While most contest entrants would be thrilled to discover they have won a contest, ambiguities in the contest rules or computer glitches can result in unintended or disgruntled winners. It is therefore important to have carefully worded contest rules and promotional materials in order to avoid a lawsuit, or at the very least, negative publicity.
One of the most puzzling elements of Canadian contests is the inclusion of a skill-testing question. While it may seem strange to require the winner to correctly answer a math question prior to claiming a prize (particularly in the United States where there is no similar requirement), the Criminal Code prohibits the conduct of contests in which winners are determined solely by chance. Therefore, most contest sponsors incorporate into the rules a requirement for a skill-testing question to be administered to the contest winner as a simple method of complying with the Criminal Code. If the contest already involves an element of skill, it is possible that no further skill-testing question is required. However, determining what qualifies as "skill" is often a grey area, and therefore, most contest sponsors include a skill-testing question to be cautious.
The "no purchase necessary" language found in contest rules is also a requirement that originates from the Criminal Code. Under the Criminal Code, a contest is prohibited if winners are determined based on chance or a mix of chance and skill if the entrant is required to pay money or give valuable consideration. In addition to indicating "no purchase necessary" in the rules themselves, contest sponsors should provide the method by which the entrant can enter without making a purchase, for example, by mailing in an entry form to the sponsor's address, often referred to as an alternate "snail mail entry." Many online contest sponsors continue to provide a snail mail entry alternative even when purchases are not required by the entrant. This is due to the ambiguity around the meaning of "valuable consideration" under the Criminal Code, and in particular the question of whether the payment of internet service provider fees constitutes "valuable consideration." It is important to be mindful of the obligations under the Criminal Code given that failure to comply with the Criminal Code can result in a fine or imprisonment.
In addition to the Criminal Code, the Competition Act sets out a number of requirements for contests and in particular, requires that there is adequate and fair disclosure of matters such as the number and approximate value of prizes, the areas to which they relate (regional allocation of prizes), and any fact within the knowledge of the contest sponsor that materially affects the chances of winning the contest. Guidelines published by the Competition Bureau note that the disclosure should be made prior to the contest entrant being inconvenienced. Since retailers often do not permit in-store displays promoting contests, the Guidelines note that manufacturers should provide a short list of the contest rules that contains the following information on the outside of each package:
- the number and value of prizes;
- any regional allocation of prizes;
- the skill-testing question requirement;
- details as to the chances of winning;
- the contest closing date; and
- any other fact known to the advertiser that materially affects the chances of winning.
It is also advisable to include in the short list the "no purchase necessary" requirement and the place where the full contest rules are available. Those found to contravene the Competition Act may be required to publish a corrective notice or pay a monetary fine.
When it comes to entering contests, Quebec entrants are at a significant disadvantage – many contest sponsors opt to exclude Quebec residents from entering the contest given the additional requirements for including Quebec. The Régie des alcools, des courses et des jeux ("Régie") has jurisdiction over publicity contests that are open to Quebec residents. If a contest is open to Quebec residents, below are just some of the additional requirements for the contest sponsor:
- A publicity contest notice, text of the contest rules, and promotional materials must be filed with the Régie in advance of the contest.
- Duties based on the value of the prizes awarded to Quebec residents must be paid and in most cases must be paid in advance of the contest.
- The contest rules must contain certain provisions and statements.
- A security bond is required in some circumstances.
- The Régie has authority to determine whether the contest rules can be cancelled or modified.
While the Régie does not require the translation of contest rules into French for contests held exclusively online, the Office québécois de la langue française does require translation. Therefore, given the additional requirements, it is not surprising that many contest sponsors opt to exclude Quebec residents from entering contests.
In addition to the above, it is also advisable that the contest rules restrict the number of entries, particularly for online contests so that entrants do not overwhelm the website, and provide details regarding how the winner is selected and contacted. Further, contests that involve the submission of a work of art, such as photographs, should specify that the sponsor obtains copyright ownership in the entry. Without copyright ownership the sponsor could be prevented from using or modifying the winning artwork in any promotional campaigns associated with the contest.
A number of contest disclaimers should also be inserted into the rules in order to limit liability, such as the ability of the sponsor to suspend, cancel or modify the contest at any time. Also, the rules should specify that, if there is, as a result of any error, more potential winners than contemplated in the rules, the contest sponsor reserves the right to hold a random draw amongst all prize claimants to award the correct number of prizes. This provision is especially useful for online contests subject to computer glitches, and many other settings. For example, in 2001 Ultramar Ltd. distributed 314,000 "Reveal a Deal" booklets in New Brunswick and three of these booklets were supposed to pay an instant prize of $1,500 in gasoline. However, a printing error resulted in 100,000 of the booklets paying the instant prize. Ultramar, relying on its contest rules, held a draw to pick three winners from among the 100,000 misprinted winning coupons.
Contest sponsors should also take steps to ensure that the contest complies with Canada's privacy laws, and an entrant's personal information should not be used for marketing purposes unless the entrant has provided consent.
Finally, in advertising the contest, sponsors should take caution and be sure not to mislead entrants given that the misleading advertising provisions of the Competition Act apply to the advertising of the contest.
While contests are a useful marketing and promotional tool, contest sponsors should be mindful of the various requirements under the Competition Act and Criminal Code, as well as the need for appropriate disclaimers in the rules, and compliance with privacy laws. Further, the specifics of each contest can raise unique issues such as copyright ownership and the need for age restrictions, and therefore contest sponsors would be prudent in having counsel review any proposed contest rules, packaging and advertising materials prior to launching the contest.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly