Understanding Trade Promotions: A Deep Dive into How to Run Compliant Trade Promotions

Understanding Trade Promotions: A Deep Dive into How to Run Compliant Trade Promotions

Private Law

Facebook, Pinterest, Instagram, LinkedIn, Twitter – these are the playgrounds where businesses are actively connecting with their loyal customers and attracting new ones in a flash. So what are the Australian laws around running a promotion online?

What is a trade promotion lottery? 

A trade promotion competition is a free-entry competition that a business conducts to promote their goods or services.  It can be a contest, a raffle, a sweepstakes, or any other promotion that has prizes and winners determined by chance. Businesses run trade promotions to encourage sales and increase engagement. 

The three elements to a trade promotion are that they are:

  1. free to enter;
  2. promoting goods or services; and
  3. conducted by a registered business.

While trade promotions are designed to create excitement and incentivise consumer participation, they must adhere to specific rules and regulations set forth by the Australian government to ensure fairness, transparency, and consumer protection.

Permits

Imagine planning the most glamorous fashion show, only to realize you forgot the VIP invitations. That’s the importance of permits in the world of trade promotions. It’s important to obtain the right permits, especially when your promotion involves lotteries or games of chance. 

Trade Promotion Tips: Breaking Down the Legal Runway

Here are the key takeaways:

1. Game of Skill vs. Game of Chance: Firstly, you need to work out what type of promotion you are running. If your promotion involves an element of luck – like drawing winners randomly – you’re wading into lottery territory. It’s a delicate balance that requires the right legal finesse. 

A game of skill is a promotional activity whereby the winner is determined by a skill-based assessment (for example, entrants submit an answer to a promotional question which can then be judged in order to determine a winner). 

A game of chance is one where random winners are picked and it does not involve an assessment of any skill. This could be a Facebook ‘Share to Win’ promotion, lottery ticket, bingo game or a scratchie.

2. State-Specific Permits: Each state in Australia has its own set of rules and requirements. It’s like tailoring your legal outfit to fit perfectly in each jurisdiction. You do not need a permit for a game of skill. However, you still need to comply with any state or territory laws or regulations that deal with trade promotions generally, as well as the Australian Consumer Law (ACL). 

For example, in Western Australia, a trade promotion lottery must be free to enter, and the prize must not be a cosmetic surgical or medical procedure. In South Australia, if you are using instant scratch or break open tickets (where the number, letter or symbol is hidden) it is an instant prize trade promotion lottery and you must apply for a licence regardless of the prize amount and remember that each of the states have their own rules about ticket draws and prizes, etc. 

Be mindful of the laws in each of the states and remember that permit numbers need to appear on your trade promotion creative so give yourself ample time to apply for the permits.

You may need a permit or authority for a game of chance, depending on a number of factors including where you operate your business and the dollar value of the total prize pool.  For example, if the prize pool for a game of chance is:

  • less than $3,000, you do not need a permit;
  • between $3,000 and $5,000, you only need a permit in the ACT;
  • $5,000 or over, you need a permit in the ACT, SA and NT; and
  • $10,000 or over, you need a permit in the ACT, SA, NT and NSW.

Queensland, Tasmania and Victoria do not require businesses to acquire Trade Promotion Lottery permits. Despite this, each business is required to comply with a variety of state specific mandatory conditions.

Here’s a list of the some of the laws and regulations that apply in each state (non-exhaustive):

New South Wales:
– Community Gaming Act 2018
– Community Gaming Regulations (NSW) 2020

NSW trade promotions are reviewed by the following regulatory body:

– NSW Fair Trading

Australian Capital Territory
– Lotteries Act 1964

ACT trade promotions are reviewed by the following regulatory body:

  • ACT Gambling and Racing Commission

Victoria
– Gambling Regulation Act 2003
– Gambling Regulations 2015

VIC trade promotions are reviewed by the following regulatory body:

  • Victoria Commission for Gambling and Liquor Regulation

South Australia
– Lotteries Act 2019
– Lotteries Regulations 2021

SA trade promotions are reviewed by the following regulatory body:

  • SA Consumer and Business Services

Queensland
– Charitable and Non-Profit Gaming Act 1999
– Charitable and Non-Profit Gaming Regulation 1999

