Contests 101: What marketers need to know

Josephine A.L. Palumbo, Deputy Commissioner, Deceptive Marketing Practices Directorate, Competition Bureau shares what marketers need to know about promotional contests.

1. What are the advertising guidelines for contests in Canada?

There are several ways that businesses can give away prizes or other benefits. Under the Promotional Contest provision of the Competition Act, a promotional contest can be any of the following when used to promote a product, service, or any business interest in any way:

• a contest,
• a lottery,
• a game of chance or skill,
• a mixed game of chance and skill, or
• a business disposing of a product or other benefit by any mode of chance, skill, or mixed chance and skill.

When running a contest, businesses are required to adequately and fairly disclose the following information:  

• the number and approximate value of prizes;
• any regional allocation of prizes; and
• any other fact known to the advertiser that affects the chances of winning.

To meet the “adequately and fairly” disclosure requirement, it is the Bureau’s view that the required information should be disclosed in a reasonable manner prior to the potential entrant being inconvenienced in some way. Such inconvenience may include, for example, the need to make a purchase or visit a store to see or obtain the required information.
It is important to also know that:

• the distribution of prizes cannot be unduly delayed; and
• the participants must be selected or prizes distributed on the basis of skill or on a random basis.

Note that the requirements mentioned are specific to contests, but businesses should understand that advertising for contests also follow the same rules as advertising for products or services. That is, for one, they must not be materially false or misleading. “Material” means they could influence a consumer to take a particular course of action, like buying or using a product or service. Additionally, depending on the marketing channel used, other requirements might apply. These are discussed in more detail under question 5.

2. What information should be included in the official contest rules and what are mini rules?

As outlined above, the Competition Act sets out the minimum required information and requires that this information be disclosed in an adequate and fair manner.

There are no specific rules as to where the required information must be located, but many businesses include them in the contest rules. Additionally, businesses tend to also have this information in what many, in the marketing industry, call the “mini rules” or “short rules” — a shortened version of the full contest rules.

One example of where the mini rules can be helpful is where a manufacturer holds a promotional contest involving specially-marked packages of its product, such as a cereal box. In this case, it is our view that the manufacturer should ensure that proper disclosure of the contest rules is made wherever the specially‑marked packages are sold. Since retailers often do not permit in‑store displays promoting manufacturers' contests, manufacturers ought to provide a short list of the contest rules on the outside of each package, with the following information:

• the number and value of prizes,
• any regional allocation of prizes,
• the skill testing question requirement,
• details as to the chances of winning (a chart may simplify explanation of the chances),
• the contest closing date, and
• any other fact known to the advertiser that affects the chances to winning.

Businesses can use this list as guidance to determine what information to include in their mini rules. Finally, the mini rules may also provide information regarding where the full version of the contest rules can be found.

3. Can participants be charged to enter a contest or are contest organizers required to provide a "no purchase necessary" entry option?

A contest must comply not only with the Competition Act, but also with other federal/provincial laws and regulations and local by‑laws. For example, under the Criminal Code, participants cannot be required to purchase a product or service as the sole condition of contest participation. This is why businesses provide a "no purchase necessary" entry option.

While the Competition Act does not directly prohibit a requirement that participants pay or make a purchase in order to participate in a contest, it has long been the Bureau’s policy that a potential contest entrant should not be required to make a purchase to obtain required information about the contest.

Additionally, businesses should prominently disclose whether or not a purchase is necessary. This is material information, as it could affect the potential entrants’ behaviour, such as their decision to participate or not.

4. What must brands do to comply?

Every advertisement for any promotional contest must comply with the Competition Act. Remember to:

• Disclose all information that affects the chance of winning, as outlined in question 2.
  Think about what potential entrants need to know to make an informed decision.  For example, whenever the total number of seeded prizes in any production run or other population is known, in our view, this would be a "fact within the knowledge of the advertiser that affects materially the chances of winning", and should be disclosed. This could be information such as the total number of winning coupons packed in a known total number of specially marked containers, or in a contest where sets of tokens under bottle caps are distributed, information as to the number of scarce tokens needed to complete a set.

