Marketing and social media campaigns designed to promote a brand, product, service or business where consumers enter a competition to win a prize are known as “trade promotions” and typically fall within two categories – “games of skill” and “games of chance”.

Both categories of trade promotions are regulated generally by the Australian Consumer Law (ACL)¹; however, games of chance are also regulated by specific state- and territory-based laws.

This means that a game of chance promotion that is:

• Run nationally in Australia needs to comply with the ACL and the relevant laws across all of the states and territories in Australia; or
• Confined to a particular state or territory needs to comply with the ACL and only with the laws in that state or territory.

A “free gift with purchase” campaign is not considered a “game”, as long as it is clear to the consumer whether or not they will receive the gift prior to making the “qualifying” purchase.

The ACL

Amongst other things, the ACL prohibits conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive. An example of misleading or deceptive conduct is where a trade promotion is not run according to its advertised terms and conditions or where the chances of winning are misrepresented in the marketing collateral such as a social media post.

A consumer that has suffered loss or damage as a result of a promoter’s misleading or deceptive conduct is entitled to seek damages from the promoter, and the promoter may also be subject to regulatory action by the Australian Competition and Consumer Commission.

Games of Skill vs Games of Chance

To qualify as a game of skill, a competition must not involve any element of chance and the entries must genuinely be judged on merit, against set criteria.

Examples of game of skill trade promotions include entrants:

• Submitting a print design to be selected for a limited product run; and
• Answering a particular question in 25 words or less.

Games of skill should still be governed by terms and conditions, which deal with judging criteria, intellectual property releases, limitation of liability regarding usage of a prize and more.

If there is any element of chance in the process, even where there is also some element of skill, then the trade promotion will be categorised as a game of chance trade promotion – for example, if there is uncertainty about whether a consumer will receive a prize or not at the time of entry or what type of prize they might receive or both.

Examples of games of chance trade promotions include entrants:

• Submitting certain details or performing certain actions (such as liking a social media post) for winners to be selected at random; and
• Purchasing an item within a promotional period to go into the draw to win a prize or for a chance to instantly win a prize.

How Games of Chance are Regulated

Games of chance are specifically regulated by state and territory-based gambling or lottery laws or both as set out in the table below. A game of chance trade promotion that is run nationally needs to comply with the relevant laws across all the states and territories, while a game of chance promotion that is confined to a particular state or territory only needs to comply with the laws in that state or territory.

The laws differ across states and territories; however, they generally mandate how campaigns are to be conducted (sometimes including strict timelines in relation to winner notification and prize delivery), what must be included in the terms and conditions, the information that must be made available in relation to the campaign, restrictions in relation to prizes, minimum requirements for advertising the campaign and record keeping.

Importantly, a permit or authority from the relevant regulator may be required before a game of chance trade promotion is advertised or conducted in South Australia, the Australian Capital Territory, Northern Territory and New South Wales. This is dependent on criteria such as the value of the total prize pool, where the game of chance trade promotion will be run and whether the competition is an instant win trade promotion. There are also requirements to notify the Western Australia and New South Wales authorities of certain trade promotions.

Key Takeaways

Before running a campaign in Australia where consumers enter a competition to win a prize or prizes, assess whether the campaign is a game of skill or a game of chance to determine the laws applicable to that campaign. Any type of campaign which offers prizes should be governed by terms and conditions.

A game of chance trade promotion needs to be planned in advance so that compliant terms and conditions can be prepared, any permits or authority can be obtained and other notification requirements to regulators can be met before the campaign is advertised.

How We Can Help

Our team advises extensively on trade promotion legislation in every state and territory. We can assist by providing advice regarding the trade promotion(s) you wish to run, preparing compliant terms and conditions, preparing internal guides for running trade promotions, reviewing marketing materials and assisting you in obtaining the relevant permits and authority.

Footnotes:

¹ Schedule 2 of the Competition and Consumer Act 2010 (Cth).