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.

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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 general civil and criminal misleading advertising and contest provisions of the federal Competition Act (sections 52, 74.01 and 74.06), section 206 of the federal Criminal Code (the need to avoid the illegal lottery offences under section 206) and the common law of contract (which governs contest terms between contest sponsors and contest entrants).

Other laws and rules that can apply when running contests in Canada, depending on the type of contest/sweepstakes, include privacy law (governing the collection, use and protection of personal 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 that may be owned by a third party) and social media platforms’ terms of use (e.g., if a contest will be promoted on Facebook, Twitter, Instagram, YouTube, TikTok or other social media platforms that have terms of use relating to running contests on their platforms).

What are the potential penalties for failing
to comply with Canadian contest/sweepstakes laws?

Given that the improper operation of a promotional contest in Canada can lead to civil and/or criminal liability under the Competition Act, the Criminal Code or based on a contractual (i.e., common law) or other legal basis (e.g., violation of a third party’s intellectual property rights), it is important for contest sponsors to review contests before launched for legal compliance.

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.

In addition, an increasingly relevant risk is violating CASL (Canada’s anti-spam legislation) – for example, where contest sponsors 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 legitimate as long as the requirements to send unsolicited CEMs is met under CASL), it is very important that the key requirements of CASL be complied with when doing so.

Some of the other potential penalties and risks of running a contest/sweepstakes without complying with Canada’s relevant contest laws include intellectual property law challenges (e.g., where a sponsor uses third party marks, names, images or other third party owned content without consent) or social media platform take-downs where platform terms of use for running contests are not met.

What provisions of the Competition Act
apply to contests?

Canada’s federal 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 …” (section 74.06).

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.

In practice, contest sponsors also include other material terms of a contest in the short rules in addition to the mandatory disclosures required by section 74.06 to reduce the risk that marketing is false or misleading (see below).

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 (sections 52 and 74.01) also apply to contests/sweepstakes.

As such, it is important to review contest/sweepstakes marketing materials before launching a contest 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” and
Are they mandatory?

Based on the disclosure requirements set out in section 74.06 of the Competition Act, most contest/sweepstakes sponsors provide short rules / mini-rules in point-of-purchase and other marketing materials where entrants first see a contest promoted. 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 where the contest is being promoted (e.g., at in-person trade shows, in-store promotions, etc.).

Point-of-purchase disclosures typically includes the number and approximate value of prizes, any regional allocation of prizes, 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 mandatory statutory disclosures and other material disclosures about the contest 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 disclosures are 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 civil and criminal misleading advertising provisions of the Competition Act (sections 52 and 74.01) 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 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 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.

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 any material terms of the contest, including the number and value of prizes, odds of winning and conditions of entry into the contest).

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 (section 74.06) and the general criminal and civil misleading advertising provisions (sections 52 and 74.01) apply to Internet marketing and advertising (i.e., the medium doesn’t matter if a false or misleading claim is made in relation to a product or service).

The Competition Bureau’s position is that special considerations may apply in the online environment to ensure that the required statutory disclosures for promotional contests are 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 provision of the Competition Act (section 74.06) and the general criminal and civil misleading advertising provisions (sections 52 and 74.01), Canada’s federal Criminal Code also governs promotional contests in Canada (sections 206 and 207).  The Criminal Code makes it a criminal offence to operate illegal lotteries.

What is an “illegal lottery”?

While the relevant offences of the Criminal Code under sections 206(1)(a)-(f) are complex and inconsistently drafted, in general an illegal lottery consists of the following three former common law elements: (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).

Each of the offences under sections 206(1)(a)-(f) of the Criminal Code, however, is different and it is important to ensure that a contest does not violate any of these offences.

Based on the potential Criminal Code risk, 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 as a condition of awarding prizes.

These requirements are, in general, intended to remove contests from pure chance games awarding prizes and requiring consideration (i.e., payment) as a condition of winning a prize, both of which can raise Criminal Code risk under section 206(1).

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’s illegal lottery offences under sections 206(1)(a)-(f) (see above), contest/sweepstakes sponsors in Canada commonly remove both the consideration element (by not requiring a payment as the only means of entering a contest and offering a “no purchase necessary” or “alternative means entry” entry option) and removing some of the chance in a random draw (by requiring a skill-testing question as a condition of awarding prizes).

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.

Does CASL (Canadian anti-spam law) apply when running a contest?
If so, what are some of the CASL issues that can arise?

Canada’s federal anti-spam legislation (CASL) is now often relevant when running contests in Canada.

This includes 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 third party affiliate marketers or influencers) or entrants are either required or incentivized (e.g., with bonus entries) to “share” information about the contest with friends, family or others.

Given the potentially severe penalties for violating CASL, which include administrative monetary penalties of up to CDN $10 million, it is very important for contest sponsors to ensure that they comply with CASL for all electronic marketing conducted when running a contest 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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Does contract law apply to contests?
If so, what are the legal requirements?

Yes.

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 contest rules can, therefore, reduce the potential liability for a contest sponsor in the event issues arise in connection with the contest (e.g., relating to winner selection or if the terms of a contest need to be changed during the contest).

For information about the Canadian contest law precedents and checklists that we offer, see: Canadian Contest Law Forms/Precedents.

As such, in addition to ensuring compliance with the statutory requirements of the Competition Act and Criminal Code, it is also important that the terms and conditions of a promotional contest be carefully prepared to reduce potential contractual liability. Contest/sweepstakes sponsors have significant latitude in determining the rules for their contests/sweepstakes but should prepare detailed long rules that both reflect the promotion being run and anticipate key issues that can arise.

This includes a careful review of short rules, long rules and winner release forms to ensure that the terms are precise, enforceable and reduce the likelihood of a credible contractual or other challenge.

Potential technical problems and other contingencies should be addressed in the rules, including in relation to unavailability of prizes, technical problems arising from the operation of the contest (e.g., computer, Internet or server issues or the need to select additional potential winners) and give the sponsor the right to revise the rules during the contest if necessary.

Does Canadian privacy law apply to contests?

Yes.

Contest sponsors should be aware of and comply with the key Canadian privacy law requirements when running a contest/sweepstakes in Canada, which include requiring consent for the collection, use, storage and protection of personal information collected.

In practice, contest sponsors in Canada typically clearly disclose in the short and long rules what entrant information will be collected, what the information will be used for and include a link to the sponsor’s privacy policy in the long rules.

Does intellectual property law apply to contests/sweepstakes?
If so, what are some of the key requirements for contests?

Yes.

Contest/sweepstakes sponsors in Canada should ensure that they either own or have consent to use any intellectual property in a contest.

This can include both third party owned names, logos, trade-marks, photographs and graphics and also contributions from content entrants themselves, such as entrant contributed essays, photographs or other original content contributed by entrants to participate in a contest (e.g., in a skill-based contest).

In practice, 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. Also, contest sponsors that use entrant content (e.g., essays, photographs or other original works) are well advised to include guidelines in their contest rules governing the content, use and rights relating to original entrant material submitted.

For more information, see: Contest Law Tips – Intellectual Property Law Consents. For more information about the precedent Guidelines for Consumer Generated Contest Contests that we offer and to order, see: here.

KEY LEGAL TIPS FOR RUNNING
CONTESTS/SWEEPSTAKES IN CANADA

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.

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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. 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.

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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