Trade promotions, commonly known as competitions, are a powerful marketing tool and a great way to promote your business. Before running an awesome consumer-engaging trade promotion, you should ensure your trade promotion complies with the plethora of laws, regulations and codes governing the conduct of trade promotions.
– The trade promotion lottery laws of each State and Territory;
– The Australian Consumer Law;
– Privacy laws.
A comprehensive discussion of all the laws, regulations and codes that come into play when running a trade promotion is beyond the scope of this article. Rather, the purpose of this article is to provide a general guide to some of the key legal implications that may arise in running a trade promotion.
Now that’s settled, let’s get started!
First Things First
Before thinking about the legal dos and don’ts of running a trade promotion, it’s important to first decide on the type of trade promotion you intend on running: a game of skill or a game of chance. The State and Territory trade promotion laws generally only apply to games of chance or a trade promotion that involves combination of both skill and chance. Making this distinction from the outset is therefore a critical first step.
So, what exactly is the difference between a game of skill and a game of chance?
A game of chance, as the name suggests, must involve an element of chance. That is, the winner must be selected completely at random. An ‘instant win’ competition is, for example, a game of chance. On the other hand, entrants of a game of skill are judged and the best entrant is the winner. A trade promotion that asks entrants to tell the judges in 100 words or less why they deserve to win, is, for example, a game of skill.
Other discernible features of a game of chance are that entry must be free and all entrants must have an equal chance of winning.
Australian Consumer Law
The Australian Consumer Law (ACL) prohibits businesses from engaging in conduct that misleads or deceives or is likely to mislead or deceive consumers. Given the maximum penalty for breach of this prohibition is $1.1 million, an adverse finding can be financially disastrous for a business. Ensuring your trade promotion does not offend the ACL is, accordingly, of the utmost importance.
To be sure your trade promotions complies with the ACL, you should:
– Adopt clear and accurate terms and conditions that outline the rules applicable to your trade promotion;
– Make certain your terms and conditions reveal any ‘catches’ – for example, if entrants must satisfy certain conditions to claim a prize, make this clear from the outset;
– Ensure all entrants have an opportunity to read the terms and conditions before they enter the trade promotion;
– Procure all entrants’ agreement to abide by the terms and conditions;
– Strictly abide by the terms and conditions yourself.
Taking the above five steps will go a long way to ensuring you fulfil your responsibility not to engage in any misleading or deceptive conduct.
Subject to certain exceptions, private sector organisations must comply with the Privacy Act 1998 (Cth) (the Act), which regulates the handling of personal information. Personal information is information about an individual that could identify, or could reasonably identify, that individual. Such information includes an individual’s full name and postal and/or email address.
In the course of running your trade promotion, you will undoubtedly collect personal information about individuals who enter your trade promotion. Assuming your business is required to comply with the Act, you will need to ensure you:
– Collect, store, use and disclose personal information in strict compliance with the Act;
The potential consequences for non-compliance – civil penalties, fines and not to mention reputational damage – renders it imperative for organisations to fully adhere to their legal obligations under the Act.
Trade Promotion Laws
The regulatory requirements of each of the States/Territories are, unfortunately, not uniform across Australia. Accordingly, if you intend on running your trade promotion through a universal medium like the internet or a social media platform, you will need to ensure your trade promotion complies with the trade promotion laws of all States and Territories.
While the requirements under these laws are varied, they generally regulate the same matters, such as:
– Whether a permit is required to run the trade promotion;
– How winners must be notified;
– Mandatory terms that must be included in terms and conditions governing the trade promotion;
– How the terms and conditions must be advertised;
– Prohibited prizes;
– The steps you must take in the event the prize is unclaimed; and
– What records must be kept and for how long.
You should also keep in mind each of the State and Territories have their very own ‘trade promotion watchdog’ empowered with the authority to issue businesses fines for conducting a non-compliant trade promotion.
Trade promotions are undeniably an effective way to promote your business and to directly interact with potential customers. However, potential benefits can be rendered redundant by running a trade promotion in non-compliance with the law, the consequences of which not only include pecuniary penalties but also reputational damage to your business’ brand and image. Accordingly, scrupulous consideration should be given to ensuring your trade promotion satisfies the requirements of all applicable laws.
At Law Squared, we partner with passionate entrepreneurs and businesses who need our technical help and expertise in many areas. We’d love to have a chat with you, so feel free to drop us an email at email@example.com.
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