QLD trade promotions are reviewed by the following regulatory body:

  • Business Queensland

Western Australia
– Gaming and Wagering Commission Act 1987
– Lotteries Commission Act 1990

WA trade promotions are reviewed by the following regulatory body:

-WA Department of Government, Sport and Cultural Industries

Tasmania
– Gaming Control Act 1993

TAS trade promotions are reviewed by the following regulatory body:

  • TAS Department of Treasury and Finance

Northern Territory
– Gaming Control (Community Gaming) Regulations 2006
– Gaming Control Act 1993

NT trade promotions are reviewed by the following body

  • NT Department of the Attorney-General and Justice

3. Transparency: Front-Row Access for All: In the fashion world, inclusivity is a trend that never goes out of style. Translate this into your trade promotion by ensuring that the entry process and winner selection are as inclusive and transparent as possible. You should clearly communicate the terms and conditions to participants. You should also maintain good record-keeping, manage any privacy issues and consider what specific rules exist for the applicable social media platform (for example, Facebook terms state that personal timelines and friend connections cannot be used for promotions).

Let everyone feel like they have front-row access to the fashion extravaganza. It’s not just about legal compliance – it’s about creating an atmosphere of trust, confidence and credibility.

Penalties for Non-Compliance

Each state and territory has its own penalties for not complying with their laws.

  • Breaches of the Competition and Consumer Act 2010 and the Australian Consumer Law attract fines and pecuniary penalties.
  • Some breaches are civil and can result in monetary penalties.
  • Some breaches are criminal, and can result in monetary fines and/or jail time. 

The introduction of the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 on 10 November 2022 resulted in a new maximum penalty for a corporation that breaches the Competition and Consumer Act 2010 (CCA) – $50 million. This is a significant rise from the previous maximum penalty of $10 million. For individuals, the maximum penalty has also increased from $500,000 to $2.5 million – an increase of 500%.

Leaving aside the hefty possible fines and penalties for non-compliance, not staying in line with trade promotion regulations can severely damage your business’s reputation. Negative publicity and customer backlash can be hard to recover from, making it crucial to follow the rules meticulously.

Compliance Checklist

Running trade promotions are like throwing a party for your brand, where you get to showcase your latest products, dazzle your audience, and boost your brand’s street cred all at once! But before you dive headfirst into the promo pool, let’s make sure you’re doing it right:

  • Know the Lay of the Land: Before you unleash your marketing magic, take a peek at the rules in each state or territory. It’s like scouting the terrain before going on a treasure hunt – you gotta know where you’re stepping!
  • Legal Eagles to the Rescue: Don’t worry, you don’t have to navigate this jungle alone. Seek advice from legal experts who specialize in trade promotion regulations. We’ve represented many businesses in this space and helped them craft the right trade promotion terms and conditions. We can make sure your campaign is sailing smoothly from the get-go.
  • Paperwork Party: Keep those records in check. Permits, terms, conditions – it’s like organizing the ultimate guest list for your promotion bash. The more detailed, the better.
  • Transparency is Key: Nobody likes a mystery, especially when prizes are involved. Lay it all out for your participants – how winners will be chosen, what they’re winning – the whole shebang 🙂 No smoke and mirrors here, please.
  • Privacy Matters: Last but not least, play nice with personal info. Follow Australia’s privacy laws when collecting and handling participant data.

So there you have it – your recipe for a rockin’ trade promotion that’ll have everyone talking about your brand for all the right reasons! 🚀

If you’d like help setting up your trade promotions and drafting the terms and conditions, here at Law Quarter, our lawyers work with clients across a range of industries from technology and retail to beauty, healthcare and wellness. We also run a sister business, Compliance Quarter so we can help you stay compliant as you manage your promotions.

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Commercial Law, Private Law

So, you’ve decided to dive into the glamorous world of beauty and skincare. 

And it’s all fun and games when you’re dreaming up that perfect perfume scent or creating the perfect booty cream, but there’s a whole lot of legal stuff you need to know before you can build a thriving brand.

Well, buckle up, because we’re about to embark on a journey to set up a legal foundation that’s as flawless as your favorite foundation 🙂

Firstly, before diving in, most personal care, skin care, beauty, make-up and cosmetic products may be described as ‘cosmetics’. 

