You may be considering offering member discounts, perks, or rewards through a subscription-based business. Across Australia, these types of membership programs are becoming increasingly common, with some businesses also offering entries into prize draws for cars, cash, holidays, or even property.
It sounds commercially attractive, and in some cases it can be. But the model starts to become legally risky when the giveaway is doing all the heavy lifting and the core product or service is vaguely described or viewed as a secondary offering.
This article focuses on the practical side: how subscription giveaways are designed, marketed and administered, and where businesses most often get it wrong.
Federal law update: From 1 January 2027, new federal rules will restrict subscription models that give members ongoing or repeated entries into prize draws, and a State permit will not protect a promotion that falls outside them. We explain the changes, and how to tell whether your model is caught, in Paid Prize Draws: The New Federal Rules from 1 January 2027.
The Three Key Issues You Need to Consider
If you are thinking about running a subscription-based giveaway, there are three key issues you should consider before launching your promotion. Each one is about how your promotion looks to customers and regulators.
1. Is Your Subscription Providing Genuine Value?
This is the time to ask yourself whether your subscription provides genuine value to your customers. Would your customers still see the subscription as worthwhile if the prize draw did not exist?
If the answer is yes, your promotion is generally more likely to be viewed as a legitimate trade promotion rather than a scheme where people are effectively paying for the chance to win a prize.
For example, your subscription may provide member discounts, exclusive content, educational resources, loyalty rewards, or other genuine benefits. The stronger the value of the subscription itself, the easier it is to demonstrate that your customers are paying for a real service rather than simply purchasing entries into a prize draw. This question is now part of the federal test, as we explain in our Paid Prize Draws article.
2. What Is the Main Attraction: Your Subscription or the Prize?
Next, consider what is motivating people to sign up.
If your customers are primarily joining because they value the benefits of your subscription, this may support the argument that your promotion is a genuine trade promotion.
However, if the prize draw is clearly the main attraction, the risk for your business may increase. This is particularly important in subscription-based models because recurring payments can create the impression that customers are paying for ongoing access to chance-based competitions rather than for a genuine product or service.
Your marketing is usually the clearest evidence of the main attraction. If the advertising focuses almost entirely on the prize and says very little about the subscription benefits, regulators may view the arrangement differently.
3. How Big Is the Prize Pool and How Is the Promotion Structured?
The size and nature of your prizes can also influence how your promotion is perceived.
High-value prizes such as luxury vehicles, substantial cash prizes, or property are more likely to attract attention from consumers, the media, and regulators.
You should also carefully consider how your promotion operates. For example, if participants can increase their chances of winning by paying more or staying subscribed longer, this may raise additional questions about whether the promotion resembles a gambling activity rather than a conventional trade promotion.
How A Business Can Get It Wrong
Problems usually show up in the way the promotion is marketed and administered. A business might talk endlessly about the car, the house or the cash prize, while saying very little about what a member actually receives for the subscription fee.
It might bury important eligibility exclusions in lengthy terms and conditions, or fail to make the free-entry pathway clear and accessible. Influencer campaigns can make this worse if the promotional message focuses more on the prize giveaways rather than the actual business offering.
Other common mistakes are less obvious but just as important. Businesses sometimes promote nationally without checking each state and territory position, treat permits or authorities as a one-off administrative box to tick, or assume that widespread industry practice means the model must be safe. Spoiler alert: it does not! Compliance depends on how the particular promotion is structured, what impression it gives customers, and whether the main product offering stands out and is not overwhelmed by the prize giveaways.
Another mistake will be assuming that a model which complied in 2026 will still comply in 2027. The new federal definition applies to existing promotions as well as new ones.
Marketing, Influencers and Consumer Law
Even where a promotion is structured correctly, the way it is advertised can create its own legal risk. The Australian Consumer Law prohibits misleading or deceptive conduct and false or misleading representations, and it applies to every part of the campaign.
In subscription giveaways, the common risk areas are:
- Headlines that overstate the prize, the odds of winning or the number of winners.
- Prize values that are inflated or not based on a genuine retail price.
- Advertising that implies anyone can win, when key eligibility exclusions only appear in the terms and conditions.
- Claims that entry is “free” when the free pathway is hard to find or impractical to use.
- Influencer posts that are not clearly identified as advertising, or that make claims the business itself could not make.
A business is generally responsible for the claims made in its own campaigns, including content it commissions from influencers. Brief influencers carefully, review their content before it goes live, and make sure it is consistent with your terms and conditions.
What Recent Controversy Shows
Recent media reporting has sharpened the focus on this space. In particular, NSW is keeping a close eye on subscription-based trade promotions, skirting the line of trade promotion regulations vs stricter gambling regulations. A core spotlight for the NSW regulator appears to be whether the draw has become the centre of the business rather than a tool to promote it.
