COMPETITION ACT REQUIREMENTS

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1 Source: Adapted and edited by the Marketing Research and Intelligence Association from information posted on the blog of Canadian lawyer Steve Szentesi which you can access here. The Competition Bureau of Canada also has a helpful backgrounder on the Competition Act for running contests. Disclaimer: This document should only be viewed as background information supplied by the MRIA, not legal advice. Companies (supplier and client-side) should consult with their legal teams to ensure that no laws are broken. Please note that details specific to Quebec are not included. The information laid out below addresses some of the key rules and regulations to keep in mind when operating contests in Canada. These rules should be taken into account when prizes are offered as an incentive for participating in a research study. Contest Rules COMPETITION ACT REQUIREMENTS Contest organizers should provide a short version of a contest s terms (the short rules ) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media). The short rules commonly includes both the required statutory disclosure and other key contest elements. The full version of the contest rules, the official rules, should be available on request and are commonly posted on the sponsor s website. (The MRIA also suggests that the official rules be posted at the location where the contest is offered, e.g. at a grocery store. Please consult your legal team.) The following are key disclosure requirements under the Competition Act for any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit Contests organizers must disclose: i. the number and approximate value of prizes ii. the area (or areas) to which they relate, and; iii. any fact that may materially affect the odds of winning. The Act also prohibits contest organizers from unduly delaying the award of prizes. Misleading Advertising 1

2 The Competition Act prohibits making materially false or misleading representations to the public for the purpose of promoting products or any business interest. Potential penalties include civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and court orders to cease the conduct, publish corrective notices or compensate consumers. (This information is in sections 52 and of the Competition Act) Other Competition Act Rules to consider Specific provisions for contests telemarketing Section 52.1 of the Competition Act prohibits telemarketers from conducting contests where: Prize notices a) the delivery of a prize (or other benefit) is, or is represented to be, conditional on prior payment; OR b) adequate and fair disclosure is not made of the number and approximate value of prizes, the area or areas to which they relate and the odds of winning. Section 53 of the Competition Act prohibits prize notices sent by electronic or regular mail that give the general impression that a recipient has won (or will win) a prize and requires a payment (or incurring another cost) unless the recipient actually wins the prize or benefit and certain disclosure and other requirements are satisfied by the sender. These include adequate and fair disclosure of: i. the number of prizes available; ii. the approximate value of prizes; iii. the regional allocation of prizes; and iv. any fact within the sender s knowledge that materially affects the chances of winning (i.e., odds of winning). In addition, the distribution of prizes cannot be unreasonably delayed and there are requirements for the selection of participants and distribution of prizes. Persons that violate section 53 are liable to fines, on summary conviction, of up to $200,000 and/or imprisonment for up to one year and, on indictment, to fines in the discretion of the court and/or imprisonment for up to 14 years. Online contests 2

3 Careful consideration needs to be considered when running contests to comply with the Competition Act provisions that all disclosures (rules) are adequately displayed in a way that they are likely to be read. (Section of the Competition Act.) What is considered to be adequately displayed will depend on the format and design of the website. For example, a notice of a contest should not require readers to take an active step, such as sending an or placing a phone call, in order to obtain the required information. The Competition Bureau does not consider clicking on a clearly labelled hyperlink as being an active step. Criminal Code OTHER LEGAL REQUIREMENTS TO CONSIDER The Criminal Code also governs the operation of contests in Canada, by making it a criminal offence to operate illegal lotteries (section 206). In order to comply with the Criminal Code, contest organizers can do the following: a) Provide a no purchase necessary entry option; and/or b) Include a multiple-step mathematical question as a condition of winning Contract Law In addition to the requirements of the Competition Act and Criminal Code, contests have also been considered legal contracts. In particular, offers made by promoters have been held, when fulfilled by contestants, to be legally binding contracts. In addition to ensuring compliance with applicable statutory requirements, it is important that contest terms and conditions are carefully and precisely drafted to reduce potential contractual liability. This includes a careful review of short rules, the official rules, and the winner release documentation to ensure that the terms are relevant to the promotion, precise and enforceable. Potential technical problems and other contingencies should also be spelled out in contest rules, including: i. the unavailability of prizes as disclosed; ii. technical problems arising from the operation of the contest (e.g., computer, Internet or server issues); and iii. other unforeseen events. Privacy Law 3

4 Canadian privacy legislation also applies to contests. Contest promoters must have a clear data collection privacy policy to protect all personal information gathered during the contest. 4

5 Intellectual Property Law Potential intellectual property (i.e., copyright, trade-mark, etc.) related issues need to be considered when running a contest. These include: i. whether a promoter owns the title for a contest; ii. whether consents have been obtained for 3 rd party marks, logos, photographs, etc. planned to be used for a promotion; iii. including promoter copyright statements in contest rules; iv. including language in rules granting a promoter the right to use original materials submitted by entrants (e.g., entry forms, photos, essays or other consumer generated content created and submitted by entrants, such as in skill based promotions); and v. representation and indemnification provisions protecting the sponsor where participants may not have rights to materials submitted for a promotion. CASL (Canada s Anti-Spam Legislation) CASL may apply where, for example: i. entrants are invited by to participate in a contest ii. In the follow up with entrants by or subsequent marketing (e.g., where a contest includes the right of the promoter to engage in subsequent marketing to entrants). 5

