Competitions and Promotions: Legal Requirements for Running Such

Posted on: 13th April 2014

For website owners out there who intend to run online competitions, social media promotions or brand sweepstakes, take time to read the following guide to ensure that you are adhering to the laws set by the state or territory you are located.

Terms and Conditions of Online Competitions

Different states and territories set different rules and regulations about all kinds of trade promotions, online competitions, and sweepstakes to protect consumer rights and privileges above all else. This is the reason they require permits for some online competitions and not require such for other forms of trade promotions. In relation to this, businesses intending to run any kind of online promotion must set specific and clear terms and conditions not only to guide the potential entrants through it but also to prove that they are adhering to the laws of the state or territory.

The terms and conditions of an online competition is usually in fine print and covers basic information such as promotional period, prize value, and other competition features. Actually, it is a comprehensive guide by the promoter/organizer to the entrant about the competition and may cover several pages of paper.

The terms and conditions of an online competition must be readily available for everyone to promote transparency and ensure that consumer rights are being protected and upheld. Usually, websites abbreviate the terms and conditions on any part of its promotional site and provides a link for its full set.

Permits for Online Competitions

Different states and territories set different rules and regulations about all kinds of trade promotions, online competitions, and sweepstakes depending on the nature, format and/or type of the competition. It is essential to contact the local governing body because a set of rules and regulations in one state may not apply to another territory. Having a promotional marketing lawyer or agency expert can help in giving you correct and up-to-date information about all the things necessary for running an online competition legally.

The reason why some website owners do away with having no permits for their online competitions is because getting one is time-consuming, expensive and an all-around hassle. But it is essential to do so especially if the trade promotion has an element of chance in it. A little effort would go a long way and save you from dealing with all legal troubles that might arise for simply ignoring the rule of law. Permits are available online and all you need to do is provide the information about your online competition and then file it.

Before you start complaining, remember that having expert knowledge about online competition rules and regulations on your state or territory can help you run a smart and successful trade promotion. The science of prizing is valuable information that could help you minimise permit costs and waste precious times in application. Lastly, it can ensure that the goals of your business are achieved – building the brand and strengthening your status in the market.

Difference between Game of Skill and Game of Chance

When an entrant has a random chance of winning, then the competition is a game of chance type.

Example: “Buy this product for the chance to win $20,000 cash”.

When there are judges to determine the winners or a selection process, then the competition is a game of skill type.

Example: “Tell us in 25 words or less why you should win”.


A game of skill requires the entrant to submit something or show a skill –whether literary or creative – in order to qualify. The judges then determine the best answer and declare the winner based on the freshness of idea, originality of work, or mere brilliance of the answer.

If the online competition requires the entrant to answer a question, it is not really a game of skill. If more than one person provides the correct answer, then the organizer must find a way to select the winner – which gives the competition an element of randomness or chance. Hence, a permit is necessary in order to run this kind of trade promotion.

Permits for Different States and Territories

Trade promotion lotteries are competitions that contain an element of randomness or chance in order to determine the final winner/s. These types of competitions require permits before it can be launched. The requirements for securing a permit can vary from state to state. It all depends on a number of factors, but not limited to, the promotion mechanics, the total prize value, location it is going to be launched, and such. The permit fee is highly dependent on the total value of the prize pool.

If a website owner intends to run several trade promotions in a specific period of time, for example, in the course of one year, then it is more practical to get Blanket Permits. Radio stations commonly use this in order to air their competitions on a regular basis. A Blanket Permit covers all online competitions and just requires the promoter/organizer to update the Terms and Conditions for each competition.

Consequences of Not Adhering to the Terms and Conditions

Setting a clear and specific set of terms and conditions is essential in running an online competition in order to protect all parties involved. It upholds a fair playing field and minimises the chance for misinterpretation that can result to legal troubles, especially if the entrant or winner cries foul.

Website owners running trade promotions should not take it lightly because it can actually be their only protection when an entrant or winner complains about any aspect of the competition. They can always go back and refer to the terms and conditions in order to clarify issues and not contribute any damage to the business and/or lose the confidence of the consumers.

Once the trade promotion commences, the finalised Terms and Conditions is a binding contract that cannot be altered, changed or edited in any way. Before a promoter/organizer launches a competition, changes in the permit can be done in order to ensure that the competition adheres to the rules and regulation of the state or territory where it is being run.

Promoters/organizers must always put the permit numbers in a conspicuous location in the promotional area of the site along with other legal mandatories such as promotional period, draw dates and places, prize values and such.

It is important that the Terms and Conditions are as comprehensive as possible because sometimes, a competition is almost about to end after a winner has already been declared. What if the winner does not respond to the email notification or answer the phone? It should be clearly stated in the Terms and Conditions that there is a certain period wherein the declared winner should respond to the confirmation call of the promoter/organizer in order to properly claim the prize meant for him or her. If this is clearly stated in the Terms and Conditions, then the promoter/organizer is free to call the next person on the list. Otherwise, this could mean legal trouble for the business, which is both costly and embarrassing.

Knowing the Competition and Consumer Act 2010 can help promoters/organizers a lot in running a successful competition. Being aware of the guidelines can help avoid unintentionally breaching it.

Terms and Conditions for an online competition must be carefully thought out, well-prepared, and strongly implemented throughout the promotional period. More often than not, there are serious compers (professional and avid competition entrants) that try to get around the rules in order to win the prize. The website owner and promoter/organizer must work hand in hand to make sure that the Terms and Conditions are properly executed to avoid legal embarrassments, loss of clients, and negative PR for the brand.

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