Ten Key Issues That Can Arise in Canadian Contests and Practice Tips

Short rules. Short rules, which are typically a single paragraph included in advertising (for example, point-of-purchase marketing), website landing pages and social media pages, are largely intended to set out the mandatory statutory disclosure requirements in section 74.06 of the Competition Act. Other material contest terms are also typically included (for example, a statement that no purchase is necessary, language that states that entrant information may be used for marketing, if that is the case, a link to the full contest rules and other terms that, if not clearly disclosed upfront, may raise misleading advertising issues). For the Competition Bureau’s position on what should be included in point-of-purchase contest materials, see Enforcement Guidelines, Promotional Contests: Section 74.06 of the Competition Act, Competition Bureau, 2009 (Promotional Contest Enforcement Guidelines).

Long rules. Contest sponsors commonly prepare full contest rules for contests (often called “long rules”), which are the contracts between sponsors and entrants. In general, contest rules are intended to set out the key elements of a promotion. In practice, they are usually drafted to protect contest sponsors in the event an issue arises. Some typical sections in long rules include eligibility, how to enter, prizes, winner selection and things that entrants must do in order to enter a contest and win a prize.

Winner release. Contest sponsors usually require winners to sign a release form as a condition of winning a prize. In general, winner releases are intended to confirm that entrants have complied with contest rules and have them release and indemnify the sponsor. Practically, winner releases are more important where a contest involves significant risk (for example, a trip contest where a travel accident may occur) or where the promotion involves large value prizes, which may mean that, among other things, entrants may be more likely to attempt to cheat.

Skill-testing question. The Code contains illegal lottery sections (206(1)(a)-(f)), which, among other things, prohibit certain types of lotteries and games where property or goods, wares, or merchandise is awarded by chance. To avoid these sections, sponsors commonly include a skill-testing question as a condition of winning a prize.

No purchase required entry option. The Code also prohibits disposing of goods, wares or merchandise by any game of chance or mixed chance and skill where an entrant pays money or other valuable consideration (section 206(1)(f), Code). To avoid this section, contest sponsors also typically include a no purchase required entry option (sometimes called an “alternative means of entry” or “AMOE”). Examples include offering entrants entry ballots with no purchase required or allowing them to enter by mailing in a short essay (often less than 100 words) on a particular topic. Some contest sponsors like to require AMOE entrants to write short essays on a topic relating to their product that can be used for marketing.

Review of draft creative materials. The final main component of a contest involves the review of draft creative materials before a contest launches. This may include print and electronic advertising, social media materials and radio and television spots. The purpose of review is to identify and avoid potential advertising issues that can arise (for example, false or misleading claims, the unauthorized use of third party trade-marks or images and CASL compliance). In practice, the review of draft creative materials is as important as drafting rules and forms. A practice tip is to always advise clients that they should run their draft creative by their counsel prior to the launch of a contest. For more information, see Practice Notes, Digital Marketing and the Competition Act, Disclaimers Under the Competition Act and Misleading Advertising Under the Competition Act. See also Best Practices for Digital Marketing Checklist, Disclaimers and the Competition Act Checklist and Misleading Advertising Due Diligence Checklist.

Purchase requirement/consideration. A common issue that arises in Canadian contests is whether a sponsor can require a purchase as a condition of entry. In general, most sponsors include a no-purchase required entry option, which may consist of a free entry for entrants that do not purchase a product or a mail-in entry option (for example, an essay of 100 words or less on a particular topic). As discussed above, a no-purchase entry option is intended to avoid section 206(1)(f) of the Code and reduce the potential risk under other sections of the Code that do not expressly refer to consideration. In certain cases, however, there is a good argument, based on the language in section 206(1), that a purchase can be required where the prize is not property or goods, wares, or merchandise (for example, the prize is cash) and a skill-testing question is included. Given, however, that there is relatively little case law on this point, conservative contest sponsors still typically include a no-purchase entry option. Counsel should also be aware that there is potential risk not only in requiring a purchase to enter a contest, but also other requirements that may involve more than minimal effort by entrants (for example, requiring entrants to agree to marketing without being able to opt out, participate in an onerous survey, etc.).

Inadequate disclosure. As discussed above, the preparation of contest materials typically includes both short and long rules. The short rules for a contest should be clearly available to entrants before they purchase a product, visit a retail outlet or otherwise commit themselves to the contest. Short rules are typically included on point-of-purchase marketing (for example, on the outside of packages or shelf-hangers), in the footers of contest internet landing pages, social media pages and footers of print marketing. It is a good practice to include short rules in the footers of all marketing where feasible with a link to the full contest rules. Short rules are important for both the required statutory disclosure under section 74.06 of the Competition Act and to bring material terms to the attention of entrants to minimize misleading advertising issues from arising. Short rules should be drafted to include the information set out in section 74.06 of the Competition Act, information recommended to be included by the Competition Bureau in its Promotional Contest Enforcement Guidelines and any other important terms that should be brought to the attention of entrants (for example, that their entry information may be used for marketing, key restrictions on entry or award of prizes). For more information, see Standard Document, Promotional Contests: Random Draw Contest Rules and Forms.