6 Running a contest? Here s a helpful checklist The following is a list of some of the key tips to review when running a contest as an incentive for your research study. Remember to always consult your legal team. 1. Give your legal team a heads up that you will be sending them contest rules to approve 2. Develop a check-list for contests to ensure that all key legal requirements are met 3. Create two sets of Contest rules: a. Short rules should include all Competition Act disclosure requirements for point-of-purchase materials and must be displayed in all point-of-purchase materials b. Official rules should particularly anticipate potential contingencies (e.g., technical problems, etc.) and should be specific to each promotion 4. Ensure that none of the advertising or marketing materials are false or misleading 5. Ensure that all key contest elements are clear and precise (e.g., eligibility, how to enter and descriptions of the prize and odds of winning). 6. Include a no purchase necessary entry option and skill element, such as a multiplestep mathematical question). 7. Consider whether consent is needed (and if necessary obtained) to reproduce 3 rd party intellectual property (e.g., trade-marks, logos, etc.) or transfer ownership in contest materials (e.g., where contestants create original material as part of the contest or promotion). 8. Comply with social media sites terms of use if using social media to promote or host a contest 9. Consider whether other competition or advertising law rules may apply (e.g., the deceptive prize notice or telemarketing provisions of the Competition Act, both of which can also apply to contests, depending on the circumstances). 10. Check if CASL applies. If using electronic communication for a contest (e.g., followups, post-contest electronic marketing, contests run in conjunction with online surveys, etc.) review Canada s anti-spam law applies, and tailor the contest to comply if necessary. 11. Ensure that Quebec legal requirements are met (or take care to make sure that eligibility is limited to Canadian residents, not including Quebec). 12. Obtain U.S. legal advice if the contest is open to U.S. residents. 6

7 Example disclaimers for Contests Disclaimer: Below are sample contest disclaimers, (that have been use by BrandSpark), which are provided only as an example. They SHOULD NOT be copied. A supplier side or client-side legal teams should always be consulted when designing disclaimers for contests. ELIGIBILITY: Residents of Canada who are of the age of majority or older and are located in Canada at the time of entry are eligible to enter, except employees, representatives and agents of Sponsor, and any other organizations affiliated with the sponsorship, judging, fulfillment, administration, prize support, advertisement or promotion and/or their respective agents, affiliates, subsidiaries and members of their immediate families or persons residing at the same address. Immediate family means parents, sisters, brothers, children and spouse. OTHER: Sponsor assumes no responsibility for entries it is unable to process, or an entrant s inability to enter the Sweepstakes/contest, due to network, hardware, software, telephone or other technical failures, or any other reason, or for incomplete, damaged, misdirected, or lost entries. Sponsor reserves the right, in its sole discretion to disqualify any person tampering with the entry process, the operation of the web site or otherwise in violation of the rules. Subject in Québec to the jurisdiction of the Régie des alcools, des courses et des jeux, Sponsor further reserves the right to cancel, terminate or modify this Sweepstakes/contest if not capable of completion as planned, including due to infection by computer virus, technical corruption, nonauthorized human intervention or force majeure. In the event of cancellation, Sponsor reserves the right to select potential winners from among all eligible entries received prior to date of cancellation. The use of automated entry systems or any other conduct that impedes the integrity is prohibited. In the event of a dispute regarding online entry, entry will be deemed made by the holder of an established account associated with the entry. DISPUTE RESOLUTION: Except where prohibited, by participating Sweepstakes entrants agree that: All issues and questions concerning the construction, validity, interpretation and enforceability of these Official Rules, or the rights and obligations of entrant(s) and Sponsor and its agents shall be governed by and construed exclusively in accordance with the laws of the Province of Ontario without giving effect to any principles of conflicts of law of any jurisdiction. Entrants agree that any action at law or in equity arising out of or relating to this Sweepstakes, or awarding of the prizes, shall be filed only in the provincial or federal courts located in the Province of Ontario and entrant hereby consents and submits to the personal jurisdiction of such courts for the purposes of litigating any such action. Except where prohibited, by participating in this Sweepstakes, entrant agrees that: (a) any and all disputes, claims, and causes of action arising out of or connected with the Sweepstakes, or awarding of the prizes, shall be resolved individually, without resort to any form of class action; and (b) any and all claims, judgments and awards shall be limited to actual out-of-pocket costs incurred, including costs associated with participating in the Sweepstakes but in no event legal fees; and (c) under no circumstances will any entrant be permitted to obtain awards for and hereby waives all 7

8 rights to claim punitive, incidental and consequential damages and any other damages, other than for actual out-of-pocket expenses, and any and all rights to have damages multiplied or otherwise increased. Some jurisdictions do not allow the limitations or exclusion of liability for incidental or consequential damages, so the above may not apply to you. QUEBEC RESIDENTS: For residents of Québec, any litigation respecting the conduct or organization of a publicity contest may be submitted to Régie des alcools, des courses et des jeux for a ruling. For residents of Québec, any litigation respecting the awarding of a prize may be submitted to the Régie only for the purpose of helping the parties reach a settlement. GENERAL: Except where prohibited by law, acceptance of a prize constitutes winner s permission to use his/her entry, name, hometown, voice, likeness, photograph, and any statements regarding this Sweepstakes for editorial, public relations, promotional and advertising purposes on behalf of Sponsor without compensation. By participating in this Sweepstakes and accepting a prize, winners agree to release Sponsor and its parents, affiliates, subsidiaries, and agencies and their respective directors, officers, employees and agents from any and all liability with respect to the prize won and participation in the Sweepstakes. 8

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