We can see where a business has fallen short of this, and the NSW regulator has actually cancelled the authority/permit of a subscription-based competition business following alleged compliance failures.
Regulators and commentators are increasingly focused on consumer harm, vulnerable customers and whether some subscription models are starting to resemble gambling-style products without the same consumer protections. The federal Government has now responded with legislation, which we cover in Paid Prize Draws: The New Federal Rules from 1 January 2027.
Because gambling laws in Australia are generally much stricter than trade promotion laws, businesses should be cautious about any model that could be characterised as gambling rather than a genuine promotion of a business’s product or service. Reach out to Prosper Law today if you need guidance on your business model.
How to Reduce Legal Risk When Running a Subscription-Based Giveaway
If a business wants to use a giveaway as part of a subscription offer, the safest starting point is to begin with the core product or service, not the prize. Ask what value the customer receives even if they never win anything. If that answer is fuzzy, the subscription model probably needs more work before launch.
From there, the focus should shift to transparency. Eligibility needs to be obvious before purchase or sign-up. Free entry mechanics, draw processes, prize details and any meaningful limitations should be easy to understand. Advertising, landing pages, influencer messaging and terms and conditions all need to say the same thing.
Remember: fine print is not a cure for a misleading headline!
Just as importantly, compliance should be treated as an ongoing process, not a last-minute formality. Businesses should check the position in every state and territory where the promotion will run, keep records of approvals and draw procedures, and revisit the structure whenever the prize pool, subscription tiers or marketing claims change. A campaign that was low risk at launch can become much riskier after an ambitious marketing decision.
Because trade promotion laws vary across Australian states and territories, businesses should not assume that compliance in one jurisdiction means compliance nationwide. National promotions often require a review of multiple regulatory regimes before launch. For a state-by-state overview, see Prosper Law’s Guide to Trade Promotions in Australia. For the federal rules that apply from 1 January 2027, see our Paid Prize Draws article.
The Practical Test
A useful way to pressure-test your campaign is to read it through a customer’s eyes, and then through a regulator’s. Ask yourself:
- Does your advertising clearly describe what members actually receive, or only what they could win?
- Could a customer work out who is eligible, how winners are chosen and what conditions apply before paying?
- Is the free entry pathway easy to find and use?
- Do your landing pages, influencer content and terms and conditions all say the same thing?
These questions matter because regulators will not look at your promotion the same way that your marketing team does. They will look at the overall impression to the consumer and the practical operation of the subscription offering. They will also consider if there is a real risk of consumer harm.
If the campaign stops looking fair the moment you read it through a regulator’s eyes, that is usually a sign the structure needs to be revisited.
How Prosper Law can help before launch
For businesses thinking about launching a subscription-based trade promotion, early legal advice can make a significant difference. The right review can help test whether the promotion is structured around a genuine product or service, whether permits or authorities may be required, whether the terms and conditions align with the advertising, and whether the campaign creates avoidable consumer law risk.
At Prosper Law, we help businesses review promotion structures before launch, assess existing models against the new federal rules, assess permit and notification requirements, check advertising claims and influencer content, and refine terms and conditions so the commercial objective can still be achieved without drifting into unnecessary regulatory risk.
Contact us today to start the process.
Frequently Asked Questions
Do I need a permit to run a subscription giveaway?
It depends on where the promotion runs and the value of the prizes. Some States and Territories require a permit or authority above a prize threshold, while others do not. Holding a permit does not by itself make the promotion compliant, and from 1 January 2027 it will not protect a model that falls outside the federal rules explained in our Paid Prize Draws article.
How should I advertise a subscription giveaway?
Lead with what members receive, not just what they could win. Make eligibility, the free entry pathway and the key conditions clear before customers pay, and make sure influencer content is identified as advertising and matches your terms and conditions.
What can go wrong if a business gets a trade promotion wrong?
A poorly structured trade promotion can create material regulatory and consumer law risk. Common problems we see are unclear eligibility rules, misleading advertising, inconsistent terms and conditions, problems with prize draws, or failing to comply with state-based permit requirements.
From 2027, the risks also include penalties under the federal gambling laws and the loss of payment processing.
These can all flow into reputational risk to your business. Trust is a key element of these types of promotions and if a customer feels like they were sold the chance to win rather than a real product or service, the business may face regulator complaints and damage to its brand.
How can a business run a subscription promotion the right way?
The safest starting point is to make sure the subscription has legitimate value (i.e. the business’s genuine product or service offering), even if the customer never wins a prize. Draws should be time-limited campaigns that support the business, not an ongoing entitlement that comes with the subscription.
Before launching, businesses should check the rules in each relevant state or territory and under the federal law, prepare clear terms and conditions, review advertising and influencer content, and make sure customers understand who can enter, how winners are chosen, and what conditions apply.
Contact Prosper Law’s trade promotions legal team to learn more about your obligations.
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