Not CASL compliant. Some contest sponsors may wish to collect email addresses during a contest for later marketing. Running a contest can be a very good opportunity to expand a sponsor’s electronic marketing list. However, sponsors should comply with the requirements of CASL, including the core consent, identification and unsubscribe requirements. Some common issues that can arise in this regard are express consent requests on contest entry forms or web pages that are not CASL compliant, subsequent electronic marketing that does not include the required identification requirements or electronic marketing that does not include an easy unsubscribe mechanism. Sponsors should also comply with other CASL requirements, including documenting consent. It should be noted that some CASL exemptions may apply to merely the administration of a contest by electronic means (for example, section 3(b) of the Electronic Commerce Protection Regulations under CASL, which permits an electronic message in response to a request or inquiry or is solicited by the recipient). It is a good practice for counsel advising contest clients to confirm whether a client wishes to have CASL advice in relation to any subsequent electronic marketing and, if not, to include a clear qualification in their retainer.

Failure to review draft creative materials. As discussed above, one of the key aspects of preparing contest materials in Canada is the review of draft creative materials before the launch of a contest. In this respect, counsel should advise their contest clients to provide them with draft creative to review and provide advice in relation to potentially false or misleading claims, inadequate short rule disclosure, whether consent has been obtained for any third-party trade-marks, images or content, and to ensure that the full contest rules are easily accessible by entrants. Several practice tips include ensuring that short rules are clearly stated upfront, that all key claims are true (particularly relating to prizes), that any important conditions or limitations related to entry or participation are clearly stated upfront and that the sponsor owns (or has consent to use) all marks, images, graphics and content.

Failure to comply with social media platform rules. Most social media platforms (for example, Facebook, X, Pinterest and Instagram) have specific terms of use relating to contests. These terms of use commonly not only apply where a particular platform is used as an active means of entering and participating in a contest (for example, liking a page or posting), but where a social media platform is merely used to promote or publicize a contest (for example, hosting contest materials on a social media page). As such, when assisting clients in the preparation of contest materials, counsel should check the relevant social media platforms’ terms of use and, if necessary, include disclaimer language in contest rules (or comply with other requirements). For more information, see Standard Document, Social Media Language for Contest Rules.

Unauthorized use of third-party intellectual property. Another question that can arise during the preparation of contest materials is whether a sponsor owns or has consent to use creative elements (for example, trade-marks, logos, images, photographs or other content that may be subject to third-party intellectual property rights). It is important for counsel to confirm with their clients that they own (or have rights to use) creative elements. This may involve flagging creative elements that may be subject to third party rights, asking whether a trade-mark search has been conducted for a catchy contest title, whether a client owns graphics or photos used in marketing or has the rights to use product names that may be trade-marked. It is also important to note that some companies have specific requirements where their products are given away as prizes or their marks used or product images reproduced (Apple has been one example).

No contest rules. Some contest sponsors run contests with no contest rules whatsoever. As discussed above, it is important for sponsors to include both short rules and long rules for promotions to meet statutory disclosure requirements (that is, under section 74.06 of the Competition Act), regulatory guidelines (for example, the Competition Bureau’s Promotional Contest Enforcement Guidelines) and protect the sponsor from potential liability in the event an issue arises.

Contest rules that do not reflect the contest. Another common issue that arises in Canadian contests relates to contest rules that do not reflect the promotion. Every section of short and long contest rules should be drafted for the specific promotion, particularly key sections, such as eligibility, how to enter, prizes, winner selection and odds of winning. This is important, among other things, to reduce the risk that an element of a contest will be challenged as false or misleading and so that the sponsor can rely on the rules (that is, enforce them) in the event that an issue arises.

Failure to comply with Quebec or international law. When assisting a client with a contest, counsel should be aware that contest law differs between jurisdictions. The applicable laws will typically be the same for a contest across Canada, except for Quebec. In Quebec, contests are regulated by the Régie des alcools, des courses et des jeux (RACJ). Additional requirements in Quebec typically include bilingual rules, filings with the RACJ, additional language to be included in contest rules and, in some cases, a bond may be required by the RACJ. It is prudent for counsel to obtain advice from Quebec counsel if a client wants to run a contest in Quebec given that, in addition to the basic requirements, discrete Quebec-specific legal questions commonly arise. Counsel should also be aware that contest laws differ outside Canada (as such, again local advice should be obtained if a client wishes to run an international contest, for example, in the United States or other countries).

Technical issues. Technical issues can also arise during a contest. This is more likely in a contest that relies on technology for the functionality of the promotion (for example, a contest involving online voting that may lead to cheating if precautions, such as including a captcha mechanism, are not in place). Where a contest relies on technology as part of its structure, it is prudent to involve an IT person to reduce the likelihood that issues will arise.