Trade promotion lotteries are popular ways for businesses to promote their goods and services. Especially in the age of social media, they can be a powerful tool to engage consumers with a business’ products.
Typically trade lottery promotions are competitions where the winners are decided at random or there is at least an element of chance involved in determining who wins the prizes.
Until now, businesses running ‘trade promotion lotteries’ in Victoria were required to obtain a permit for each such lottery, where the value of the prize pool exceeded $5,000. Recent legislative changes mean it is no longer necessary to obtain a permit to conduct a trade promotion lottery in Victoria, regardless of the prize pool value.
The removal of the permit requirement should make it administratively simpler for businesses to run competitions in Victoria and in other States where a similar approach is taken. However, there are some new requirements that must also be kept in mind.
In 25 or words or less…
The more relaxed scheme may mean we see fewer competitions requiring entrants to submit a creative responses in order to enter (for example, “in 25 words or less, tell us why summer is your favourite season”).
This format has often been chosen as a way for a business running the trade promotion to sidestep the permit requirement, as such competitions are considered ‘games of skill’ (which have never required a permit) rather than ‘games of chance’ (and hence a trade lotteries) for which permits may in the past have been required.
While permits may no longer be needed for trade promotions in Victoria, the new regulations nevertheless prescribe a series of mandatory conditions. Failure to comply with these conditions can attract penalties of $8,857 for first time offenders and $14,761 for repeat offenders.
Some of the new conditions include that:
- If an entry fee is charged, it must not exceed 70 cents;
- Certain information needs to be included in the promotion of the lottery, for example, the closing date for the competition and details of the location and time of any drawing of the lottery (if applicable);
- The names of winners of all prizes valued at over $1000 must be published;
- The winners of prizes must be advised in writing of their win;
- Certain records must be kept for a period of three years after the lottery;
- If the trade promotion lottery is to be drawn, the method of the draw must allow each ticket in the draw a random and equal chance of being drawn;
- The winner of the prize must not incur a cost to accept a prize (other than a trivial cost); and
- The prize must be given to the winner within 28 days of the draw.
There are a number of other conditions and requirements as well.
What does this all mean?
The new regulations make it somewhat administratively easier for businesses to conduct trade promotion lotteries in Victoria while also providing protection for those who enter such a lottery. It should be remembered, however, that while no permit is required in Victoria, a business seeking to hold a promotion outside Victoria may well require a permit in that jurisdiction. There are also various other regulatory requirements to be complied with, that differ subtly in the various States and Territories of Australia.
Need advice?
If you are considering running a trade promotion (or any other competition, including a game of skill, you should seek legal advice about the necessary requirements for doing so.
Daniel Kovacs, Principal Lawyer, has significant experience in this area, frequently advising clients and drafting competition terms and conditions. He can be contacted on (03) 8600 8859 or dkovacs@kcllaw.com.au.
Note: This update is a guide only and is not intended to constitute legal advice.