Canadian COMPETITION LAW

January 10, 2023

A Canadian contest/sweepstakes law law question that we commonly receive from our clients is how the “no purchase required” entry option works for Canadian contests/sweepstakes.

The starting point to understand the requirement for most, but not all, contests/sweepstakes in Canada to include a no purchase required entry option for contest entrants is the federal Criminal Code.

Section 206(1) of the Criminal Code contains a number of illegal lottery offences that must be avoided to legally run a contest in Canada.

One of these requirements is to not require a purchase as the only means of entry into a game of chance or mixed skill and chance (e.g., as prohibited by section 206(1)(f) of the Criminal Code).

As such, contest promoters in Canada commonly include some type of no purchase required entry option to enter into promotional contests.

Contest sponsors have wide latitude to determine how entrants that do not purchase any product or service can enter into a contest, including offering free online entries, free paper ballots or the traditional requirement to handwrite and mail in a short essay (e.g., 50-100 words) on a topic specified by the sponsor.

The Canadian no purchase required entry requirement is, however, slightly more complex, depending on the type of promotion involved.

For example, there is case law that has held that no purchase entrants must be treated substantially the same as purchase entrants (i.e., substantially treated the same as entrants that purchase a product or service in order to enter the contest). This is commonly called the “equal dignity” requirement for contest entries.

For example, in one case, a contest promoter that offered more entry ballots to entrants that paid to enter than were offered to no purchase entrants was prosecuted and convicted for violating the Criminal Code’s illegal lottery offences. In that case, the court held that the purported no purchase required entry option was in fact a sham and that the promotion was an illegal lottery. In this regard, in general, private parties cannot operate lotteries in Canada unless they are charities and provincially licensed in the provinces in which they intend to operate the lottery.

As such, while contest sponsors can make it somewhat more difficult for no purchase entrants to enter into a contest (e.g., by answering a short survey, mailing in an entry ballot or mailing in a handwritten essay with a stamp to enter), the risk increases the more difficult a contest sponsor makes it for no-purchase entrants to enter into a contest.

In this regard, one of the most commonly asked related questions we receive is whether a sponsor can offer entrants that purchase a product or service more entries than no purchase entrants. The short answer is, based on the above, no and this approach risks committing a criminal illegal lottery offence.

In addition to the above, contest sponsors running promotional contests in Canada commonly state in their  short (i.e., “mini”) and long contest rules that a purchase is not required to enter or win a prize and set out in the long contest rules how entrants that do not purchase a product or service can enter (i.e., set out the requirements in the contest rules what no purchase entrants must do to enter).

For more information about Canadian contest/sweepstakes law, see: Contests, Contests and CASL, Contest FAQs, Contest Law Tips and Contests and Social Media.

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CONTEST FORMS/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 Forms/Precedents.

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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 Contest 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

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

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