Promotions law in Australia requires business to obtain a permit for some promotional competitions.
Running a trade promotion is a powerful way to increase brand awareness, win more customers and drive engagement. Many businesses in Australia engage in this practice.
In this article we set out what you need to run a promotional competition in Australia.
What is a Trade Promotion?
Promotional competitions are a type of marketing activity. Promotional competitions are used by businesses to increase sales and improve brand loyalty. Businesses use promotional competitions to drive consumer demand by giving customers a push to buy with the prospect of winning something.
There are lots of benefits to using competitions. A few of them are to:
- boost sales
- attract new customers
- develop customer relationships
- increase brand loyalty
- expand market reach
Promotions law in Australia generally recognises three elements:
- the competition is free to enter by customers
- the competition aims to promote goods or services
- the promotion is conducted by a registered Australian business
Types of Promotional Competitions: Games of Chance versus Games of Skill
There are two different kinds of competitions, being:
- a game of chance; or
- a game of skill.
A game of chance is a competition where the winner is randomly selected. This means that all entrants have an equal chance of winning. The game of chance is the same as a ‘game of luck.’
Participants do not need to demonstrate their skills, and there is no criteria against which a winner will be assessed.
For example, you might hold a barrel draw to determine winners for those who enter your trade promotion. This would be a game of chance.
A game of skill is a competition where participants submit an entry that needs to meet the criteria. The criteria might be based on their physical or mental skills. There is no element of chance or luck involved in determining the winner. Instead, the winner is determined entirely by merit, judges, or vote.
For example, a typical game of skill is where entrants are asked to submit an answer to a question in 25 words or less, and the judges pick a winner based on the creativity, skill or originality of the response.
Social media posts such as Instagram photo competitions and “share a story or video” are other examples of a game of skill.
Trade promotions are used in different ways to achieve distinct goals. The one you choose for your business depends on your goals. And the trade promotion you choose determines the legal rules you need to follow and whether you need a permit or authority.
Therefore, the most important question when running a trade promotion is, “How will the winners be determined?” The answer will directly determine the regulations that apply to the competition and whether a permit is required.
For example, you will need a trade promotion permit in some states in Australia to operate a promotion where the winner is determined by an element of chance.
The size of the prize pool being offered and the State or Territory in which the competition is run will also determine whether or not a permit is needed.
Read on below to see the need for permits for trade promotions for each State and Territory.
|State or Territory||Do I need a trade promotion permit?|
|New South Wales||Yes|
|Australian Capital Territory||Yes|
As you can see, permits are required in some States and Territories and not in others. And the requirements may vary across the various States and Territories. And if you run promotional competitions across Australia, you must comply with the regulatory requirements of each State and Territory.
When do I not need a trade promotion permit?
You don’t always need a trade promotion permit. For example, you do not need a permit for a game of skill.
However, the rules may be different for a game of chance. If the prize pool for a game of chance is:
- less than $3,000, you do not need a permit;
- between $3,000 and $5,000, you only need a permit in the ACT;
- $5,000 or over, you need a permit in the ACT, SA and NT; and
- $10,000 or over, you need a permit in the ACT, SA, NT and NSW.
However, you still need to comply with State or Territory laws or regulations that generally deal with trade promotions and the Australian Consumer Law.
As previously mentioned, the trade promotion you choose determines the rules you need to follow and whether you need a permit or authority.
In Australia, the game of skill does not require a permit, regardless of the size of the prize offered.
However, most states still impose regulations on the way the competition is run.
- clear guidelines as to judging criteria must be available to entrants before entering
- all entries must be judged individually on their merit
- one winner is chosen based on the skill and originality of their submission
Likewise, for the game of chance, you will be required to comply with the State and Territory laws governing the conduct of the competition. You will also be required to apply for a Trade Lottery Permit / Authority in some states. The permit application is simple in some jurisdictions and involves a straightforward online form and fee payment. However, in other jurisdictions, the process can be lengthy and complex.
If not prepared perfectly in line with the requirements, delays can result in a back-and-forward communication battle with various government bodies.
Remember that once you obtain a permit, there are further rules that apply.
For example, permit numbers need to appear on your promotion creative. Because of this, you need to consider your deadlines and give yourself ample time to apply for the permits.
Promotions laws in different States and Territories
Different States and Territories have different laws and regulations for running a promotional competition. It is important to ensure that a business complies with these rules and regulations, as they could face penalties for any errors.
New South Wales requires businesses to apply for a Trade Promotion Authority if the total prize pool for a single trade promotion exceeds $10,000. An authority can be issued for either 1, 3 or 5 years. The authority can be used across multiple trade promotions for its duration.
Once you receive your authority, any time you wish to conduct a trade promotion during your authority period. If the total prize pool exceeds $10,000, you must apply to notify the NSW regulator of your upcoming promotion.
For example, if you wish to conduct a trade promotion in NSW in 2 months’ time where the total prize pool is $15,000, you should start to think about applying for your authority.
