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.