A cosmetic is defined in our legislation as a substance or preparation intended for placement in contact with any part of the human body, including the mucous membranes of the oral cavity and the teeth, with a view to:

  • altering the odours of the body
  • changing its appearance
  • cleansing it
  • maintaining it in good condition
  • perfuming it
  • protecting it

Cosmetics include soap, shampoo and conditioner, moisturiser, ‘bath bombs’, hair dye, perfume, lipstick, mascara, nail polish, deodorant and many other products.

What laws and regulations govern the beauty and skincare industry?

The regulation of cosmetics in Australia is administered by three government regulators – the Therapeutic Goods Administration (TGA), the Australian Government, Department of Health under the Australian Industrial Chemicals Introduction Scheme (AICIS) and the Australian Competition and Consumer Commission (ACCC).

The Therapeutic Goods Administration (TGA) is responsible for regulating chemicals in personal care, skin care, make-up and cosmetic products that are medicines or marketed as having therapeutic effects

This includes most skin-whitening lotions, primary sunscreens, disinfectants, complementary medicines and blood products.

The second regulatory body is the Australian Industrial Chemicals Introduction Scheme (AICIS).  AICIS is a regulatory scheme that regulates chemicals that are imported or manufactured (introduced) for industrialuse and it’s part of the Australian Government, Department of Health.

It’s basically responsible for regulating the chemical ingredients in personal care, skin care, make-up and other cosmetic products that are not medicines or marketed as having ‘therapeutic effects’ and are considered to have an ‘industrial’ use.

The final body, the ACCC, regulates cosmetic product labelling or product safety in accordance with the Consumer Goods (Cosmetics) Information Standard 2020. The ACL also provides for penalties for false or misleading claims and representations about products.

So remember: one of the most important first steps is figuring out whether your products are cosmetics or therapeutic goods. 

Here’s a (non-exhaustive) list of laws and regulations you should pop on your radar if you’re operating a skincare business:

  • Therapeutic Goods Act 1989 (Cth)
  • Therapeutic Goods (Excluded Goods) Determination 2018 (Cth)
  • Australian Consumer Law (Competition and Consumer Act 2010 (Cth))
  • Consumer Goods (Cosmetics) Information Standard 2020
  • National Measurement Act 1960 (Cth)
  • National Trade Measurement Regulations 1989 (Cth)
  • Industrial Chemicals Act 2019 (Cth)
  • Fair Work Act 2009 (Cth) 
  • Good Manufacturing Practice (GMP)
  • Agricultural and Veterinary Chemicals Act 1994
  • Privacy Act 1998 (Cth)
  • Spam Act 2003 (Cth)
  • The Poisons Standard (also known as the Standard for the Uniform Scheduling of Medicines and Poisons (SUSMP)
  • The Mandatory Standard for Labelling Cosmetics (regulated by the ACCC)
  • General Data Protection Regulation (GDPR)

OK, so that’s the general framework for the beauty industry – now let’s get down to the nitty gritty of laying your flawless legal foundation:

1. Slay the Business Structure Game

First things first, let’s talk business structures. 

It’s like choosing the perfect shade of lipstick – you want something that suits you and makes you feel fabulous. In Australia, you can opt for a sole trader setup, a partnership, a company, or a trust. Each has its own perks and quirks, so get some solid legal advice and choose the one that aligns with your business goals and ensures you’re strutting down the right legal runway.

2. Registrations and Compliance: Because You’re Worth It

Now that you’ve picked your business structure, it’s time to register your baby. 

Start by getting yourself an Australian Business Number (ABN) with ASIC. 

Think of it as your business’s VIP pass to the exclusive party that is the Australian business scene. 

Next step: compliance

It’s not always the most glamorous field but the beauty world has its own set of rules, and it’s crucial to play by them. Complying with regulations is not only responsible but also adds a layer of trust to your brand – consumers love transparency.

You don’t need to register cosmetic products like you do in the EU, for example, but you will need to think about what other licences, registrations or permits you need, depending on what area of the beauty and skincare industry you’re operating in. 

