Contests (i.e. a game of skill, chance, or mixed skill and chance) are useful marketing tools that individuals and organizations often employ to promote their goods, services, or other commercial interests. While the logistics of setting up and running a contest may seem conceptually simple, care must be taken to ensure that each contest is compliant with legal requirements including those arising under the Competition Act, the Criminal Code, privacy legislation and Canada’s anti-spam legislation (“CASL”).
The following is a list of non-exhaustive legal considerations concerning the administration of promotional contests in Canada.
1. Contest Type
Contests can be divided into three broad categories: (a) games of chance, such as a giveaway where the winner is selected by random draw; (b) games of skill, such as an essay competition where the winner is selected based on the quality of his or her written composition; or (c) games of mixed skill and chance.
Pursuant to section 206(1) of the Criminal Code, it is an indictable offence to administer a contest involving a game of pure chance where winning contestants are selected on a random basis. However, if a selected contestant is required to complete a skill-testing task, then the contest becomes a game of mixed skill and chance. For this reason, many Canadian lottery tickets include reasonably complex skill-testing mathematical equations.
2. Payment for Entry
Pursuant to section 206(1)(f) of the Criminal Code, it is an indictable offence to administer a contest involving a game of mixed skill and chance where: (a) the prize is any form of good, ware or merchandise; and (b) the contestant pays money or other valuable consideration to participate. This is the reason why many contest rules explicitly include a “no purchase necessary” disclaimer. Notably, this section of the Criminal Code references forms of “valuable consideration” other than money. In other words, contests of mixed skill and chance which require contestants to provide a form of property other than money or to perform an act that a contestant is not ordinarily obligated to perform in order to participate may nonetheless contravene section 206(1)(f) of the Criminal Code.
3. Adequate and Fair Disclosure
Section 74.06 of the Competition Act requires contest administrators to ensure that they adequately and fairly disclose the number and approximate value of the prizes, the area or areas to which the prizes relate, and any fact within the knowledge of the administrator which materially affects the chances of winning. This disclosure must be made in a conspicuous manner which does not inconvenience a potential contestant (e.g. a requirement for a potential contestant to send an e-mail or visit a specific location to obtain contest terms and conditions). In order to comply with section 74.06 of the Competition Act, contest administrators often prepare “short rules” (i.e. a short list of contest rules and disclaimers which sets out all legally required disclosure) to accompany all forms of contest advertisement and literature.
What specifically constitutes adequate and fair disclosure will vary depending on the circumstances and the mechanics of each contest. Regardless, short rules should generally set out: (a) a description of the prizes; (b) the number of prizes and regular market value of the prizes; (c) any regional allocation of prizes or regional exclusions; (d) the skill-testing question requirement; (e) whether or not a purchase is required; (f) the contest commencement time and date and closing time and date; (g) the procedure and timeline for selecting winners; and (h) any other information which may materially affect the chances of winning.
4. Privacy Laws
Private sector entities in Canada are either subject to the federal Personal Information Protection and Electronic Documents Act or to the equivalent provincial personal information legislation. If a contest administrator wishes to collect, retain, use, or disclose the personal information of contestants, the administrator should: (a) obtain the express consent of each contestant to such collection, retention, use or disclosure; (b) provide for any such collection, retention, use or disclosure in the contest terms and conditions; and (c) otherwise comply with applicable privacy laws.
5. Anti-Spam Laws
CASL applies to all commercial electronic messages sent to an electronic address. An “electronic address” is defined as an e-mail account, a telephone account, an instant messaging account or, in certain circumstances, a social media account. Accordingly, contest administrators who intend to undertake contest communications (e.g. contest invitation, contest follow-up, continued marketing) using any of these means should: (a) obtain the prior express consent of the contestant to receiving such communications; (b) provide requisite identification information in the communications; (c) provide for an unsubscribe mechanism in the communications; and (d) otherwise comply with CASL requirements.
6. Social Media
Many social media platforms (e.g. Facebook, Instagram and Twitter) have published policies or guidelines concerning the use of the platform to promote or otherwise administer a promotional contest. These policies or guidelines often require the contest administrator to obtain a complete release of the platform by each contestant and to expressly acknowledge that the promotion is not associated with the platform in any way, though specific requirements vary depending on the platform. Individuals or organizations who intend to use a social media platform to promote or otherwise administer a contest should carefully review and comply with these requirements.
7. Contest Terms and Conditions
In addition to short rules, contest administrators should prepare comprehensive contest terms and conditions. These terms and conditions should detail the rights of the contest administrator (e.g. to select alternate winners, to suspend or cancel the contest, or to amend contest rules), limit the liability of the contest administrator, and require each winner to sign a form of release.
8. Intellectual Property
Many contests require contestants to submit contestant-generated content, such as a written composition or photo. Terms and conditions for contests involving contestant-generated content should specifically address intellectual property issues including ownership and use of the content and, where appropriate, should include representations and warranties concerning the intellectual property, an assignment of intellectual property rights, and a waiver of moral and other rights.
Canadian contests often exclude Quebec residents due to the unique and relatively onerous requirements arising under the Act Respecting Lotteries, Publicity Contests and Amusement Machines. Pursuant to the provisions of this statute, no “publicity contest” (i.e. any operation carried on for the purpose of promoting commercial interests and which results in the awarding of a prize) may be held unless the contest is authorized by the Régie des alcools, des courses et des jeux and otherwise complies with the statute. Contest administrators who wish extend their contest to Quebec residents should seek legal advice from Quebec counsel.
The successful implementation of a promotional contest requires careful planning and consideration of complex legal issues. If you have questions about your legal obligations as a contest administrator or require assistance with preparing contest rules or releases, please contact one of the lawyers in our Corporate/Commercial Practice Group.