Promotions 101
Promotions are used broadly by brands to increase awareness generally, or to promote their goods or services to consumers, suppliers and even staff. They can be referred to as trade promotion lotteries, sales promotions, competitions, sweepstakes, contests and giveaways.
Promotions can be a fun way to boost sales or generate ‘likes’ on social media channels, but with this comes numerous Federal, State and Territory laws and regulations that govern the giving away of prizes in Australia.
The laws below are applicable to all variants of promotions, regardless of the channel, for example, promotions conducted on social media, cash back offers, manual ballot entry form or automatic entry with purchase.
Game of skill, chance or both?
Promotions are categorised into two types:
- Games of Chance
If a promotion involves any random element, it is deemed to be a game of chance. Each entry in a game of chance must have a fair and equal chance of winning. Games of chance include promotions with the following mechanic:- barrel or electronic draw, i.e. “purchase a specially marked product, visit the Promoter’s website and complete the entry form to go into the draw to win a prize”;
- instant win, i.e. “do X to receive a scratch card and scratch to reveal whether or not you are an instant winner”;
- first past the post, i.e. “the first 100 entrants to purchase a product will each receive a prize”; and
- chance for a chance, i.e. “the first drawn entrant wins the opportunity to choose 1 of 10 envelopes, only 1 of which will contain a prize”.
- Games of Skill
A Game of Skill describes a promotion where entrants are individually judged against a pre-defined and objective criteria on the basis of skill and with no possibility of a tie. Skill in this context might involve writing the best response to a promotional question or capturing the best photo according to the judges.
Gaming laws and regulation
All promotions in Australia (including Games of Skill) are subject to the consumer protection requirements under the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Under the ACL, a person must not, in trade or commerce, engage in conduct that is misleading or deceptive (Section 18), make a false or misleading representation about goods or services (Section 29) or offer any rebate, gift, prize or other free item with the intention of not providing it at all or as offered (Section 32).
If a promotion contains any element of chance, the promotion must comply with the lottery laws of each State and Territory in which the promotion is conducted. Lottery laws vary between each State and Territory, so national promotions must comply with all requirements of the individual lottery laws in all States and Territories. Trans-Tasman promotions must also comply with New Zealand’s lottery laws. Depending on where the promotion will be conducted and the total maximum value of the prize pool, the Promotor (or agent on their behalf) may be required to obtain permits from the ACT and SA regulators, and a Gaming Authority from the NSW regulator.
Beyond the Australian Federal, State and Territory laws and regulations concerning the conduct of draws and distribution of prizes, there are various other laws, regulations, industry codes and guidelines that govern the conduct of promotions, for instance: marketing collateral, advertising, alcohol consumption and prizes, copyright, trade marks, privacy, spam, certain products (i.e. Apple products), social media platforms (i.e. Facebook, Twitter, Instagram) and applications (i.e. Bump, Shazam).
Further, electronic drawing systems used to randomly draw winners in a promotion will require prior approval from the South Australian lottery department (if the promotion is conducted in South Australia). Once an electronic drawing system is approved, it can be used for all future promotions that use the system to draw winners. The New South Wales lottery department also requires the promoter obtain certain electronic draw procedure reports (if the promotion is conducted in New South Wales), which may be called upon at any time.
Permit / Authority
For Games of Chance requiring permits or a Gaming Authority, permit fees are payable upon lodgement of an application to the lottery department in each State and Territory in which a permit must be obtained. The permit fee is calculated based on the total maximum recommended retail value including GST of all prizes to be awarded in the applicable State or Territory.
In ACT you will require a permit if the total maximum prize value is greater than $3,000.
In SA, you will require a permit if the total maximum prize value is greater than $5,000 – unless the promotion has an instant win mechanic, in which case the promotion will require a permit regardless of prize value.
In the NT, you will require a permit if the total maximum prize value is greater than $5,000. If the promoter has obtained a lottery permit in another state or territory, you can also run the lottery in the NT without a local permit. However, a promotion that is conducted in the NT only, with a prize value greater than $5,000, will require a permit from the NT lottery department.
In NSW, you will require a Gaming Authority if the total maximum prize value is greater than $10,000. Once the Promoter has obtained a Gaming Authority, the Authority provides duration-based permission to conduct promotions and distribute prizes of $10,000 or more for a period of 1, 3 or 5 years.
Where a promotion conducted in NSW requires an authority, the Promoter must provide a copy of the terms and conditions to the NSW regulator for each separate promotion at least 10 working days before the proposed promotion takes place.
