Thinking about running a competition? Here’s what you need to know
Have you thought about running a contest or competition to boost interest and sales in your business or to reward loyal customers? Contests are a great way to boost your business, build your mailing list, or increase social media followers, but there are some legal requirements you need to be aware of.
What do you need to know?
1. General Consumer law requirements
Businesses must run competitions ethically and in a manner that is fair to consumers or you will face stiff fines. There are some even more obvious general consumer law requirements such as actually giving away the prizes you offer, that they match the description and value you advertise in the competition and that you are not running a competition where winners only win the chance to enter yet another competition.
2. Some competitions require permits
Often online promoters are running competitions without permits and we frequently hear "I've been told you don't need one if the prize is under $100". No, if you own a website and are reading this please take note: the form of the competition and the value of the prize as well as the location of the competition in Australia dictate whether you require a permit. The various states have different regulations which change so you need to check the local state government website for the latest rules.
3. Chance versus Skill decides permit requirements
In Australia, competitions are split into two main areas: competitions of ‘chance’ and competitions of ‘skill’.
A competition of chance is one in which the winner is selected at random (technically a "lottery”).
A competition of skill is one in which the winner is selected based on the judging of an entry. The difference is the element of actual competition rather than a random draw.
Depending on the State where the competition is run, a permit is required for games of chance irrespective of the prize value. Most games of skill do not require permits regardless of prize value.
But take note: if the competition ends in a random draw of any type, and even if it is called a game of skill, it still will be deemed a competition of chance and you will likely require a permit.
If you are running a competition of chance, you need to check each individual state as all States have different requirements. For example, in Victoria you would require a permit for any prizes over $5K but in NSW all games of chance require a permit but games of skill do not require a permit.
Can I require people to pay or purchase to enter?
Generally, you are allowed to require people to purchase a particular product in order to enter. There are some States that require entry to be free and put limits on entry costs such as telephone, mobile fees and similar cannot exceed a certain limit.
Victoria and some other States will close down a competition that promotes things that may be contrary to public interest such as excessive alcohol consumption or things dangerous behavior such as filming yourself or others doing dangerous stunts.
If you are running a contest or competition, you need to check the guides in each State or Territory to meet their specific requirements. It’s a great way to boost sales for your business but may not be worth it if you have to add in permit costs.