Contest Marketing And Its Dangers

The SAXLAW Report
Fall 1998

Running a contest is an innovative way of collecting new marketing data on existing (and potential) buyers or clients. But without some understanding of the relevant Canadian laws (and those of other jurisdictions if you plan to run your contest over the Internet), contests can turn into costly affairs.

A contest run within Canada falls under the Criminal Code and Competition act, and various provincial laws, and all the traditional rules of advertising should be followed to avoid running afoul of the law. This is true, too, of competitions run over the Internet.

The following five suggestions will help you to stay on the right side of the law and ensure your marketing effort is successful.

1. The rules of your contest must be disclosed to entrants in a "fair, adequate, and conspicuous" manner, so that he or she is not inconvenienced or in any way committed to the product or contest. Additionally, there can be no requirement on the entrant's part to make a purchase in order to enter the contest.

2. Any fact that materially affects the entrant's chances of winning must also be disclosed, as well as the odds of winning each prize.

3. The number and approximate retail value of the prizes must also be disclosed.
4. The contest must have a closing date, and the distribution of prizes to the winners must be carried out in a timely fashion, without any undue delays.

5. Your rules must specify whether the selection of the participants or the distribution of prizes is to be carried out on a random basis or is to rely upon the completion of a skill-testing question. Additionally, the particular geographic region to which the contest is open and if and where prizes have been allocated must also be specified.

By following these guidelines your contest should run smoothly and your marketing effort prove fruitful. Two other publications which provide valuable guidance in this matter are: The Misleading Advertising Bulletin and The Director's Advisory Opinion, both of which can be obtained by contacting me.

Finally, if you plan to run your contest in jurisdictions outside of Canada there exist published codes or guides set out by associations such as the International Chamber of Commerce that can also be of help. Contact me regarding obtaining these.

1. The rules of your contest must be disclosed to entrants in a "fair, adequate, and conspicuous" manner, so that he or she is not inconvenienced or in any way committed to the product or contest. Additionally, there can be no requirement on the entrant's part to make a purchase in order to enter the contest.

2. Any fact that materially affects the entrant's chances of winning must also be disclosed, as well as the odds of winning each prize.

3. The number and approximate retail value of the prizes must also be disclosed.
4. The contest must have a closing date, and the distribution of prizes to the winners must be carried out in a timely fashion, without any undue delays.

5. Your rules must specify whether the selection of the participants or the distribution of prizes is to be carried out on a random basis or is to rely upon the completion of a skill-testing question. Additionally, the particular geographic region to which the contest is open and if and where prizes have been allocated must also be specified.

By following these guidelines your contest should run smoothly and your marketing effort prove fruitful. Two other publications which provide valuable guidance in this matter are: The Misleading Advertising Bulletin and The Director's Advisory Opinion, both of which can be obtained by contacting me.

Finally, if you plan to run your contest in jurisdictions outside of Canada there exist published codes or guides set out by associations such as the International Chamber of Commerce that can also be of help. Contact me regarding obtaining these.

THE SAXLAW REPORT has been prepared by Michael M. Sax for information purposes only and does not constitute a legal opinion. This representation is not intended to create, and the receipt of it does not constitute a solicitor-client relationship. Readers should not act upon this information without seeking professional counsel. This information is forwarded on the basis and understanding that Michael M. Sax, Barrister & Solicitor is under no responsibility or liability whatsoever in respect thereof.