A trade promotion is a free entry competition, to promote goods and services, conducted by a registered business. Each state and territory have their own regulations for running trade promotions, and therefore it is important to carefully consider these requirements when planning your activity.
The regulations that will apply to your promotion will largely depend on the type of activity you want to run.
Broadly speaking, there are two types of trade promotion competitions in Australia: games of chance and games of skill.
A game of chance is a game whose outcome is determined purely by chance. For example, it would be considered a game of chance if winners are determined by a random competition draw or a scratch and win mechanic, where no skill is involved in determining a winner.
The most common examples of game of chance:
· random prize draws; and
· instant win mechanics, such as scratch and win.
A trade promotion permit is generally required when there is chance involved in determining the winner.
For a standard game of chance promotion (e.g. draw, instant win mechanic), permits may be required in SA, ACT, and NT, and an authority may be required in NSW, depending on where the promotion is conducted and the prize pool (as outlined below).
In some instances, limited gift with purchase offers are also considered games of chance which may require competition permits. The States that may require permits and when they require a permit are outlined below. Please note these only apply if the offer is available in these States.
· NSW (2 or more steps and gift pool over $10K = Authority Required): If a person does not know at the time of purchase whether or not they will receive a gift, and the gift pool is greater than 10K then an authority will be required in NSW. A classic example is where a consumer purchases in store and then goes online to claim a gift. If there are only 50 gifts available, they won’t know when they complete the purchase whether or not they will receive the gift when they go online to claim; or if at that point all gifts have already been exhausted.
· ACT (online claim = NO permit; mail claim = permit required): If there is chance in ordering claims then a permit is required in ACT. If a person submits a claim online, you can time stamp claims and it will be possible to determine which are the first X claims to be received and no ACT permit would be required. If claim is via mail, you could receive 100s pieces of mail delivered at the one time and it will be impossible to pinpoint which was the first received.
A game of skill is a competition which requires an entrant to apply a level of thought and skill to their entry, and where the winner/s are determined based on qualitative methods rather than chance.
The most common examples of game of skill are outlined below:
Regardless of the kind of trade promotion you intend to run, full competition Terms and Conditions will be required, to set out the details of the promotion, protect the Promoter, and to comply with State and Territory regulatory requirements. Competition Terms and Conditions in effect create a contract between the Promoter and the consumer. Therefore, non-compliance with the competitions will amount to a breach of contract.
As mentioned, trade promotion competitions are regulated by state and territory regulations, and therefore the contents of competition Terms and Conditions will depend on where the Promotion is being conducted. If the Promotion is being conducted nationally, or in several jurisdictions, the Terms and Conditions must be drafted in accordance with the most restrictive requirements.
For national game of chance trade promotions, the following will generally need to be included in the Terms and Conditions:
· the Promoter’s details, including ABN;
· the promotion period;
· closing date and time for entries;
· draw date(s) and the draw method;
· full prize particulars, including the value of the prize;
· the method of claiming the prize;
· notification and publication particulars;
· a privacy clause, in accordance with the Australian Privacy Principles
Please note this is not an exhaustive list, and the requirements can be complex. We recommend obtaining legal advice to ensure that your promotion is fully compliant.
The contents of most clauses will depend on the states and territories requirements and time frames, which must be adhered to when drafting competition Terms and Conditions. For example, the following requirements apply for notifying winners:
· VIC- in writing (e.g., e-mail, mail, fax, SMS);
· ACT- within 21 days of the prize draw, in writing (e.g., e-mail, mail, fax, SMS; and
· SA- within 7 days of the prize draw, in writing (e.g., e-mail, mail, fax, SMS)
Including all the different requirements would substantially lengthen and complicate the competition Terms and Conditions, and therefore, for a national promotion, the competition terms should include the most stringent requirement to ensure compliance in all states and territories.
Games of skill do not require permits in any state or territory; however, they must still comply with the regulatory requirements.
Depending on the prize pool and where the promotion is run, games of chance may require trade promotion permits or an authority in:
· ACT; and
NT may also require a permit if one is not received in any of the other states or territories with trade promotion competition permit systems.