Here are some of the registrations you need to consider in different categories:

Therapeutic Goods

If you’re in the game of selling therapeutic goods, make sure to register with the TGA – consider it your product’s exclusive red carpet moment ⭐

Importers

If you plan to sell any cosmetics in Australia that you bought from overseas, you must register your business with AICIS before you import (introduce) into Australia. Imagine your business as a jet setting beauty guru, and the entry stamp on your passport to the ultimate beauty destination comes from the AICIS. There is no threshold value or limit so you must register regardless of how much you sell.

Manufacturers (including home-based and small businesses)

If you intend to make cosmetics for sale in Australia where one or more ingredients were purchased from overseas, then you must also register your business with AICIS. Again, there’s no threshold value or limit so you must register regardless of the quantity and how much you sell.

If you purchase all ingredients locally and you blend these together to make your cosmetics, then you don’t need to register with AICIS. But if your process of mixing ingredients results in a chemical reaction, then they consider this to be manufacturing and you must register.

Take soap making, for example. If you’re a chemical maestro, whipping up soaps through the process of ‘saponification’, then you’re not just a soap maker: you’re a chemical magician! This means registering with AICIS is essential.

Local Council – Your Business’s Neighborhood Watch

If your business is setting up shop at home, your local council is like the neighborhood watch – keeping an eye out for all things business-related. Check out your local council’s website for the lowdown on any registrations or permits needed. It’s like getting the thumbs up from your local squad.

Insect Repellent – Keep Bugs at Bay, the Legit Way

Planning to whip up an insect repellent potion? Smart move – bugs are so last season 🙂 Make it official by registering your bug-be-gone creation with the Australian Pesticides and Veterinary Medicines Authority (APVMA).

3. Taming the Tax Beast

Taxes – the necessary evil that keeps the beauty industry glowing. Familiarize yourself with the Australian Taxation Office (ATO) and their guidelines (and find yourself a great accountant). It’s like contouring – a bit tricky at first, but once you get the hang of it, you’ll be sculpting your financial success with finesse.

4. Protecting Your Magic Formula: Intellectual Property

Your beauty and skincare creations are your magic potions, so guard them with all your might. 

Just like a signature fragrance, you want your brand to be unmistakably yours. 

One of the most important ways that you can protect your cosmetic brand and keep copycats at bay is by registering a trade mark

You can register your business name, logo (or a combo of both) and cosmetics brand, and you can also trade mark the distinctive packaging of your products and their distinctive scent. 

A registered trade mark will provide you with the exclusive right to use, licence and sell your mark, which means no one can use or misappropriate your trade mark without your permission. 

You might also want to apply for a patent to protect your product formulas. A patent is a type of intellectual property that gives its owner a legally enforceable right to exclude others from making, using or selling their innovative device or process. 

With a patent, you’re not just creating products; you’re crafting a legacy. It’s a legally enforceable declaration that says, “This genius is mine, and no one else’s!” Whether it’s a groundbreaking skincare formula or a haircare concoction that’s pure magic, a patent makes it yours – and yours alone.

5. Employment: Hiring and Contracts

As your empire grows, you might need to bring in some glam squad members. 

When hiring, ensure you’ve got the legalities covered with proper employment contracts (you can check out our post on contract playbooks and employment considerations here). 

It’s like having a beauty agreement that keeps everyone on the same page – no messy breakups, just a flourishing business relationship.

6. Insurance: A Beauty Business’s Best Friend

Accidents happen, my beauty friends. That’s why insurance is your BFF in the beauty biz. 

Whether it’s public liability, product liability, or professional indemnity insurance, make sure you’re covered. It’s like having a nice big beauty umbrella, protecting you from unexpected downpours.

7. Staying Ethical and Sustainable: A Trend That Never Fades

In the era of conscious consumerism, consider weaving ethical and sustainable practices into your business model. It’s not just good for the planet; it’s excellent for your brand image. Showcase your commitment to beauty that cares, and watch your customer base flourish.

There you have it – a laid-back guide to navigating the legal and regulatory scene in the beauty and skincare business.

If you’d like help setting up your legal foundations or drafting your contracts, here at Law Quarter, we advise clients throughout the cosmetics supply chain, including product and packaging manufacturers, importers, exporters, wholesalers, distributors and retailers and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing beauty empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Now, go forth and conquer the beauty world – stay fabulous 💄✨