The Rules of Online Contests
It seems that the holiday season in the 21st century brings with it an endless supply of social media contests and giveaways. In today's blog post, we'll set out some key concepts to keep in mind when running an online promotion, including the application of the Criminal Code, the Competition Act, privacy and anti-spam legislation.
The Criminal Code contains provisions aimed at preventing illegal lotteries. While the relevant provisions of the Criminal Code are complex and somewhat archaic, there are three elements to an illegal lottery:
first, there has to be a prize,
second, there has to be consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest), and
third, it has to be a game of chance.
Because of these "illegal lottery" offences, contest organizers typically try to remove either the consideration element by providing a “no purchase necessary” entry option or the chance element by including a "skill-testing question" as a condition of winning (or a combination of both of these).
Including a skill-testing question means the contest won’t boil down to pure chance, but still involve an element of skill.
As far as the consideration element, even with online contests, many contest organizers continue to provide a "no purchase necessary" entry option (i.e. snail mail entry alternative) even when purchases are not required by the entrant. This is due to the ambiguity around the meaning of "valuable consideration" under the Criminal Code, and in particular the question of whether the payment of internet service provider fees constitutes "valuable consideration".
The Competition Act
In addition to the Criminal Code, the Competition Act sets out a number of requirements for contests and in particular, requires that there is adequate and fair disclosure of:
specifics of the prizes such as the number and approximate value of the prizes,
the areas in which the prizes are being distributed, and
anything within the knowledge of the contest operator that materially affects the chances of winning.
Guidelines published by the Competition Bureau note that the disclosure should be made prior to the contest entrant being inconvenienced. The Guidelines note that contest organizers should provide a short list of the contest rules that contains the following information:
the number and value of prizes,
any regional allocation of prizes,
details as to the chances of winning,
the skill-testing question requirement,
the "no purchase necessary" requirement,
the contest closing date,
timelines and process to award prizes, and
any other fact that materially affects the chances of winning.
It is also recommended to include a link to where the full contest rules are available.
Also, in advertising the contest, you should take caution and be sure not to mislead entrants given that the misleading advertising provisions of the Competition Act apply to the advertising of the contest as well.
The federal Privacy Act and BC's Personal Information Protection and Electronic Documents Act can also come into play with the law of contests because most times you will be asking entrants to provide personal information upon entering a contest or winning a prize. The key is to ensure that contest entrants are informed as to why their information is being collected, and that the information that is collected is only be used for its intended purpose unless the entrant has consented to additional uses.
You will also need to consider the application of Canada's Anti-Spam Legislation ("CASL"), which may apply where, for example, entrants are to be invited by e-mail to participate in a contest, for the follow up with entrants by e-mail, or subsequent e-mail marketing (e.g., where a contest includes the right of the promoter to engage in subsequent marketing to entrants).
To ensure compliance with CASL, keep in mind that:
Any message sent by electronic communication must be received with consent, must clearly identify who sent the message, must allow the recipient to contact the sender (contact information must remain valid for at least 60 days), and permit an unsubscribe option where opting out can be done at no cost and up to at least 60 days later,
Opt out requests must be processed within 10 days,
The law adopts an opt-in approach that requires requires express or implied consent for each new commercial electronic message, and
The law also prohibits false or misleading subject lines or sender information.
Social Media Platforms
If you use any social media platforms to communicate or administer your promotion, you will also want to consider the specific rules set out in that platforms' terms and conditions. And remember that these rules are constantly changing, so it's important to double check the rules each time you are looking to run a new contest.
Most platforms have some variation of: "you are responsible for the lawful operation of your promotion, including stating the official rules, offer terms and eligibility requirements, and compliance with applicable rules and regulations" so the onus is on you to make sure your promotion complies with all the applicable rules and regulations.
Online promotions can be a valuable marketing tool for businesses, but if you choose to partake in this new age holiday tradition, make sure you have a good set of contest rules that comply with the various laws and regulations that may apply to your promotion. Also keep in mind Advertising Standards Canada's regulations on paid social media endorsements, which we talked about in a previous blog post. Simply put: if your business is receiving any sort of compensation for promoting a sponsor for the giveaway, that needs to be disclosed.
Happy holidays and happy contesting!