• Ensure that the information you are required to provide is easily accessible.
  Potential entrants should not be inconvenienced to obtain this information by having to, for example, visit a store, make a purchase, tamper with a product, or provide their personal information.

• Test your participants’ luck or skills.
  Ensure that the participants are selected, or prizes distributed, either on the basis of skill or randomly in any area where prizes have been allocated.

• Distribute the prizes within a reasonable period of time.
  Ensure that the distribution of prizes is not unduly delayed. Plan ahead to avoid such circumstances. This could be as simple as ensuring that you have the winners’ contact information.

5. What are some of the most common missteps that brands make?

It is common for businesses to only look at the Promotional Contest provisions in the Competition Act, but they need to be mindful of the requirement of other provisions of the Act as well:
False or misleading representations:

It is against the law to make materially false or misleading representations to promote a product, service or business interest. As previously mentioned, if a representation could influence a consumer to take a particular course of action, like buying or using a product or service, it is material. A “representation” refers to any marketing material, including online and in-store advertisements, direct mail, social media messages, promotional emails, and endorsements, among other things.

Representations in electronic messages and web addresses:

It is against the law to make false or misleading representations in the sender, subject and content of electronic messages, as well as in locator information such as URLs.

Deceptive notices of winning a prize:

It is against the law to send prize notices that give recipients the general impression that they have won (or will win) a prize but requires them to pay a fee or incur a cost to collect their prize unless they have actually won the prize and the sender makes specific disclosures and satisfies certain other requirements.

Contravention of any of these provisions could lead to serious consequences.

6. Are there any specific rules for contests on social media?

The Competition Actapplies to social media the same way it applies to traditional forms of advertising, as outlined above.

7. Are there specific disclosure requirements or restrictions on the value and type of prizes?

The Competition Act requires that the "approximate value" of the prizes be disclosed. In our view, this would normally mean the approximate regular market value of the product. In instances where it is difficult to make an approximation, providing a few representative examples or the range of possible values of the prize would meet the requirements.

Although the Act does not put any restrictions on the value and type of prizes, when a contest involves a series of prizes to be awarded at different times, ensure that the promotional material does not imply that prizes remain to be won when they have, in fact, already been awarded. Additionally, where "early bird" prizes are to be awarded only to the first entrants in a contest, the Bureau is of the opinion that businesses should disclose the starting date of the contest. This is so intended to ensure that, at any point during the contest offer, a consumer could evaluate the chances of winning an "early bird" prize.

8. Can a contest be restricted to certain provinces and territories?

Yes, and in such cases, organizations are required to clearly state this, along with any regional allocation of prizes, as part of adequate and fair disclosure from the outset.  

9. Are there any requirements for retaining contest entry data?

The Competition Act has no requirements for businesses to retain contest entry data.

10. What are the penalties for not complying with contest laws in Canada?

The penalties can be substantial for contravening the Competition Act. The consequences depend on whether the conduct falls under the civil or criminal provisions of the Act and can include monetary penalties and/or imprisonment. More information about penalties and remedies for non-compliance with the law can be found on the Competition Bureau’s website.

11. Where can businesses or consumers get more information?

The Bureau is here to help.

Businesses and consumers can visit the Bureau’s website for more information and guidance about promotional contests, and other topics such as deceptive notice of winning a prize, false or misleading representations or representations in electronic messages and web addresses.

Marketers can also refer to the Canadian Marketing Association’s Guide on Promotional Contests, and consumers can visit the CMA Consumer Centre.

The Bureau encourages anyone who suspects that a company or individual is engaging in practices contravening the Competition Act to report it.

Author:

Josephine A.L. Palumbo, Deputy Commissioner, Deceptive Marketing Practices Directorate, Competition Bureau (Canada)