criminal liability, or negative PR for a brand which is often as much of a concern for contest sponsors, it is important to review proposed promotional contests for compliance with key Canadian laws.

Operating contests in Canada typically includes the preparation of short rules (mandatory statutory disclosure, which are sometimes called “mini-rules”), long rules (or “official rules” as they are sometimes referred to), winner release forms for winners, a skill-testing question as a condition of winning a prize and a review of draft marketing materials for misleading advertising compliance.

Below is a discussion of key laws and issues relating to running a promotional contest in Canada.

COMPETITION ACT

Short Rules (“Mini Rules”)

Canada’s federal Competition Act requires that certain disclosure 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 disclosing the number and approximate value of prizes, the area (or areas) to which prizes relate and any fact that may materially affect the odds of winning a prize. The Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes.

Based on these requirements, contest sponsors typically provide short rules (mandatory statutory disclosure, which are sometimes called “mini-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 (i.e., long rules) available (commonly posted on the sponsor’s online contest landing page). Point-of-purchase disclosure (short rules) commonly includes both the required statutory Competition Act disclosures and other material terms of the contest.

While short, and usually straightforward, it is important that the mini rules 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 are included in all point-of-purchase and similar marketing materials where entrants first see a contest promoted.

General Misleading Advertising Provisions
(Sections 52 and 74.01)

In addition to specific rules relating to promotional contests, the general criminal and civil misleading advertising provisions of the Competition Act also apply to contests, as with any other advertising or marketing in Canada.

In this respect, sections 52 and 74.01 of the Competition Act prohibit materially false or misleading representations made to the public for the purpose of promoting products or any business interest.

Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and orders to pay AMPs.

Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.

In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the general civil misleading representation provisions with the only leave requirement for standing being that the proceedings are in the “public interest”.

The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.

The Competition Bureau also commonly negotiates civil consent agreements (i.e., settlements) with parties, which can include remedies not expressly set out under the Competition Act such as the requirement to adopt a competition law compliance program, or seeks a prohibition order under the criminal provisions of the Competition Act.

The enforcement of the criminal and civil deceptive marketing provisions of the Competition Act is also an ongoing priority for the Competition Bureau, particularly false or misleading price claims, performance claims and ordinary selling price claims.

Based on the potential penalties for false or misleading advertising, it is important that creative contest materials be reviewed for misleading advertising compliance before a contest is launched. In this regard, contest counsel typically provide comments and suggested changes to draft contest marketing materials before a contest is launched.

Other Competition Act
Contest Related Rules

In addition to the standalone promotional contest provision (section 74.06), 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).

Section 52.1 of the Competition Act prohibits telemarketers from conducting contests where the delivery of a prize (or other benefit) is or is represented to be conditional on prior payment or 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 Competition 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 disclosures and other requirements are met by the sender.

These requirements 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 the distribution of prizes.

CRIMINAL CODE

In addition to the promotional contest provisions of the Competition Act, the federal Criminal Code also governs the operation of contests in Canada. Section 206 contains certain lottery related offences. Generally, the Criminal Code makes it a criminal offence to operate illegal lotteries, as defined and set out by the offences under section 206.

At common law, illegal lotteries had been defined as consisting of three elements: a prize, chance and consideration (i.e., something of value provided by entrants as a condition of eligibility in the contest). These core elements of illegal lotteries are now codified (although inconsistently) in section 206 of the Criminal Code.

Based on these illegal lottery offences, it is important for contest sponsors to structure their contests in Canada to avoid violating the Criminal Code. As such, contest sponsors commonly remove either the consideration element (e.g., providing a “no purchase necessary” entry option), the chance element (e.g., including a multiple-step mathematical question as a condition of winning) or both to remove a promotional contest from the scope of the illegal lottery provisions of the Criminal Code.

It is important to note, however, that the illegal lottery offences under the Criminal Code are more complex than described above. As such, contest sponsors planning to run a contest that deviates from commonly run types of contests are well advised to obtain competent legal advice as to whether any possible criminal law issues may arise.

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 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.

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

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

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

CONTRACT LAW

In addition to the requirements of the Competition Act and Criminal Code, contests have also been held by courts in Canada to be contracts. In particular, offers made by contest sponsors have been held, when fulfilled by contest entrants, to be legally binding contracts.

This means that contests are governed by the common law of contract and that contests can establish contractual relations between contest sponsors and entrants, which, if breached or unfulfilled, can lead to liability for breach of contract. Well drafted contest rules can, however, also allow sponsors to avoid liability.

As such, in addition to ensuring compliance with applicable statutory requirements, it is important that contest terms and conditions are carefully and precisely drafted to accurately reflect the contest and reduce potential contractual liability.

This includes a careful review of short rules, long rules and winner release forms to ensure that the terms are relevant to the contest, precisely drafted to reflect the contest and enforceable.

Potential technical problems and other contingencies should also be addressed in contest rules, including in relation to the unavailability of prizes as disclosed, technical problems arising from the operation of the contest (e.g., computer, Internet or server issues) and other unforeseen events.

Some common contest rule related errors we see include contest rules that are not relevant to a particular contest, non-applicable U.S. or international rules used for Canadian contests, contests that purport to apply to many countries that have not been vetted for compliance with the various countries’ laws and those run with no rules at all (or rules that do not comply with Canadian legal disclosure and other requirements).

INTERNET CONTESTS & PROMOTIONS

The Competition Bureau also takes the position that both the promotional contest provisions of the Competition Act under section 74.06 and the general civil and criminal misleading advertising provisions (sections 74.01 and 52) apply to Internet marketing and advertising. In this regard, the Bureau’s view is that special considerations may apply online to ensure that the required statutory disclosure for 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.’”

SOCIAL MEDIA PLATFORMS
TERMS OF USE

Social media is increasingly important for effective marketing and promotion, including the operation of contests.

Contest sponsors should be aware, however, that most social media platforms (including Facebook, Instagram, Twitter, YouTube and LinkedIn) have specific, and different rules relating to contests operated or promoted on their platforms.

As such, it is important to review the terms of use for social media platforms on which a contest will be promoted.

PRIVACY LAW

Canadian privacy legislation also applies to promotional contests.

In this regard, contest sponsors typically take key privacy law related steps when running contests in Canada, including clearly disclosing what personal information will be collected and what it will be used for and including a link to the sponsor’s privacy policy disclosing the sponsor’s polices regarding the collection, use and protection of personal information.

INTELLECTUAL PROPERTY LAW

In addition to the above, intellectual property law issues can sometimes arise in connection with the operation of contests in Canada.

Some of the potential intellectual property law (i.e., copyright, trade-mark, etc.) related issues that may need to be considered when running a contest include: whether a promoter owns the title for a contest; whether consents have been obtained for the use of any third party owned marks, logos, photographs, etc. planned to be used in the contest; including sponsor copyright statements in contest rules; including language in contest rules granting the sponsor broad rights to use any original materials submitted by entrants (e.g., entry forms, photos, essays or other “consumer generated” content created and submitted by entrants, such as in skill based contests); and representation and indemnification contest rules protecting the sponsor where participants may not have rights to materials they submit in a contest (e.g., third party copyrighted works).

It is also important to note that some companies have specific and in some cases quite restrictive policies regarding the use of their products as contest prizes or intellectual property they own (e.g., third party owned photographs, logos or trademarks).

QUEBEC

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, 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 contest launch.

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

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. 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 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. 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. Contest sponsors should 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.

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 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.

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

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

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

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. 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 and Advertising Law Rules. 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.

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

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