Gaming activity is not permitted if the prizes include prohibited weapons, firearms, cosmetic surgery 1, or tobacco in any form. There are also limitations on the amount of alcohol that can be given away.
You must provide a copy of the gaming rules to NSW Fair Trading at least 10 working days before the proposed promotion takes place.
A permit is always required unless the:
- total prize pool is less than $3,000;
- promotion is a private lottery;
- prizes or rewards consist of rebates, discounts and other allowances that are equally available to all customers;
- prizes or rewards consist of the granting of a refund that is equally available to all customers regardless; or if
- promotion involves a lottery conducted via a website hosted or advertised in the ACT.
Where the total value of the prize pool for a Trade Promotion Lottery in South Australia exceeds $5,000, the organiser is required to apply for a competition permit. Promoters must abide by State Regulations. Entry by post can’t be more than the normal postage cost, and entry by phone can’t exceed 55 cents (including GST) for landlines and 50 cents for mobile phones (plus mobile charges). If you are using instant scratch or break open tickets (where the number, letter or symbol is hidden), it is an instant prize trade promotion lottery.
You must apply for a licence regardless of the prize amount. A prize must not include cosmetic or medical procedures, tobacco products, firearms, ammunition or prohibited weapons. If the prize is drawn electronically, you will also need an electronic drawing system approval number.
In the Northern Territory, a business will not be required to apply for a Trade Promotion Lottery permit where they have acquired a permit for the same competition in another state or territory. If the business does not intend to run the competition outside the Northern Territory, it will only be required to acquire a permit where the total prize value exceeds $5,000.
Liquor must not be a principal prize, and a prize must not include firearms, weapons, ammunition, explosives or tobacco products. You must not award a prize to a person under 18 years that include liquor or goods or services that are restricted by law to people over 18.
If the Trade Promotion Lottery complies with the conditions prescribed under regulations, you are not required to apply for a permit to operate the competition. A business will be required to submit an application for a permit where it intends to conduct a Trade Promotion Lottery that does not comply with the prescribed provisions. A prize in the lottery must not consist of or include cosmetic surgical or medical procedures.
Queensland, Victoria and Tasmania
Queensland, Tasmania and Victoria do not require businesses to acquire Trade Promotion Lottery permits. Despite this, each business is required to comply with a variety of state-specific mandatory conditions.
Some of the key conditions businesses must adhere to include:
- Entry into a trade lottery is free unless entry is gained by purchasing goods or services at their normal retail value;
- If the Trade Promotion Lottery is to be drawn, the method of the draw must ensure that each ticket in the draw has a random and equal chance of being drawn;
- All information relating to the competition must be communicated and easily accessible to entrants, including eligibility requirements, dates of the draw, publishing dates etc.;
- Winners are notified, and prize/s are awarded within the specified timeframe and by the specified means;
- Where prizes exceed $1,000 the names of winners are published in a newspaper or online for 28 days;
- The winner of a prize does not incur a cost to accept a prize (other than a trivial cost);
- Where a prize is left unclaimed, it must be kept for 3 months from the day the winner is decided (unless the conditions allow for the redrawing of winners for unclaimed prices or the jackpotting of unclaimed prizes. If the prize is not claimed within 3 months, a redraw must occur);
- Prizes do not include weapons, cosmetic surgery, tobacco product, or alcohol where the competition is open to entrants under the age of 18;
- Records are maintained for up to 5 years, including books, finances and prize details; and
- The purpose for which the entrant’s personal information is to be used is made clear to the entrant (if used for a purpose other than the lottery).
Drafting trade promotion terms and conditions for trade promotion is an essential part of conducting it. These terms and conditions must be consistent with the Australian Consumer Law and applicable state regulations.
You must comply with these laws and regulations when you apply for a permit. This is because the regulator will require you to first submit your terms and conditions in order to obtain approval. Regulators often refuse to issue a permit until you have amended all non-compliant terms and conditions.
The most important aspects to include in your terms and conditions include eligibility of entry, the prize, how to enter, any special conditions of entry, and when and how the competition winner(s) will be announced.
It is advisable that you clearly state all important terms and conditions of entry in advance of any promotional activity. You must post your terms and conditions wherever the promotion is advertised. They must also be made available to participants when they enter.
Your terms and conditions must be well-drafted and comprehensive so consumers understand the promotion and can decide whether or not to participate. It also ensures that all participants know their rights and obligations.
Prosper Law is Australia’s online law firm. We provide legal services to businesses and individuals across Australia. Our practice areas include contracts, eCommerce, publishing, legal counsel, and employment law.
There are a number of things to consider when drafting competition terms. Depending on the type of competition you are planning, you may need to comply with a number of laws relating to the conduct of your competition.
Having a business lawyer legally draft your terms of competition will ensure that your terms are comprehensive and tailored to your specific situation.
Contact the team at Prosper Law today to discuss requirements for your tailored competition terms and conditions!
Farrah Motley | Director
M: 1300 003 077
A: Suite No. 99, Level 18, 324 Queen Street, Brisbane, Queensland Australia 4000