This means that a National promotion with a total prize pool of less than $3,000 WILL NOT require permits from any State or Territory (unless it is an ‘instant win’ entry mechanic, in which case you will require a permit from SA). Nevertheless, you must meet the requirements of each State and Territory lottery department to conduct a compliant promotion.
Despite the absence of permits and a formal review process, WA, QLD, VIC and TAS all have standing requirements for promotions which must be complied which in order to conduct promotions. Where the prize pool brings the promotion under the threshold in permit states, the promoter must still comply with the requirements of the NSW, SA and ACT lottery departments in order to conduct the promotion.
Entry must be free
Entry into a promotion must be free, however the Promoter may require that entrants purchase their product at the recommended retail price in order to enter the promotion. The Promoter may also require entrants to enter the promotion via a communication mechanism (such as mail, telephone or SMS) at a cost not exceeding 55 cents including GST (except in Victoria, where the maximum entry cost is 60 cents including GST).
Terms and Conditions
All relevant information on a promotion, including the rights of the Promoter and limitations on entry and prizes, must be disclosed to entrants at time of entry into the promotion via a set of ‘terms and conditions’ or ‘conditions of entry’. The terms and conditions for a promotion must be readily accessible by entrants before they enter the promotion in order to be enforceable pursuant to contract law and the ACL. Entrants cannot be charged to access the terms and conditions.
For promotions involving an element of chance, the terms and conditions must be approved by the lottery departments in each State and Territory in which a permit is required to conduct the promotion. Any randomised electronic draw must be conducted using a drawing system that has been approved by the SA lottery department and issued with an Electronic Draw Approval number (EDA). In the absence of an EDA, the draw must be conducted manually (i.e. pulling paper entries out of a hat). Additionally, if the promotion involves any electronic element and is conducted in Western Australia, the final terms and conditions must be provided to the Western Australia lottery department prior to the start of the promotion.
Advertising
If artwork for a promotion does not contain the full terms and conditions, the artwork must include a reference to where the full terms and conditions may be accessed and the terms and conditions must be accessible at that location. The promotional artwork must also contain certain minimum disclosures, or ‘abbreviated terms and conditions’, to adequately communicate the promotion to consumers for compliance with the various State and Territory lottery laws and the ACL.
Amendments
If any amendments are made to the terms and conditions of a promotion after the permit application has been submitted to a lottery department, the lottery department must be notified of the proposed amendments. If the lottery department has already processed the permit application and granted permit approval, an amendment application must be lodged. Amendment fees are payable in the ACT and SA.
Once a promotion has commenced or its advertising is live in the marketplace, lottery departments will not generally allow any amendments to a promotion and it must therefore be run in accordance with the representations and disclosures made to consumers via the advertising for compliance with the ACL and the terms and conditions originally approved by the lottery departments.
Data and Privacy
Following the Digital Platforms Inquiry by the Australian Competition and Consumer Commission (ACCC), attention to data and privacy in the media, tech and communications sector is changing considerably. Specifically, the spotlight is on consumers being able to make ‘informed choices’ about the handling of their data and the current and future consequences of providing their data.
In the ACCC’s view the practice of using clickwrap agreements, take it or leave it consents, and bundling numerous consents is very problematic and results in legally questionable consumer consent. They also consider that Privacy Policies that are too long, complex, vague, and difficult to navigate are problematic and furthermore it is an issue that consumers may not be made aware about targeted advertising and third-party data sharing within these Privacy Policies.
Businesses with Privacy Policies that ostensibly protect consumers, but where the policies are not followed in practice are. in the ACCC’s view, also problematic. Generally, it is the ACCC’s position that Australian privacy regulation should be more closely aligned with the GDPR’s higher standards of protection. Data and Privacy is an area that will have knock on effects for those running promotions going forward. Specifically, ensuring data hygiene and modern collection disclosures and privacy policies will be increasingly vital.
Probity
From 1 July 2020, the NSW lottery department has made changes to its Trade Promotions processes, requirements, and its reporting obligations.
An annual audit of all promotions conducted is now required if the sales proceeds of all gaming activities in one year exceed $250,000. If you are of the view that you or your client’s promotional activity in a financial year is likely to generate proceeds of this amount, you will need to make preparations for such an audit and you may need to obtain advice from your accountant.
As a baseline, for probity, having a scrutineer oversee all draws conducted, and maintaining adequate record keeping documentation in the form of scrutineer documentation for auditing purposes, is recommended.
Article by the VML team.
If you have any questions about legal compliance or protecting the rights and reducing the risk to the Promoter, please contact us. von Muenster Legal has specialised in providing a diverse range of legal and commercial services to the advertising, marketing, and media industries for more than 20 years.