Running Competitions in Business

In NSW (and other States), there are laws governing special offers and competitions. Depending on the type of competition, you may need to register the competition at the NSW Department of Gaming and Racing. This government body is responsible for approving trade lotteries and games of chance.

To run a trade promotion lottery, that is, a competition which requires the purchase by a customer of your goods or services to win a prize (usually through a prize draw), you will need to get a permit from NSW Department of Gaming and Racing. Application fees for permits range in cost from $50 to $2,000 depending on the value of the prize you will be giving away. In order to obtain a permit you must complete an application form and provide the following information:

• full disclosure of all terms and conditions;
• a copy of any advertisements associated with the competition;
• start and finish dates of the competition (permits can be issued for a maximum period of 12 months);
• information about unclaimed prizes;
• relevant information about the prize (e.g. does a new car include on-road costs);
• full details of any 0055 or 1900 phone lines (pay phone lines must meet certain conditions);
• compliance details of any scratch, break-open or instant-win competition (basic security measures need to be in place to ensure no tampering is possible);
• compliance details of any computerised draw, lottery, raffle, random-number generator or mechanical device (e.g. chocolate wheel) which must meet certain criteria under the regulations and legislation;
• information about prize collection and publishing competition results.

You will not need to register competitions where the competition is based on the entrant's skill (for example by submitting a question on the legal issues of running a business to this newsletter to be in the running to win a double cinema pass) and no `chance' contingency is involved (for example, by drawing the customer's name from a barrel). However, you should still have in place some effective terms and conditions describing how the competition is to operate and the extent of the responsibility you are willing to bear if things go wrong (for example, if one of the providers of the prizes were no longer able to provide the goods) to ensure you are fully protected from claims by disgruntled entrants.

In all cases, however, you need to make sure that if you say you are offering a prize, you DO actually offer that prize. It is an offence under the Fair Trading and Trade Practices Acts to run competitions or make offers where businesses have no actual intention of offering the prize stated.

If you have any questions about compliance issues when running a competition through your business or you would like us to draft up some terms and conditions of a competition you wish to run, give us a call.

This article is provided courtesy of Peter Townsend Business Lawyers http://www.petertownsend.com.au

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