What You Need to Know Before Running a Trade Promotion Competition

Interest has risen in Trade Promotions due to their effective marketing applications but it is important to consider how to conduct them legally

What is a Trade Promotion?

Referred to as either a Trade Promotion Competition or a Trade Promotion Lottery (trade promotion), a trade promotion is a free-entry competition that promotes a business or brand via the incentive of a chance to win prizes made available by the trade promotion.

Trade promotions are not limited to businesses and can be run by communities, and charitable organisations as well. They are distinguishable from the heavily advertised monetary lotteries most are familiar with, by the fact that entry to trade promotion must be free, however, promoters may offer entry to the competition by purchasing goods or services at normal retail value. This is where the promotion of the trade comes in, as the incentive creates an enticing opportunity for the public to enter into the running for a prize, and while doing so the entrants are offered a platform to genuinely engage with your company, making it an excellent way to promote a business. Moreover, the promoter can usually expect brand recognition and increased marketing opportunity as a result. 

There are strings attached to the running of the trade promotion that vary on a State-by-State basis with each state having its own form of gaming and/or gambling-related regulatory body that legislates around the competitions. To ensure that you are compliant with respective government bodies it is recommended that you contact a solicitor experienced in commercial law, and trade promotions. 

Two distinct categories of trade promotions are run throughout Australia, with the aforementioned caveat that each state has its own regulations imposed on same. The two types of trade promotions are games of skill and games of chance, which we elaborate on further below.

Game of Skill

A game of skill does not require an element of chance or random selection, entrants are entered based on a criterion of skills which could be physical or mental. The winner is selected by judges or votes.

Example 1: The promoter/company being promoted may request entrants to submit their most impressive use of the promoting company’s item on social media, coincidentally promoting their product and page, while simultaneously allowing entrants entry into the competition on social media. The winner could be chosen by the post with the most interaction, or a panel of judges could select what they consider to be the most impressive submission.

Example 2: A request for willing entrants to email in 25 words or less what they love about the brand, stipulating that the winner will be selected by judges as to the most creative answer. It may be a condition of entry that the entrants must have their submission featured on the page as a form of advertisement upon determining the winner. This is why terms and conditions are important!

Games of skill do not have as many regulations as games of chance, however, they are still governed by legislation, such as Schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law). Supporting this premise is the fact that games of skill do not require obtaining a permit, regardless of the monetary value or size of the prize.

Regulations are still imposed on games of skill, particularly in the following areas where it is required that there are:

• Clear guidelines as to judging criteria must be available for entrants;

• All entries must be judged individually on their merit; and
  
  
• One winner is chosen based on the skill and originality of their submission.

Game of Chance

A game of chance is a competition where the winner is randomly selected. It is strictly a chance or ‘luck’ based competition, where the winner is literally ‘luck of the draw’.

Example 1: Pulling numbers out of a hat.

Example 2: Utilising random selection software or applications from an exhaustively compiled list of eligible entrants.

This type of promotion usually attracts more entrants than a game of skill, as there are low barriers to entry and usually limited criteria to be able to enter. There would still be criteria to adhere to which might look like ‘entrants must be over the age of 18’, however it is limited to those criteria and doesn’t place additional obstacles on people such as a requirement for creativity, a large social media following to gain votes, or certain physical attributes. These criteria are important to ensure compliance with the State and Territory legislation that is heavily imposed on games of chance, and most states require permits before being able to legally carry out the competition. Usually, the criteria will be in carefully drafted terms and conditions, or ‘ts and cs’ as they are sometimes referred.

Terms and Conditions

Terms and conditions of the trade promotion need to consider the requirements imposed by each respective state that they are carried out in. Regulative bodies will likely not grant a permit without compliant terms and conditions, and if any terms are non-compliant the application may be rejected. This results in monetary and time losses, due to having to redraft documents, and any fees associated with the rejection or re-application.

Will I Require a Permit for My Trade Promotion Lottery?

Certain states may attach monetary thresholds as to whether a permit is required, and other states may not require permits at all. However, it is important to know that although a permit may not be required for your trade promotion lottery, the conduct demonstrated throughout the trade promotion is still subservient to legislation. This is why consulting a solicitor is crucial. The legislation may not be as obvious as a permit that after being applied for can either be approved or rejected by a governing body. Self-representing promoters may find that due to not receiving the checks and balances of an explicit approval and/or rejection they are unaware of legislation that may be relevant to them.  This also means they could be more susceptible to negative consequences due to uninformed decisions. Solicitors who regularly assist with trade promotions understand significant legislative changes, current or proposed that may adversely or positively effect the competition.

Therefore, it is imperative that a solicitor who is well-versed in the area is consulted.  

How Arrow White can help

The Arrow White Solicitors and Lawyers are able to provide assistance on all aspects of Trade Promotions and all incidentals to them, including:

• Terms and Conditions
• Privacy Policies
• Data Breach Information

Carrying a wealth of knowledge in both business and commercial law, contact a member of our team today to ensure you receive purposive legal solutions. 

IMPORTANT: This is not advice. Readers should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice is sought before acting in any of the areas covered in any newsletter.

This webpage is made available by Arrow White for educational purposes only as well as to give you general information and a general understanding of the law, but not to provide specific legal, tax, financial or investment advice. By using this webpage, you understand that there is no lawyer-client relationship between you and Arrow White. The webpage should not be used as a substitute for competent professional advice from a suitably qualified professional. Nothing on this webpage should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any asset by Arrow White or any third party. You alone are solely responsible for determining whether any investment, asset or strategy or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult a suitably qualified professional regarding your specific legal, tax, financial or investment situation.

Disclaimer: This publication is intended for general and informative use only and is not to be relied upon as professional financial or legal advice.

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