Be a Winner: Complying with Canadian Contest Laws

Monica Sharma
Articles

Promotional contests can be a great way to obtain brand exposure and generate consumer loyalty for the products and services of a business. With the rise of social media, business owners now have an additional platform to run contests and reach even more consumers than ever before. Canadian contest law regulates contests, both online and offline, through a variety of statutes and regulations. Operators of contests should be aware of the legislative framework for running contests in Canada and ensure that their Canadian contests and contest rules are compliant with the legislation. Non-compliant contests could result in heavy penalties.

Canadian contests are governed by complex laws and regulations, including the Competition Act and the Criminal Code. Additionally, if a contest is offered in Quebec, specific provincial legislation will apply. Below, we discuss some key concepts to keep in mind when running a promotional contest in Canada. Please note that, given the complex legislative framework, this article is not meant to offer legal advice. If you intend to run a contest in Canada, it is important to obtain legal advice on both the contest and the contest rules.

Skill Testing Questions

Under the Criminal Code, games of pure chance are considered illegal lotteries. Random draws for prizes fall into this category. As such, it is important to include a skill testing question in promotional contests to comply with the Criminal Code. By adding a skill testing question to a random draw contest, the contest becomes a permitted game of mixed skill and chance, provided that the “no purchase necessary” requirement (discussed below) is also fulfilled. Conversely, a contest based on pure skill does not require a skill testing question. However, it is important to clearly disclose how a pure skill contest will be judged in order to satisfy competition law requirements (discussed further below).

No Purchase Necessary

The Criminal Code also deems it an illegal lottery to require an entrant to pay valuable consideration in order to play a game of pure chance or a game of mixed skill and chance. “Consideration” does not only include money—it could be requiring a contestant to complete a list of tasks prior to entering the contest or requiring the entrant to purchase a product or service in order to enter the contest.

In order to avoid this aspect of the illegal lottery provision, the contest should provide that no purchase is required to enter the contest and provide a no purchase necessary method of entry. If an entrant may be entered into a contest by virtue of purchasing a product or service, it is important not to distinguish these entrants from those who enter without a purchase. For example, contestants who purchase should not be put into a separate draw from entrants who do not purchase. Furthermore, those entrants purchasing products or services should not be provided with additional entries.

Failure to comply with the Criminal Code provisions on illegal lotteries can lead to being found guilty of an indictable offence (which may involve a term of imprisonment of up to 2 years) or an offence punishable on summary conviction.

Contests in Quebec

Any contest that is offered to Quebec residents must meet the requirements of the Régie des alcools, des cours et des jeux (“Régie”), a government of Quebec board that regulates contests, among other products and services. The Régie’s requirements include translating the contest rules into French and payment of an administrative fee. Unless contest sponsors comply with the Régie’s requirements, contests should specifically exclude Quebec residents from participating.

Competition Act and Contest Rules

The Competition Act prohibits promotional contests that do not disclose the number and approximate value of the prizes, the area or areas to which the contest relates and any fact within the knowledge of the contest operator that materially affects the chances of winning. The Act further states that distribution of prizes must not be unduly delayed and that participants must be selected or prizes must be distributed on the basis of skill or on a random basis.

The contest rules should address these requirements by clearly setting out:

  • any regional allocation of prizes;
  • the number and value of the prizes;
  • any additional material information that affects the chances of winning; and
  • timelines and process to award prizes.

Failure to comply with the provisions of the Competition Act regarding promotional contests can lead to onerous fines of up to $750,000 for individuals (and $1,000,000 for each subsequent court order) and $10,000,000 for corporations (and $15,000,000 for each subsequent court order).

The contest rules can also be used to limit risk and liability exposure for the contest sponsor in various respects. For example, if the contest involves participants making submissions (such as a written essay or a photograph), it is important to address copyright and moral rights issues in the rules, allowing the contest sponsor to use submissions as intended. If the contest sponsor wishes to take ownership of the user content, the rules should contain an assignment of copyright. If ownership is not required, the rules should contain a license to permit the contest sponsor to use the user content as desired. Whether there is an assignment or a license of copyright in the user content, the rules should contain a waiver of moral rights to allow the content to be used without attribution to the author and to allow amendments to the content.

The contest rules can also be used to address any particular privacy aspects, such as obtaining consent to use entrant information to contact entrants with respect to special promotions or marketing initiatives. Note that Canadian privacy laws require that collectors of personal information identify the use of the information and that such collectors must obtain the consent of the relevant individual to use their information as specified.

Social Media Rules

In addition to the legislative requirements described above, running a contest through a social media outlet requires compliance with the outlet’s rules for contests. For example, if Facebook is used to communicate or administer a contest, Facebook’s contest rules require that the contest rules contain a complete release of Facebook by each entrant or participant in the contest and an acknowledgement that the contest is not sponsored, endorsed or administered by Facebook. Pinterest also has guidelines on how to run a contest on its site, including not allowing more than one entry per participant and not requiring participants to “Pin” a specific image. It is important to keep these specific social media rules in mind as you develop and offer your contest.

Conclusion

The laws governing contests in Canada are complex and entail significant penalties for non-compliance. Should you require any legal advice with respect to running contests in Canada, we would be pleased to speak with you.