A competition or giveaway can be a good way to spread the word about your business. In this series, we help you decide why, what, when, where
and how to run a competition in Australia. Part 2 looks at the types of competitions, legalities and permits.
In part 1 of our series on running a competition we looked at defining the goals of a competition, including building a mailing list or social media followers, increasing site / store traffic, rewarding loyal customers, increasing sales and creating a buzz around a new product or special offer.
Once you have a goal in mind, a key element in planning and budgeting for a competition should be understanding the basic rules and regulations.
Consumer rights and competitions
Businesses must run competitions ethically and in a manner that is fair to consumers, or face stiff fines. Some of the requirements are that you must give away the prize or prizes you offer, that they match the description and value you advertise in the competition, and that you aren’t running a competition where winners only win the chance to enter yet another competition.
Permits for competitions
In Australia, the form the competition takes and the value of the prize dictate whether you will need permits to run the competition legally. State government sites describe some competitions and giveaways as “trade promotion lotteries” because they are used to promote a business.
States have different regulations in place and these can change, so you need to check with the governing body in each state before you set a competition in motion (see contact details in “Useful tools and resources”).
Chance versus skill
The two main types of competitions or “trade promotion lotteries” are games of chance and games of skill. In games of chance, winners
are determined by some element of chance, such as winners’ names being drawn at random. In games of skill, entrants are required to demonstrate some element of skill, such as submitting a unique entry that is judged in order for winners to be selected. Often, a game of
skill asks entrants to answer a question in 25 words or less. Importantly, there cannot be one single correct answer, so, for instance, your question cannot ask in what year your business started trading or what your business name is. This is because you will then probably have multiple winners so you would have to select the actual winner randomly (making it a game of chance), or somehow split the prize between them all.
Games of chance require a permit in some states and territories, no matter what the prize value is, so you might want to consider restructuring your competition as a game of skill in order to cut down on permit costs. In some states (currently Victoria and the South Australia) you may need a permit if the prize is worth $5,000 or more.
Other states insist on free entry and may also stipulate that additional costs, such as phone call costs to competition lines, cannot exceed a certain limit. Note that you are usually allowed to run a competition where people must purchase a particular product in order to enter.
Looking after public interest
According to the Victorian Commission for Gambling Regulation, state authorities may also refuse a competition permit if they believe that the contest is counter to public interest: for example, a competition that encourages excessive alcohol consumption by giving people an extra entry for every pint they drink. Many of these regulations relate to liquor, gambling, firearms, tobacco, dangerous or offensive behaviour, and the wellbeing
Useful tools and resources
* The Australian Competition & Consumer Commission offers an Advertising and Selling e-publication, which outlines consumer rights and business responsibilities across different types of marketing communications.
* Check that you are adhering to the competition rules in each state:
Disclaimer: This article is intended to provide general information only. The information provided is not, and is not intended to be, legal advice. You should not act or refrain from acting on the basis of any of the information without first obtaining advice specific to your own situation.
The views expressed in this article are those of the author and the interviewees, and not of Australia Post.
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