It’s becoming easier and more popular for businesses to run online contests as promotional tools. But contests are fraught with legal risk. If they’re not done properly, the business running the contest can face consequences ranging from the embarrassment of having the contest shut down, to fines and criminal charges.
Some of the legal requirements call for contests to be run in specific ways. Some require contest rules to be drafted in specific ways and include certain information.
The Canadian Criminal Code contains several sections governing lotteries and games of chance. Essentially, the code makes unlicensed lotteries illegal. These sections lead to things like having to be able to enter without paying or buying anything, and having to answer skill-testing questions to win. Unfortunately, the code provisions are confusing, and are not always easy to translate into practice.
The Canadian Competition Act contains rules that require the disclosure of certain information, such as the odds of winning and prize details. Essentially they require entrants to be fully informed of the details of the contest.
Privacy laws impact what you can do with entrant information. Specific permission may be required, for example, to release winner names, or to send advertising material to entrants after the contest.
Intellectual property laws can have an impact as well. If the contest includes submitting a creative work — such as a photo, video, or something written — care needs to be taken to ensure it’s an original creation of the entrant, and that the entrant actually has the rights to submit it and to allow the business to use and publish it.
Running contests on social media platforms adds complexity as well. Facebook, for example, has rules that prohibit running contests on Facebook in certain ways, and require certain wording in the contest rules. If you don’t, they can simply shut the contest down.
The upcoming anti-spam act will affect some contests as well, as it will govern how people can be contacted by e-mail or other electronic messaging.
If you have ever wondered why contests often say they are void in Quebec, it is because Quebec has a contest law that is so onerous that most businesses just opt out of offering the contest in Quebec rather than complying with the rules.
Indeed, while an online contest can reach anywhere in the world, laws vary dramatically from one jurisdiction to another. Choosing who can enter and from where is an important decision to make. If the business decides to allow entrants in multiple jurisdictions, it should obtain advice in each of those jurisdictions to ensure it complies with all applicable laws, or indeed that running the contest is permissible at all.
Contests can be a powerful promotions tool, but they must be approached carefully to ensure they are a marketing success, rather than an embarrassing legal failure.
David Canton is a business lawyer and trademark agent with a technology focus at Harrison Pensa LLP. This article contains general comments only, not legal advice. Contact Canton at 519-661-6776 or www.canton.elegal.ca.