How can I legally run a competition for my business?

How can I legally run a competition for my business?

Are you looking to run a competition or contest as an advertising method? Competitions can be an effective way to grow your brand and build your mailing list and social media followers. 

These kinds of contests are called ‘trade promotions’ and they must adhere to the relevant legal requirements. 

What are the types of competitions? 

There are two categories of competitions.

  1. A game of chance (AKA a lottery): where all entrants have an equal chance of winning and the winner is randomly chosen.
  2. A game of skill: where the winner is chosen by a judge/judges based on the skill of their entry into the competition (such as a design or answer to a question). 

The type of competition you run will impact the applicable regulations and permit requirements.

General requirements

All competitions, whether games of skill or chance, must comply with Australian consumer protection and privacy laws. For example, under Australian consumer protection law, you must not perform the competition in a way which could mislead or deceive the competitors. You must also be careful not to make any misrepresentations about the competition and its prize. 

To mitigate your liability, you should have well-drafted terms & conditions for the competition which are made available to all entrants and which are strictly adhered to. These should cover issues such as who is eligible to enter, how the competition is won, the judgement criteria (for games of skill), the competition duration and how the prize is claimed. If you are conducting a game of chance, it is likely many of these conditions are dictated by state/territory requirements.

A privacy policy should also be provided to all entrants setting out how their personal information is dealt with. 

Additional legal obligations for games of chance

Throughout Australia, games of skill do not require permits.

The states and territories have different permit requirements for games of chance. This table provides an overview of whether or not you may require a permit for your competition. 

JurisdictionGame of chancePermit Cost
NSWPermit required for trade promotions where the total prize value exceeds $10,000Permits (authorities) granted for periods of time rather than individual competitions. 
An authority for 1 year costs $389
South AustraliaMajor trade promotions: Permit required where the total prize value exceeds $5,000
Instant prize promotions: Permit required regardless of prize value
Major trade promotion (prize between $5,001-$10,000) standard fee is $219
Instant prize ($0-$10,000) standard fee is $219
Prices increase depending on the prize value.
Northern TerritoryPermit required for a major trade lottery where the total prize value exceeds $5,000
However, a permit is not required if one has already been acquired in another jurisdiction
No fee
ACTPermit required for trade promotions where the total prize value exceeds $3,000Prize value ($3,000-$5,000) fee is $220
Prize value ($5,000-$10,000) fee is $321
Prices increase depending on the prize value.
Tasmania No permit required
VictoriaNo permit required
QueenslandNo permit required
Western AustraliaNo permit required

Take note: All states and territories have detailed rules/conditions which must be followed when conducting a game of chance competition, even those which do not require a permit. These rules cover the types of prizes which can be given, how the competition is promoted and run, record-keeping and other elements of the competition.

Can I charge people to enter the competition?

Despite minor variations based on jurisdiction, businesses generally cannot charge any fee for entry into trade promotion competitions. However, they can restrict eligibility to enter a competition based on the purchase of a good/service at its standard cost (i.e. normal retail price). 

There is usually also an exception for telephone costs (normally 55 cents) and standard local postage costs. 

Takeaway

Trade promotion competitions can be a great way to increase your business’ audience, launch new products and grow your business. However, there are particular rules and regulations which must be adhered to. In particular, games of chance which take place in NSW, South Australia, the Northern Territory and the ACT may require a permit. Additionally, many of the states and territories have particular conditions for how games of chance are run. Businesses should be particularly mindful of ensuring compliance across the various jurisdictions to mitigate their legal liability for the competition. 

If you need advice on a trade promotion competition, get in touch with us via the contact form or by calling 1300 337 997. 

About Brigid Nelmes

Brigid NelmesBrigid is a legal intern at OpenLegal, working with our legal content team. She is currently completing her Bachelor of Laws and Bachelor of Arts (International Studies) at the University of Technology Sydney. Her interests are in digital/privacy and startup law.