To apply for a trade promotion permit or to run a promotion under a NSW authority, the full competition terms and conditions will need to be drafted for your game of chance, in accordance with the state and territory trade promotion regulatory requirements. Notably, the requirements are more extensive for games of chance, with varying state and territory requirements for conducting the prize draw, notifying winners, publishing results, and awarding unclaimed prizes.
Once the game of chance competition terms are submitted to the departments, approval can take up to 14 days, and therefore it is best to plan in advance for game of chance competitions, to ensure there is sufficient time to draft the competition terms and receive the necessary approvals. Permit fees will also apply, depending on the total prize pool.
Once the Promotion has concluded,
Some key requirements for national promotions to be aware of after your competition has closed, include:
· Drawing winners within 1 month of entry closing date
· Notifying winners within 7 business days & in writing
· Distributing Prizes: Within 28 days of draw
· Publishing winners:
Winners of prizes over $250 must be published within 30 days of draw.
As outlined in the Terms and Conditions (e.g. on the promotional website, via social media channels, if the promotion is run on social media, etc.).
Sufficient records of the promotion must also be kept in accordance with the requirements of each state and territory. For national promotions, all entry forms, proof of purchase receipts, barcodes, coupons and ticket butts etc., must be retained for at least 12 months after the promotion has ended. In addition, general records, including Terms & Conditions, winners’ names, addresses & their prizes, must be retained for 5 years. Victoria also requires that an accounting of all entries be kept for 3 years.
Here are 5 Dos and Don’ts to help you run your next promotion effortlessly and successfully:
If your promotion contains an element of chance in determining the winner (e.g. a “barrel draw” or “instant win”), you may need a trade promotion permit. Each state has their own conditions so make sure your trade promotion is compliant in each state you are running the promotion (e.g. NSW trade promotion laws may differ from SA trade promotion laws).
Fearful of the costs, time and effort involved in running games of chance, many marketing teams avoid them altogether (or are forced to do so by their counterparts in Legal) often opting for “games of skill”, which don’t require permits. This is a real mistake. While games of skill can be highly effective, as any gambler (and modern neuroscientist) can attest, there’s nothing quite like the rush of winning a contest through chance. Moreover, the effort customers must expend to enter a game of chance is typically significantly less than it is for entering a game of skill—and that drives better participation.
Social media offer excellent platforms for conducting trade promotions. However, getting these types of competitions right requires a few key elements. First, be clear on your goal. Do you want to drive “likes” on your posts? Get a hash-tag trending? Go viral? This information is critical to building your entry mechanics effectively.
Second, leverage as many social channels as possible to optimise exposure to your promotion and increase participation and engagement. For example, requiring entrants to upload a photo with a certain hashtag to various sites can have exponential impact as customers share news of your competition within their networks.
Those who are new to trade promotions—particularly to games of chance—are often surprised by the intense degree of detail that is required when applying for state permits. Prize details are a classic source of error. Take travel and accommodation prizes, which are quite common. These require incredibly nuanced information, such as whether or not you will provide airport transfers and spending money, and the specific cities from which the trip commences. Getting this right is not only critical to minimising legal liability but to protecting your brand. A customer who learns that her “all expenses paid” trip to Hawaii actually requires a self-funded ticket from Perth to Sydney where the prize commences is likely not a happy one.
Technology has been used to simplify complex processes across many industries for decades—and the legal profession is finally starting to catch on. At Plexus, we’ve developed a tool called the Promotion Wizard, which enables marketers to build fully-compliant T&Cs and permit applications for trade promotions on their own in about 15 minutes. The Wizard improves marketer quality of life by eliminating the hassle of trade promotions and by freeing up time for more interesting and important activities. It also enables marketing teams to run a greater number of promotions across each year, which translates into more customers, more customer data and more revenues.
Plexus Promotion Wizard offers end-to-end legal support for competitions & promotions. Custom T&Cs and the right permits without any hassles, 90% faster and half the cost of traditional legal firms.
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